                        T.C. Memo. 2003-132



                      UNITED STATES TAX COURT



        FREDERICK W. AND CANDACE J. TILEY, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 1402-02.               Filed May 8, 2003.



     Frederick W. and Candace J. Tiley, pro sese.

     Kelley Blaine and Robert V. Boeshaar, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     COHEN, Judge:   Respondent determined a deficiency of $6,409

in petitioners’ Federal income tax for 1998 and a penalty of

$1,281.80 under section 6662(a).   Unless otherwise indicated, all

section references are to the Internal Revenue Code in effect for

the year in issue.   The issue for decision is whether petitioners

are liable for the accuracy-related penalty.
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                         FINDINGS OF FACT

     Some of the facts have been stipulated, and the stipulated

facts are incorporated in our findings by this reference.

Petitioners resided in Salem, Oregon, at the time that they filed

the petition in this case.

     In 1978, petitioner Frederick W. Tiley (petitioner) married

Kathleen Ann Tiley (Ms. Tiley).   In 1991, petitioner and

Ms. Tiley filed a Stipulated Judgment of Dissolution of Marriage

in the Circuit Court of the State of Oregon for the County of

Polk.   On August 27, 1998, petitioner and Ms. Tiley entered into

a settlement agreement set forth on the record in a transcript of

proceedings in the Circuit Court of the State of Oregon for the

County of Polk.   As stated in the record, among other things:

          It is the stipulation of the parties that
     Dr. Tiley will pay by cashier’s check the sum of
     $80,000 on or before September 28th, 1998, to
     [Ms.] Tiley. On condition--by the way, that payment
     would all be classified as payment for attorney’s fees,
     both present and past, and back child support. None of
     the $80,000 would be classified as payment of any back
     spousal support and both parties have agreed that
     Dr. Tiley will not attempt to deduct any portion of
     that $80,000 payment as spousal support and that
     [Ms.] Tiley would not be required to recognize it as
     taxable income.

Petitioner was present at the time that the settlement agreement

was stated in the record, as shown by the following excerpt from

the transcript:
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          THE [State] COURT: All right. So you’re in
     agreement with the stipulation as recited by Mr. Hemann
     [Ms. Tiley’s counsel]?

          MR. WHEELER [petitioner’s counsel]:    Is that
     correct, Doctor?

           DR. FREDERICK TILEY:    Yes.

          THE COURT: I was going to ask you, Dr. Tiley.
     For the record you are in agreement with it as well?

           DR. FREDERICK TILEY:    Yes.

On October 7, 1998, and November 25, 1998, petitioner wrote

checks to Ms. Tiley in the amounts of $23,004 and $57,000,

respectively.

     On their 1998 Form 1040, U.S. Individual Income Tax Return,

petitioners deducted $38,500 as alimony paid to Ms. Tiley.

                               OPINION

     In the petition in this case, petitioner alleged that

$38,500 of the $80,000 in payments made to Ms. Tiley in 1998 was

for “deductible spousal support.”     Petitioner did not concede the

deficiency until the time of trial, although his claim was

clearly contrary to the settlement agreement that he entered into

in 1998.   Petitioner, however, contends that he should not be

liable for the accuracy-related penalty because he did not

remember the settlement agreement entered into the record of the

State court.    He asserts that, at the time of the settlement,

approximately $38,000 was owed to Ms. Tiley as spousal support.
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     Section 215(a) allows a deduction for alimony paid during a

taxable year.   “Alimony” is defined in section 71(b) as a payment

if “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".   The settlement entered into by petitioner with his former

wife expressly stated that the payments agreed to would not be

income to Ms. Tiley and would not be deductible by petitioner.

Thus, the amount paid by petitioner to Ms. Tiley during 1998

clearly was not alimony deductible by petitioner.

     Section 6662 imposes a penalty in an amount equal to

20 percent of the portion of an underpayment attributable, among

other things, to negligence or disregard of rules or regulations.

“‘[N]egligence’ includes any failure to make a reasonable attempt

to comply with the provisions of * * * [Title 26], and the term

‘disregard’ includes any careless, reckless, or intentional

disregard.”   Sec. 6662(c).

     This case clearly justifies the penalty.   Petitioner

expressly agreed in open court, in response to questions from his

counsel and from the court, that the amounts that he paid to

Ms. Tiley would not be deductible alimony.   He ignored that

agreement and, instead, seeks to justify his deduction on the

basis of his preexisting liabilities that were reduced and

liquidated in the settlement.   Even if we were to accept
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petitioner’s questionable assertion that he does not recall the

agreement, it was incumbent upon him, as a reasonable person, to

refer to the settlement agreement before deducting as alimony the

payments that he made.


                                           Decision will be entered

                                      for respondent.
