                  T.C. Summary Opinion 2011-11



                      UNITED STATES TAX COURT



                JAMES DAVID SHILEY, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 13418-09S.             Filed February 7, 2011.



     James David Shiley, pro se.

     Emly B. Berndt, for respondent.



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

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.   Pursuant to section

7463(b), the decision to be entered is not reviewable by any

other court, and this opinion shall not be treated as precedent

for any other case.   Unless otherwise indicated, subsequent
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section references are to the Internal Revenue Code in effect for

the year in issue, and all Rule references are to the Tax Court

Rules of Practice and Procedure.

     For 2007 respondent determined a deficiency of $1,708 in

petitioner’s Federal income tax.    The sole issue for decision is

whether payments petitioner made in 2007 to his former wife are

deductible as alimony.

                           Background

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the attached exhibits are

incorporated herein by reference.   When petitioner filed his

petition, he resided in Ohio.

     Petitioner was married on November 10, 1989.    Approximately

10 years later, he and his former wife separated, and on July 19,

1999, they entered into a separation agreement (agreement).1    The

agreement provided that neither party would be entitled to

receive spousal support and both parties waived any future claim

thereto.

     The agreement also included several provisions regarding the

division of property, providing in pertinent part:

          5. As a further division of property, Husband shall
     pay to Wife, the sum of Sixty-five Thousand Dollars
     ($65,000), plus the marital portion of COLA as detailed
     below, as follows: Five Thousand Dollars ($5,000) upon the


     1
      The divorce decree, signed July 27, 1999, fully
incorporated the terms of the separation agreement.
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     granting of a Decree of Divorce or July 17, 1999 whichever
     occurs first, and the balance as follows:

               A) Five Hundred Dollars ($500.00) per month
          commencing July 10, 1999 and due and payable on the
          10th day of each month thereafter for 120 months,
          ending June 30, 2009. Said monthly payments shall be
          increased by the marital portion of COLA compounded,
          commencing July 10, 2000, and each July 10th thereafter
          until the obligation has been satisfied in full.

               B) Rights of Survivorship. During the term of
          this obligation and until this obligation is satisfied
          in full, Husband covenants that he shall submit to
          all physicals and sign all documents required for Wife
          to purchase a life insurance policy on his life in
          the amount of Fifty Thousand Dollars ($50,000) to
          secure this obligation, at Wife’s cost.

               C) Nature of Obligation. The parties agree that
          the payments hereunder are a division of property.
          Husband agrees that he will pay, and save Wife harmless
          from any liability on, any and all taxes attributable
          to this obligation and the payments hereunder. Except,
          however, in the event Husband attempts to discharge
          this obligation through bankruptcy, or other means, he
          shall continue all such payments as spousal support,
          increased by Wife’s tax obligations thereon. Husband
          agrees that his obligation hereunder is binding upon
          his heirs, executors, administrators and assigns and
          shall become an obligation of his estate.


           *      *      *      *      *      *      *


          13. It is agreed that this Agreement shall be binding
     upon the heirs, executors, administrators, next of kin and
     assigns of each party thereto.

     With respect to his obligation pursuant to the agreement, in

2007 petitioner paid his former wife $6,000 which he deducted on

his Federal income tax return as alimony.
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       On March 13, 2009, respondent issued to petitioner a

statutory notice of deficiency disallowing petitioner’s alimony

deduction.

                             Discussion

I.    Burden of Proof

       Generally, the Commissioner’s determinations are presumed

correct, and the taxpayer bears the burden of proving that those

determinations are erroneous.2    Rule 142(a); see INDOPCO, Inc. v.

Commissioner, 503 U.S. 79, 84 (1992); Welch v. Helvering, 290

U.S. 111, 115 (1933).

II.    Alimony Payments

       Section 215(a) allows a deduction for alimony paid

during the payor’s taxable year.    Section 215(b) defines alimony

or separate maintenance as any “payment (as defined in section

71(b)) which is includible 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:

            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--


       2
      Petitioner has not claimed or shown that he meets the
requirements under sec. 7491(a) to shift the burden of proof to
respondent as to any factual issue relating to his liability for
tax.
                                - 5 -

                 (A) such payment is received by (or on
            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 * * *
            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.

     Payments are deductible as alimony only if all four

requirements of section 71(b)(1) are met.    Respondent agrees that

petitioner satisfies subparagraphs (A) and (C) of section

71(b)(1).    The parties disagree, however, as to whether

petitioner’s payment was designated a payment not includable in

gross income and whether petitioner’s payment obligation would

terminate upon the death of his former wife.    See sec.

71(b)(1)(B), (D).

     We first address the requirement of section 71(b)(1)(B),

which provides that a payment will not be alimony if the

governing divorce or separation instrument designates the payment

not includable in gross income under section 71 and not allowable
                               - 6 -

as an alimony deduction under section 215.   A divorce or

separation instrument “contains a nonalimony designation if the

substance of such a designation is reflected in the instrument.”

Estate of Goldman v. Commissioner, 112 T.C. 317, 323 (1999),

affd. without published opinion sub nom. Schutter v.

Commissioner, 242 F.3d 390 (10th Cir. 2000).   Generally the

divorce or separation agreement must provide a “clear, explicit

and express direction” that the payments are not to be treated as

alimony, Richardson v. Commissioner, 125 F.3d 551, 556 (7th Cir.

1997), affg. T.C. Memo. 1995-554, but the designation “need not

mimic the statutory language of * * * sections 71 and 215”,

Estate of Goldman v. Commissioner, supra at 323.   A nonalimony

designation will be found if the substance of such a designation

is reflected in the instrument.   Estate of Goldman v.

Commissioner, supra.

     Petitioner’s separation agreement unambiguously provides

that he shall pay his former wife “As a further division of

property” $65,000.   The agreement characterizes petitioner’s

obligation as a division of property.   Part and parcel of

petitioner’s payment liability was his further agreement that “he

will pay, and save Wife harmless from any liability on, any and

all taxes attributable to this obligation and the payments

hereunder.”   The agreement, in addition, sets forth as a separate
                              - 7 -

general provision that neither party shall be entitled to receive

spousal support from the other.

     While petitioner did not focus on any particular provision

in the agreement, there is a colorable argument that the payment

obligation satisfies section 71(b)(1)(B) because of the provision

that in the event of an attempt to discharge the obligation in

bankruptcy, the obligation shall continue as “spousal support,

increased by Wife’s tax obligations thereon.”3   Notwithstanding

the foregoing language, the Court concludes that when the

agreement is read as a whole, it reflects an intent and agreement

of the parties that the payments are pursuant to a division of

property, as opposed to spousal support, and are not to be

includable in the gross income of petitioner’s former wife.   See

Fields v. Commissioner, T.C. Memo. 2008-207; see also Hoover v.

Commissioner, T.C. Memo. 1995-183 (where payments of sum certain

are made over a definite period regardless of contingencies, it

is as a matter of law a division of property), affd. 102 F.3d 842

(6th Cir. 1996).

     Petitioner’s payments were made to his former wife as part

of a division of property,4 his former wife was not liable for


     3
      Petitioner has not alleged that the payment obligation was
actually converted to spousal support.
     4
      Ohio Rev. Code Ann. sec. 3105.18 (LexisNexis 2008) also
provides that “Spousal support” does not include any payment made
to a spouse that is made as part of a division or distribution of
property.
                              - 8 -

any taxes attributable to those funds, and neither party was

entitled to spousal support pursuant to the agreement.    Upon

consideration of the agreement, the Court concludes that

petitioner’s payments made to his former wife pursuant to a

division of property are not deductible as alimony.   Respondent’s

determination is sustained.

     The Court notes that even if petitioner’s payments satisfied

section 71(b)(1)(B), they do not satisfy section 71(b)(1)(D)

because the payments do not terminate upon the death of

petitioner’s former wife.5

     The Court finds that the agreement contains a nonalimony

designation within the meaning of section 71(b)(1)(B) and a

liability for payment that survives the death of the payee spouse

as described in subparagraph (D) of section 71(b)(1).    Thus

petitioner’s payment of $6,000 in 2007 to his former wife was not

deductible alimony.




     5
      The agreement provides that the obligations of the parties
shall be binding upon the heirs, executors, administrators, next
of kin and assigns of each party hereto. See Hoover v.
Commissioner, T.C. Memo. 1995-183, affd. 102 F.3d 842 (6th Cir.
1996); Cunningham v. Commissioner, T.C. Memo. 1994-474. Pursuant
to the agreement, petitioner is obligated to fulfill his payment
liability, an obligation which does not terminate at the death of
either party.
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     Other arguments made by the parties and not discussed herein

were considered and rejected as irrelevant, without merit, or

moot.

     To reflect the foregoing,


                                         Decision will be entered

                                 for respondent.
