                  T.C. Summary Opinion 2003-166



                     UNITED STATES TAX COURT



              LAWRENCE ROBERT GAMER, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 19013-02S.            Filed December 15, 2003.


     Lawrence Robert Gamer, pro se.

     Laura A. McKenna, for respondent.



     ARMEN, Special Trial Judge:    This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time that the petition was filed.1   The decision to

be entered is not reviewable by any other court, and this opinion

should not be cited as authority.


     1
        Unless otherwise indicated, all subsequent section
references are to the Internal Revenue Code in effect for 2000,
the taxable year in issue, and all Rule references are to the Tax
Court Rules of Practice and Procedure.
                               - 2 -

     Respondent determined a deficiency in petitioner’s Federal

income tax for 2000 in the amount of $5,267.

     The sole issue for decision is whether a payment of $37,000

made by petitioner to his former wife in 2000 is deductible as

alimony under section 215.   We hold that it is not.

     An adjustment to the amount of petitioner’s itemized

deductions is a purely mechanical matter, the resolution of which

is dependent on our disposition of the disputed issue.

Background

     Some of the facts have been stipulated, and they are so

found.   Petitioner resided in Loxahatchee, Florida, at the time

that his petition was filed with the Court.

     At or about the time they were married in July 1997,

petitioner and his then wife, Deborah Gamer (Ms. Gamer), jointly

purchased a residence in which they lived during their marriage.

The residence was titled in the couple’s joint names as tenants

by the entireties.

     Petitioner and Ms. Gamer were divorced in March 2000.

     On or about February 22, 2000, petitioner and Ms. Gamer

entered into a Marital Settlement Agreement (settlement

agreement).   The settlement agreement provided, in part,   as

follows:

          10. Alimony. Each party does hereby waive
     alimony and does hereby totally, irrevocably and
     completely relieve the other party of all matters and
     charges whatsoever excepting as set forth in this
                                 - 3 -

     instrument, each releasing the other of and from all
     claims and demands for anything whatsoever in the
     future, including, but not limited to, alimony and
     separate maintenance, regardless of the future income
     of the husband and wife.

               *    *    *       *       *   *    *

          14. Parties Bound. This Settlement Agreement
     shall be binding upon the heirs, legatees, devisees,
     administrators, and personal representatives of the
     parties hereto and, in the event of the death of either
     of the parties of this Settlement Agreement while said
     Settlement Agreement is in force and effect, the estate
     of said deceased party shall be obligated and
     responsible for the performance of the obligations and
     conditions of this Settlement Agreement.

               *    *    *       *       *   *    *

          18. Marital Residence. The parties jointly own
     as tenants by the entireties a certain single family
     residence * * *. Within ten days of the execution of
     this Agreement, the husband shall pay to the wife in
     current cash funds the sum of $37,000 representing the
     wife’s interest in this residence. Contemporaneous
     with the transfer of these funds, the wife shall
     execute a quit-claim deed conveying to the husband all
     of her right, title and interest in this property.


     The provisions of the settlement agreement were incorporated

into a Final Judgment of Dissolution of Marriage.

     On March 7, 2000, petitioner issued a check payable to Ms.

Gamer in the amount of $37,000.      Petitioner wrote “Settlement” on

the memo section of the check.

     Petitioner filed Form 1040, U.S. Individual Income Tax

Return, for the taxable year 2000.       On his 2000 return,

petitioner claimed a deduction in the amount of $37,000 for

“alimony paid” to Ms. Gamer.
                               - 4 -

     On September 3, 2002, respondent issued a notice of

deficiency to petitioner determining a $5,267 deficiency in his

income tax for the 2000 taxable year.     In the notice, respondent

disallowed the $37,000 deduction for alimony claimed by

petitioner on the ground that “Lump-sum cash paid as a property

settlement is not deductible as alimony.”

Discussion2

     Generally, a property settlement incident to a divorce is

not a taxable event and does not give rise to a deduction.       Sec.

1041; Estate of Goldman v. Commissioner, 112 T.C. 317, 322

(1999), affd. without published opinion sub nom. Schutter v.

Commissioner, 242 F.3d 390 (10th Cir. 2000).     However, section

215(a) allows a deduction for the payment of alimony during a

taxable year.

     Section 215(b) defines alimony as payment which is

includable in the gross income of the recipient under section 71.

Section 71(b) provides a four-step inquiry for determining

whether a cash payment is alimony.     Section 71(b) provides:

          SEC. 71(b). Alimony or Separate Maintenance Payments
     Defined.–-For purposes of this section--

          (1) In general.--The term “alimony or separate
     maintenance payment” means any payment in cash if--

                (A) such payment is received by (or on


     2
        We decide the issue in this case without regard to the
burden of proof. See sec. 7491; Rule 142(a); Higbee v.
Commissioner, 116 T.C. 438 (2001).
                               - 5 -

          behalf of) a spouse under a divorce or
          separation instrument,

               (B) the divorce or separation instrument
          does not designate such payment as a payment
          which is not includible in gross income under
          this section and not allowable as a deduction
          under section 215,

               (C) in the case of an individual legally
          separated from his spouse under a decree of
          divorce or of separate maintenance, the payee
          spouse and the payor spouse are not members
          of the same household at the time such
          payment is made, and

               (D) there is no liability to make any
          such payment for any period after the death
          of the payee spouse and there is no liability
          to make any payment (in cash or property) as
          a substitute for such payments after the
          death of the payee spouse.


Accordingly, if the payment made by petitioner fails to meet any

one of the four enumerated criteria, that payment is not alimony

and is not deductible by petitioner.

     The parties agree that petitioner’s $37,000 payment to Ms.

Gamer satisfies the requirements set forth in section

71(b)(1)(A), (B), and (C).   On the other hand, the parties

dispute whether the requirements of section 71(b)(1)(D) have been

satisfied.

     The history of section 71(b)(1)(D) establishes that it was

enacted to distinguish alimony, deductible by the payor and

includable in the payee’s gross income, from payments in the

nature of property settlements, which are nondeductible by the
                               - 6 -

payor and excludable from the payee’s gross income.

     In 1984, Congress revised section 71 in an attempt to

minimize the differences in Federal tax consequences created by

differences in State laws and to establish an objective and

uniform Federal standard as to what constitutes alimony.      See

sec. 422(a) of the Deficit Reduction Act of 1984 (DRA 1984), Pub.

L. 98-369, 98 Stat. 795; see also H. Rept. 98-432, Part 2, 1495,

1496 (1984), wherein the House Ways and Means Committee

articulated the purpose of the 1984 amendment as follows:

     The Committee bill attempts to define alimony in a way
     that would conform to general notions of what type of
     payments constitute alimony as distinguished from
     property settlements and to prevent the deduction of
     large, one-time lump-sum property settlements.
     [Emphasis added.]
                *    *    *    *       *   *   *

     In order to prevent the deduction of amounts which are
     in effect transfers of property unrelated to the
     support needs of the recipient, the bill provides that
     a payment qualifies as alimony only if the payor * * *
     has no liability to make any such payment for any
     period following the death of the payee spouse. * * *

     For payments to constitute alimony, section 71(b)(1)(D), as

originally enacted by DRA 1984, required the divorce or

separation instrument to state that there was no liability on the

payor spouse to make the payments after the death of the payee

spouse.3   However, under the statutory law of most States,


     3
         As amended by the Deficit Reduction Act of 1984, Pub. L.
                                                    (continued...)
                               - 7 -

alimony terminates at the death of the payee spouse unless the

separation agreement or the divorce decree provides to the

contrary.   Therefore, in 1986, Congress struck from section

71(b)(1)(D) the parenthetical providing for alimony treatment

only if the divorce or separation instrument stated that there

was no liability on behalf of the payor spouse to make the

payments after the death of the payee spouse.   See sec. 1843(b)

of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2853.

But even after the 1986 amendment, whether an obligation to make

payments survives the death of the payee spouse “may be

determined by the terms of the applicable instrument, or if the

instrument is silent on the matter, by looking to State law.”

Kean v. Commissioner, T.C. Memo. 2003-163.

     The issue before us is whether the $37,000 payment

petitioner made to Ms. Gamer pursuant to the settlement agreement

was for her support, thus constituting alimony, or in the nature

of a property settlement and therefore not deductible from his

gross income.   Specifically, we must decide whether under the



     3
      (...continued)
98-369, 98 Stat. 795, sec. 71(b)(1)(D) provided as follows:

          (D) there is no liability to make any such payment
     for any period after the death of the payee spouse and
     there is no liability to make any payment (in cash or
     property) as a substitute for such payments after the
     death of the payee spouse (and the divorce or
     separation instrument states that there is no such
     liability).
                                - 8 -

terms of the settlement agreement, petitioner would have been

liable for the $37,000 payment in the event of Ms. Gamer’s prior

death.

     Respondent contends that petitioner was obligated under the

terms of the settlement agreement to make the $37,000 payment to

Ms. Gamer in the event of her prior death.    Petitioner primarily

argues that, because the $37,000 payment was required to be made

almost simultaneously with the execution of the settlement

agreement (i.e., within 10 days of the date of the settlement

agreement), there arose no liability that would not have

terminated at Ms. Gamer’s death.

     We hold that the $37,000 payment petitioner made to Ms.

Gamer in 2000 was a property settlement and not deductible

alimony.

         In reaching our conclusion, we apply the language of the

settlement agreement itself.    Paragraph 10 of the settlement

agreement provides that both petitioner and Ms. Gamer waive

alimony.    Paragraph 18 of the settlement agreement, however,

provides that “[petitioner] shall pay [Ms. Gamer] the sum of

$37,000" in exchange for Ms. Gamer’s interest in the marital

residence.    The terms of the settlement agreement do not state

that petitioner’s liability to make the $37,000 payment would

cease upon the prior death of Ms. Gamer.    Additionally, paragraph

14 of the settlement agreement provides that petitioner and Ms.
                               - 9 -

Gamer remain bound to all obligations of the settlement agreement

in the event of the death of either individual.    Petitioner also

admitted at trial that he understood that under the terms of the

settlement agreement, in the event of Ms. Gamer’s prior death, he

would still be obligated to make the $37,000 payment to Ms.

Gamer’s estate and Ms. Gamer’s estate would still be obligated to

transfer her interest in the marital residence to him.

     The fact that petitioner was required to make the $37,000

payment within 10 days of the execution of the settlement

agreement is irrelevant.   In Webb v. Commissioner, T.C. Memo.

1990-540, the separation agreement provided, in part, that “The

Husband shall pay, simultaneously with the execution of this

Agreement, to the Wife, the sum of [$15,000]”.    We held that the

fact that the separation agreement provided that the husband

“shall pay” was sufficient to create a liability that would have

been enforceable by the ex-wife’s estate had she died after the

execution of the separation agreement but before payment by the

husband.   In Webb, it was of no consequence that the husband’s

payment was made simultaneously with the execution of the

separation agreement.

     We find that the terms of the settlement agreement provide

that petitioner would still be required to make the $37,000

payment in the event of Ms. Gamer’s prior death.   Accordingly,

the $37,000 payment from petitioner to Ms. Gamer fails to satisfy
                             - 10 -

the requirements of section 71(b)(1)(D) and, therefore, does not

qualify as deductible alimony.   In view of the foregoing, we

sustain respondent’s determination.

     We have considered all of the other arguments made by

petitioner, and, to the extent that we have not specifically

addressed them, we find them to be without merit.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                           Decision will be entered

                                      for respondent.
