                        T.C. Memo. 1998-130



                      UNITED STATES TAX COURT



                 ELLEN M. RANGOS, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 20840-96, 22733-96.          Filed April 6, 1998.



     Mark Clement, for petitioner.

     John M. Zoscak, Jr., for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     JACOBS, Judge:   By separate notices of deficiency, respondent

determined the following deficiencies, addition, and accuracy-

related penalties with respect to petitioner's Federal income

taxes:
                                      - 2 -


                                          Addition to Tax and Penalties
Year           Deficiency                 Sec. 6651(a)     Sec. 6662(a)

1991            $10,147                      ---                  $2,029
1994              6,056                     $268                   1,211

       Unless otherwise indicated, all section references are to the

Internal Revenue Code for the years under consideration.                   All Rule

references are to the Tax Court Rules of Practice and Procedure.

       These   cases      were   consolidated      for   trial,   briefing,     and

opinion.

       Following concessions by respondent, the issue remaining for

decision concerns the characterization (alimony, as respondent

contends, or a property settlement, as petitioner contends) of

payments made by petitioner's former husband for the purpose of

providing petitioner with an automobile in 1991 and 1994.                     If the

payments are determined to be alimony, then they are taxable to

petitioner; if they are determined to be in the nature of a

property settlement, then they are nontaxable.

                                 FINDINGS OF FACT

       Some    of   the   facts    have    been    stipulated     and   are    found

accordingly.        The stipulation of facts and the attached exhibits

are incorporated herein by this reference.

       At the time she filed her petitions, petitioner resided in

Monroeville, Pennsylvania.
                                    - 3 -


The Agreement

     Petitioner   and   John   G.   Rangos   were   married   in   1957;   on

February 10, 1972, they divorced.

     On January 2, 1972, petitioner and Mr. Rangos executed a

separation agreement (the Agreement), which among other matters:

(1) Settled their mutual property rights; (2) provided for the

support and custody of their then-minor children; and (3) provided

for the support of, and alimony to, petitioner. The Agreement

stated in pertinent part:

               FOURTH: Simultaneously with the execution
          and delivery of this Agreement, the Wife shall
          execute   and   deliver  an   Assignment   and
          Quitclaim for all of her right, title and
          interest in and to any and all shares of
          corporate stock owned by the Husband.       In
          addition thereto the Wife shall execute and
          deliver to the Husband an Assignment and
          Quitclaim of all of her right, title and
          interest in and to any other businesses or
          business interests in which the Husband may
          have any type ownership whatsoever.

               FIFTH: Simultaneously with the execution
          and delivery of this Agreement, the Wife shall
          execute and deliver to the Husband a Quitclaim
          Deed for all her right, title and interest in
          and to any and all real estate owned by the
          Husband and Wife wherever the same may be
          situate [sic].

          *       *       *         *        *        *        *

               EIGHTH: * * * he [Mr. Rangos] shall have
          the right of reasonable visitation with said
          children, and further shall be entitled to
          claim dependency exemptions on his Federal
          Income Tax Returns for the said children.
                    - 4 -


*      *      *      *      *       *       *

     ELEVENTH: The Husband shall pay to the
Wife for her support and maintenance the sum
of Two Thousand Eighty-three and 33/100
($2,083.33) Dollars on or before the 5th day
of January, 1972, Two Thousand Eighty-three
and 33/100 ($2,083.33) Dollars on or before
the 5th day of February, 1972, and a like and
equal sum of Two Thousand Eighty-three and
33/100 ($2,083.33) Dollars on or before the
fifth (5th) day of each succeeding month
thereafter for so long as the Wife shall live,
unless the Wife remarries or dies, in which of
either events the obligation of the Husband
under this Paragraph Eleventh shall cease and
determine forever.

*     *       *      *          *   *       *

     The parties understand and agree that the
payments made pursuant to the terms of this
Paragraph shall for Federal Income Tax
purposes be declared by the Wife as income and
deductible as an expense by the Husband in
accordance with the provisions of I.R.S. [sic]
Code Sec. 71(a)(2); Reg. sec. 1.71-1(b)(2).

     TWELFTH: The Husband shall do all things
necessary to provide the Wife with the full
and unrestricted use at all times of a motor
vehicle comparable to a Cadillac Eldorado. As
of January, 1972 this motor vehicle shall be a
new motor vehicle and thereafter on each third
anniversary of January, 1972, the Husband
shall provide a new motor vehicle for the use
by the Wife under the provisions of this
Agreement.   The use of said motor vehicle
shall be at no expense to the Wife except the
cost of the operation, maintenance and repair
of same that may not otherwise be provided by
the terms of any lease agreement or insurance
contracts related to said lease agreements as
may be contracted for by the Husband or other
lessee of said motor vehicle.
                    - 5 -


     Notwithstanding    the   foregoing,   the
Husband has the option to purchase for the
Wife and deliver to her a comparable new motor
vehicle with unencumbered title in her name,
and in such event shall thereafter on or
before each third anniversary date of such
delivery to the Wife purchase a new comparable
motor vehicle for her and deliver same to the
Wife with unencumbered title in her name. In
such event the Husband shall have the benefit
of trade in value of the used car previously
owned by the Wife.

     The Wife shall have the sole decision as
to the make, model and extras relative to said
motor vehicle provided to her or purchased for
her pursuant to the terms hereof.

     The obligation of the Husband to provide
or otherwise purchase a motor vehicle for the
Wife shall cease and determine [sic] upon her
remarriage.

     In the event of the remarriage or death
of the Wife, then the Wife, or her personal
representative, as the case may be shall
assign all her right, title and interest in
the motor vehicle in her possession at that
time to the Husband or to his personal
representative if he be deceased, and make
delivery of same accordingly.

*      *        *           *       *       *

SIXTEENTH: The Husband and Wife shall file a
joint Income Tax Return for the year 1971, and
the Husband shall pay all income taxes for the
year 1971 in accordance therewith.          In
addition thereto, the Husband shall be solely
responsible to pay any and all deficiencies
due or determined in the future to be due as a
result of any joint Income Tax Return filed by
the Husband and Wife for the year 1971, or any
prior years, and does hereby indemnify the
Wife as to any responsibility therefor. The
Husband shall be entitled to any and all
refunds from joint Income Tax Returns filed by
                                        - 6 -


             them which may be due for any years prior to
             1972, and the Wife shall endorse any such
             drafts upon request of the Husband.

     Pursuant to the Agreement, petitioner received a $90,000

equity   interest    in   the     marital       residence,    various     items   of

household furnishings, beneficiary rights in a $200,000 insurance

policy in trust (that was later canceled), and a right to use a

Florida condominium       owned    by    Mr.    Rangos   in    exchange    for    her

interests in Mr. Rangos' various businesses and real estate.

     At the time the Agreement was signed, Mr. Rangos' net worth

was between $2-3 million.         Mr. Rangos owned all the stock of U.S.

Utilities Service Co. (U.S. Utilities), a Pennsylvania corporation.

On February 1, 1972, U.S. Utilities hired petitioner as a public

relations consultant for 5 years.           As compensation, U.S. Utilities

paid petitioner $1,041 per month. This payment was considered one-

half of the alimony payment she was to receive from Mr. Rangos

pursuant to Paragraph 11 of the Agreement.                   Although petitioner

only worked for U.S. Utilities until February 1973, she continued

receiving     the   $1,041   payment      from     the   company    every    month

thereafter.

     Both parties were represented by counsel in the negotiations

and execution of the Agreement.           Mr. Rangos' attorney drafted the

Agreement.
                               - 7 -


The Automobiles

     In the beginning, Mr. Rangos provided petitioner with one of

his company's automobiles.1   From 1975 to 1983, Mr. Rangos failed

to provide petitioner with an automobile. Petitioner sued Mr.

Rangos as a result of his breach of Paragraph 12 of the Agreement.

In January 1983, the court ordered Mr. Rangos to pay petitioner the

January 1975 list cost of a 1975 Cadillac Eldorado, the January

1978 list price cost of a 1978 Cadillac Eldorado, less the January

1978 blue book value of 1975 Cadillac Eldorado, and the January

1981 list cost of a 1981 Cadillac Eldorado, less the January 1,

1981 blue book value of a 1978 Cadillac Eldorado.     Thereafter, Mr.

Rangos provided petitioner with a new automobile every 3 years.

     Mr. Rangos dictated the form of the transaction used to

provide the 1991 and 1994 vehicles.      In this respect, petitioner

had to engage in extended negotiations with various persons in Mr.

Rangos' company (Chambers Development Co.) and get the approval of

Chamber Development Co.'s purchasing department before she obtained

either the 1991 or 1994 automobiles.

     On or about June 5, 1991, petitioner selected a 1991 2-door

Cadillac DeVille (Vehicle No. 1).      It was less expensive than the



     1
          Because petitioner "basically wanted to get out of
[her] marriage [with Mr. Rangos] and just walk away from that
situation", petitioner preferred that Mr. Rangos give her an
automobile and she would have managed to provide herself with an
automobile thereafter. Mr. Rangos preferred that petitioner use
one of his company's automobiles.
                                - 8 -


Eldorado to which she was entitled under Paragraph 12.   Pursuant to

his option under Paragraph 12, and reserving the trade-in value to

himself (subject to petitioner's obligation to relinquish the

vehicle upon her death or remarriage), Mr. Rangos titled Vehicle

No. 1 in petitioner's name.      The total price of this vehicle

(including taxes, license, title, fees, and optional equipment) was

$32,733.04.    On July 22, 1991, Mr. Rangos paid Cochran Cadillac

$32,733.04 by personal check.

     Petitioner insured Vehicle No. 1 with Standard Fire Insurance

Co. and paid all insurance premiums on the automobile;   Mr. Rangos

was named loss payee.      Petitioner paid all the operating and

maintenance costs of Vehicle No. 1.

     In November 1991, Mr. Rangos sold to a third party the

automobile provided to petitioner in 1988 under Paragraph 12 and

kept the proceeds.

     Petitioner retained Vehicle No. 1 until approximately February

18, 1994, when pursuant to Paragraph 12 Mr. Rangos provided her

with a new Cadillac DeVille (Vehicle No. 2), which she personally

selected.     Mr. Rangos titled the car in petitioner's name.   The

total price of this automobile (including taxes, license, title,

fees, and optional equipment) was $36,350.60.    In accordance with

Paragraph 12, Vehicle No. 1 was traded in for Vehicle No. 2.    The

trade-in value of Vehicle No. 1 was $14,750.   On February 16, 1994,

Mr. Rangos wrote a $21,600.97 check to petitioner; she endorsed it
                              - 9 -


and tendered it to Cochran Cadillac as payment for the 1994

automobile.

     Petitioner insured Vehicle No. 2 with Allstate Insurance Co.

and paid all insurance premiums; she was named as the loss payee.

     Petitioner performed the required maintenance on both Vehicles

No. 1 and 2.     Both automobiles had low mileage and were in

excellent condition at the time they were traded in.

     Petitioner retained Vehicle No. 2 until 1997 when, pursuant to

Paragraph 12, Mr. Rangos provided her with a new Cadillac DeVille.

Federal Income Tax Returns

     On her 1991 return, petitioner excluded from income Mr.

Rangos' $32,733.04 payment to Cochran Cadillac for Vehicle No. 1.

On her 1994 return, petitioner excluded from income Mr. Rangos'

$21,600.97 payment for Vehicle No. 2. Petitioner obtained an

opinion of a law firm which she relied upon in taking these

positions on her returns.

     On his 1991 and 1994 returns, Mr. Rangos deducted as alimony

the amounts he paid for Vehicles Nos. 1 and 2 during those years

pursuant to section 215.

Notices of Deficiency

     In the notices of deficiency, respondent determined that

petitioner failed to report alimony income of $32,733 and $21,601

for 1991 and 1994, respectively.      Respondent has conceded the
                                            - 10 -


section 6651(a) addition to tax and section 6662(a) accuracy-

related penalties determined in the notices of deficiency.

                                         OPINION

       The sole issue to be resolved concerns the characterization

(alimony          or    property    settlement)      of    the     payments     made   by

petitioner's former husband for the purpose of providing petitioner

with an automobile in 1991 and 1994.                 Petitioner asserts that these

payments are not alimony and her use of an automobile was provided

for    pursuant         to   a   property     agreement.         On   the   other   hand,

respondent         contends      that   the   payments     constituted       alimony   to

petitioner because they were: (1) Made "periodically" (i.e., every

3 years) under a written separation agreement, (2) constructively

received by petitioner, and (3) made to support and maintain

petitioner.

       Succinctly stated, alimony or separate maintenance payments

are generally taxable to the recipient and deductible by the payor,

whereas transfer of property between spouses (property settlements)

incident to a divorce are generally not taxable events and do not

give       rise    to   recognizable     income      or   to   a   deduction.       Secs.

61(a)(8), 712, 215(a).




       2
          The Deficit Reduction Act of 1984, Pub. L. 98-369, sec.
422, 98 Stat. 494, 795, extensively changed the alimony rules
effective for divorce decrees executed after Dec. 31, 1984. We
note that this case involves sec. 71(a)(1) prior to its revision.
                                 - 11 -


     In   deciding   the   character   of   an   award   in   a   divorce   or

separation decree, great weight is given to the language and

structure of the decree.     Griffith v. Commissioner, 749 F.2d 11, 13

(6th Cir. 1984), affg. T.C. Memo. 1983-278.               The decision of

whether payments are in the nature of support (that is, alimony) or

a property settlement, however, is not controlled by the labels

assigned to the payments by the court in the divorce decree or by

the parties in their agreement but, instead, depends upon all of

the facts and circumstances.     Yoakum v. Commissioner, 82 T.C. 128,

140 (1984); Beard v. Commissioner, 77 T.C. 1275, 1283-1284 (1981).

     Factors which indicate that the payments are in the nature of

a property settlement are: (1) The parties in their agreement (or

the court in its decree) intended the payments to effect a division

of their assets; (2) the recipient surrendered valuable property

rights in exchange for the payments; (3) the payments are fixed in

amount and not subject to contingencies, such as the remarriage or

death of the recipient; (4) the payments are secured; (5) the

amount of the payments plus the other property awarded to the

recipient equals approximately one-half of the property accumulated

by the parties during marriage; (6) the needs of the recipient were

not taken into consideration in determining the amount of the

payments; and (7) a separate provision for support was provided

elsewhere in the decree or agreement. Beard v. Commissioner, supra

at 1284-1285.
                                    - 12 -


      In the instant case, a majority of the above factors indicates

that the payments made by Mr. Rangos were in the nature of a

property settlement rather than support.            Our analysis in this

regard is as follows:

      With regard to the first factor, we believe the Agreement was

intended   to    be   a   comprehensive   and   final   settlement     of   all

property claims and rights between Mr. Rangos and petitioner.                In

this respect, Mr. Rangos was primarily concerned with retaining

ownership of his business interests and real estate.             He wanted

these assets and used the Agreement to get them.               This factor

favors treating the payments as part of a property settlement.

      With regard to the second factor, pursuant to the Agreement,

petitioner surrendered valuable property rights: Her rights in all

of Mr. Rangos' corporate stock, his business interests, and all

real estate (except the marital residence). This factor favors

treating the payments as part of a property settlement.

      With regard to the third factor, although the payments were

not fixed in amount, they were fixed in that Mr. Rangos was

required to provide petitioner with full and unrestricted use of a

new   Cadillac    Eldorado    (or   an    equivalent    automobile).        The

automobile payments were subject to two possible contingencies:

petitioner's death or remarriage. Although these contingencies

favor characterizing the payments as alimony, we do not believe

that they prove fatal to petitioner's case in light of the entire
                                      - 13 -


record before us.       See, e.g., Stiles v. Commissioner, T.C. Memo.

1981-711.

     With regard to the fourth factor, it does not appear that the

payments were secured by any of Mr. Rangos' assets.               The absence of

this factor favors treating the payments as alimony.

     With regard to the fifth factor, petitioner received the

following pursuant to the Agreement: (1) A $90,000 equity interest

in   the    marital    residence;      (2)     certain    items    of       household

furnishings; (3) maintenance payments for the children; (4) alimony

payments of $2,083.33 per month; (5) use of a new Cadillac Eldorado

or the equivalent every 3 years; (6) beneficiary rights in Mr.

Rangos' $200,000 life insurance policy in trust; and (7) a right to

use a Florida condominium owned by Mr. Rangos.                    We believe the

value of all the assets (including the use of a new Cadillac every

3 years) received by petitioner was less than one-half of the value

of the property accumulated by petitioner and Mr. Rangos during

their marriage.       This factor favors treating the payments as part

of a property settlement.

     With regard to the sixth factor, we believe petitioner's needs

were taken into consideration in determining the amount of the car

payments.    Thus,    this   factor    favors     treating   the    payments       as

alimony.

     Finally,    with    regard   to    the     seventh   factor,       a   separate

provision for support (Paragraph 11) was clearly enunciated in the
                                         - 14 -


Agreement, declaring these support payments deductible by Mr.

Rangos and taxable to petitioner.              This factor favors treating the

automobile payments as part of a property settlement.

     Upon analyzing the seven aforementioned factors, we conclude

that Mr. Rangos and petitioner intended the automobile payments to

be part of a property settlement.              See Kohn v. Kohn, 364 A.2d 350,

353 (Pa. Super. Ct. 1976). In reaching our conclusion, we found

that petitioner credibly testified to the circumstances surrounding

execution of the Agreement, its intent, and subsequent performance.

     Although the language of Paragraph 12 does not provide for the

tax treatment of the automobile payments, elsewhere the Agreement

specifically declares the tax treatment of certain items: (1)

Paragraph 8 states that Mr. Rangos is entitled to the dependency

exemptions for the minor children; (2) Paragraph 11 states that the

payments made pursuant to this paragraph are to be includable in

petitioner's income and deductible as an expense by Mr. Rangos; and

(3) Paragraph 16 refers to deficiencies and refunds regarding

petitioner and Mr. Rangos' 1971 and 1972 income tax returns.

     We    believe     that   had    petitioner       and   Mr.    Rangos      intended

Paragraph 12 to involve taxable alimony, they would have said so.

Moreover, Paragraph 12 states that "The use of said motor vehicle

shall be     at   no   expense      to   the   Wife   except      the   cost    of   the

operation,    maintenance        and      repair."    (Emphasis         added.)      This

sentence, along with petitioner's credible testimony, supports our
                              - 15 -


conclusion that the parties did not intend for petitioner to

include the automobile payments as income.

     Ambiguous language in a contract is to be resolved against the

drafter of the agreement.   Rink v. Commissioner, 100 T.C. 319, 328

n.8 (1993), affd. 47 F.3d 168 (6th Cir. 1995); see, e.g., United

States v. Seckinger, 397 U.S. 203, 216 (1970).     Accordingly, we

construe any ambiguity of Paragraph 12 against Mr. Rangos.

     Considering all the facts and circumstances, we hold that the

amounts paid by Mr. Rangos for the purpose of furnishing petitioner

with an automobile in 1991 and 1994 are in the nature of a property

settlement, and therefore not includable in her income for those

years.

     To reflect the foregoing and respondent's concessions,



                                         Decisions will be entered

                                    for petitioner.
