                         T.C. Memo. 1998-268



                       UNITED STATES TAX COURT



   THOMAS H. NELSON AND DONNA J. ZULLO NELSON, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



       Docket No. 21947-96.               Filed July 22, 1998.



       Christopher Altier, for petitioners.

       Katherine Lee Wambsgans, for respondent.


               MEMORANDUM FINDINGS OF FACT AND OPINION


       CARLUZZO, Special Trial Judge:   This case was heard pursuant

to the provisions of section 7443A(b)(3) and Rules 180, 181, and

182.    Unless otherwise indicated, section references are to the

Internal Revenue Code in effect for the years 1992 and 1993.

Rule references are to the Tax Court Rules of Practice and

Procedure.
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     Respondent determined deficiencies in petitioners' 1992 and

1993 Federal income taxes in the amounts of $4,671 and $5,376,

respectively.      The issue for decision is whether certain payments

made by Thomas H. Nelson to his former spouse during the years in

issue constitute alimony within the meaning of section 71 and are

therefore deductible pursuant to section 215.

                               FINDINGS OF FACT

     This case was submitted fully stipulated, and the stipulated

facts are so found.      Petitioners are husband and wife.   They

filed timely joint Federal income tax returns for the years 1992

and 1993.    At the time the petition was filed, they resided in

Kingsville, Ohio.      References to petitioner are to Thomas H.

Nelson.

     Petitioner married Mary Kay Nelson on September 19, 1964.

Their marriage was dissolved by a Judgment Entry and Decree filed

on June 11, 1987, by the Court of Common Pleas, Astabula County,

Ohio (the divorce decree).

     Relevant for our purposes, the divorce decree contains the

following provisions:

            III)     ALIMONY

            A)     Periodic Payments of Permanent Alimony

          Pursuant to the agreement of the parties hereto,
     IT IS FURTHER ORDERED, ADJUDGED AND DECREED that * * *
     [petitioner] pay to * * * [Mary Kay Nelson] the sum of
     One Thousand Three Hundred Dollars ($1,300.00), plus
     two per cent (2%) poundage as and for alimony. Said
     sum to be paid through the Bureau of Support.
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          IT IS FURTHER ORDERED, ADJUDGED AND DECREED that
     said sum be paid for not less than ten (10) years
     commencing July, 1987, and each first (lst) day of the
     month thereafter; provided, however, that upon the
     expiration of * * * [petitioner's] child support
     obligation, the amount of alimony to be paid to * * *
     [Mary Kay Nelson] by * * * [petitioner] shall be
     increased the next following month and each month
     thereafter to the sum of One Thousand Six Hundred
     Dollars ($1,600.00), together with two per cent (2%)
     poundage.

          The above alimony obligation shall terminate upon
     the death of * * * Mary Kay Nelson. * * * [Petitioner]
     shall provide and maintain a policy of decreasing
     principal term life insurance upon his life in an
     amount equal to the decreasing balance of the alimony
     obligation set forth above. Mary Kay Nelson shall be
     named as beneficiary on said policy.

          Pursuant to the agreement of the parties hereto
     * * * Mary Kay Nelson, hereby waives and releases any and
     all rights to further or additional sums of alimony to be
     paid by * * * [petitioner].


In separate sections of the divorce decree, personal and business

marital property was divided between petitioner and his former

spouse.

     Apparently, Mary Kay Nelson remarried and became employed

after the effective date of the divorce decree.   Based upon those

reasons, petitioner sought relief from above-cited alimony

provisions of the divorce decree.   In 1989 he filed a motion for

relief in the court that issued the divorce decree (the divorce

court).   His motion was denied upon the ground that the divorce

court no longer had jurisdiction over the matter.   In an order

filed June 11, 1989, denying petitioner's motion, the divorce
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court noted that the payments designated as alimony in the

divorce decree were actually part of the division of marital

property.   Petitioner appealed the divorce court's order to the

appropriate appellate court.   The appellate court held that the

divorce court no longer had jurisdiction in the matter and in an

opinion filed February 19, 1991, affirmed the divorce court's

order denying the relief petitioner requested.   The appellate

court likewise viewed the alimony payments to be part of the

division of marital property, stating in its opinion:

          Although it is possible that the monthly payments
     in question were used by * * * [Mary Kay Nelson] for
     support, the foregoing evidence clearly shows that the
     payments were part of the distribution of the marital
     assets. Under these circumstances, the fact that * * *
     [Mary Kay Nelson] had remarried and had a new job would
     not affect her right to the payments. See, Zimmie v.
     Zimmie (1984), 11 Ohio St. 3d 94.

Elsewhere in its opinion, the appellate court pointed out that

under Ohio law the use of the term "alimony" in the divorce

decree did not conclusively establish the purpose for which the

payments were made, stating:

          Historically, under Ohio law, alimony has been
     said to consist of two separate elements: periodic
     payments for sustenance and support, and the
     distribution of the marital assets. Cherry v. Cherry
     (1981), 66 Ohio St. 2d 348, 352. As this court noted
     in Peck v. Peck (June 2, 1989), Ashtabula App. No. 88-
     A-1385, unreported, the distinction between the two
     types can often be difficult to discern. However,
     certain rules have been provided for making this
     determination:

                 Generally, the underlying purpose for
            the periodic payment is the factor which
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          distinguishes support from property
          distribution. The former is meant to provide
          sustenance support, while the latter involves
          the readjustment of the parties property
          rights. St Clair v. St. Clair (1983), 9 Ohio
          App. 3d 195; Wolfe, supra. Other criteria
          which courts have employed in making this
          distinction are whether the award is for a
          definite sum and if it is not subject to
          contingencies. Vaught v. Vaught (1981), 2
          Ohio App. 3d 264; Bean v. Bean (1983), 14
          Ohio App. 3d 358. If the periodic payments
          have these characteristics, they are
          considered to be part of the property
          distribution. Id. at 5.

     In each year in issue, in accordance with the terms of the

divorce decree, petitioner paid his former spouse $19,200 ($1,600

per month x 12 months).      Alimony deductions with respect to these

amounts were claimed on petitioners' Federal income tax returns

for those years.   In the notice of deficiency, respondent

disallowed the alimony deductions upon the ground that "the

payments represent a property settlement."

                                 OPINION

     In general, an individual is allowed to deduct amounts paid

as alimony during the taxable year to the individual's spouse, or

former spouse.   Sec. 215.    A payment constitutes alimony within

the meaning of section 215 if the payment is made in cash

(including checks and money orders payable on demand, sec. 1.71-

1T(a), Income Tax Regs., 49 Fed. Reg. 34455(Aug. 9, 1989)), and

(1) such payment is received by (or on behalf of) a spouse under

a divorce or separation instrument; (2) the divorce or separation
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instrument does not designate such payment as a payment that is

not includable in the payee's gross income under section 71 and

is not allowable as a deduction to the payor under section 215;

(3) if the individual and the spouse are legally separated, they

are not members of the same household; and (4) the payor has no

liability to make any such payment for any period after the death

of the payee.   Secs. 71(b), 215(b).

     Relying upon the above definition and the language of the

divorce decree, petitioners argue that the payments petitioner

made to Mary Kay Nelson during the years in issue constitute

alimony within the meaning of section 215 and are therefore

deductible as claimed on their Federal income tax returns.

     Respondent agrees with petitioners that as far as the

literal language of the divorce decree provides, the payments

satisfy the definition of alimony for Federal income tax

purposes.   However, according to respondent, the actions of the

divorce court and appellate court supersede the language of the

divorce decree.   Therefore, according to respondent, and at least

with respect to the years in issue, if not before, payments made

pursuant to the relevant alimony portion of the divorce decree

are not deductible.   Respondent's argument is grounded upon the

principle that the division of marital property does not give

rise to an alimony deduction on the part of the payor spouse, a

proposition of law not disputed by petitioners.   See sec. 1041.
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     Petitioners, however, do not agree that the alimony

provisions contained in the divorce decree were part and parcel

of the division of marital property between petitioner and his

former spouse.    They further argue that even if so, because the

payments fit within the definition of alimony for Federal income

tax purposes, the intended purpose for the payments is of no

consequence.    For the following reasons, we agree with

petitioners' second argument.

     Respondent invites us to distinguish between a payment made

as part of a division of marital property and one made for

spousal support.    As noted in the portions of the appellate

court's opinion reproduced above, that distinction "can often be

difficult to discern".    Under prior law we would have been

compelled to do so.    However, under section 71(b) the distinction

need not be made.    In an attempt to avoid the exact type of

dispute involved here, the Congress, mindful that the term

"alimony" is used and interpreted differently from State to

State, amended a prior version of section 71 in order to provide

a uniform and objective definition of the term for Federal income

tax purposes.    For a discussion on this point, see Cunningham v.

Commissioner, T.C. Memo. 1994-474.

     Neither the June 11, 1989, order of the divorce court, nor

the opinion of the appellate court affirming that order changed

or modified the divorce decree.    Consequently, the dispute
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between the parties can be resolved merely by examining the

divorce decree in order to determine whether certain payments

petitioner was obligated to make fit within the definition of

alimony set forth in section 71(b).       After doing so, we conclude

that petitioners are entitled to the alimony deductions here in

dispute because all of the requirements set forth in the relevant

statutes have been satisfied.    The possibility that the payments

might have represented a division of marital property, as

suggested by the local courts after the effective date of the

divorce decree, makes no difference.

     To reflect the foregoing,

                                         Decision will be entered

                                 for petitioners.
