                   T.C. Summary Opinion 2005-119



                      UNITED STATES TAX COURT



                 GERALYN M. RANDICH, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent

                 STEVEN M. RANDICH, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket Nos. 2641-03S, 21861-03S.       Filed August 11, 2005.


     Geralyn M. and Steven M. Randich, pro sese.

     Sean R. Gannon, for respondent.



     GOLDBERG, Special Trial Judge:     These consolidated cases

were heard pursuant to the provisions of section 7463 of the

Internal Revenue Code in effect at the time each petition was

filed.   The decisions to be entered are not reviewable by any

other court, and this opinion should not be cited as authority.

Unless otherwise indicated, subsequent section references are to
                              - 2 -

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.

     In separate notices of deficiency, respondent determined

that petitioners are liable for the following deficiencies in

Federal income taxes:

Docket No. 2641-03S                   Geralyn M. Randich

     Taxable Year                     Deficiency

        2000                            $6,091

Docket No. 21861-03S                  Steven M. Randich

     Taxable Year                     Deficiency

        2000                            $6,683

     The issues for decision are:   (1) Whether $28,800 received

by petitioner Geralyn M. Randich pursuant to a judgment for

dissolution of marriage is includable in her income under section

71 as alimony income; and (2) whether petitioner Steven M.

Randich may deduct as alimony, pursuant to section 215, $28,800

that he paid to petitioner Geralyn M. Randich pursuant to the

judgment for dissolution of marriage.

                           Background

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

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.    At the time the
                                - 3 -

respective petitions were filed, petitioners resided in New

Lenox, Illinois.

     During taxable year 2000, petitioner Geralyn M. Randich (Ms.

Randich) was gainfully employed in “student services”.    For the

year in issue Ms. Randich reported wage income of $46,549.

During taxable year 2000, petitioner Steven M. Randich (Mr.

Randich) was gainfully employed as a union pipefitter.    For the

year in issue Mr. Randich reported wage income of $62,524 from

his employment with the union and some part-time jobs.

     Petitioners were married on March 6, 1985.   During their

relationship, petitioners, together, had four children:   CR, born

in 1982; LR, born in 1983; SR, born in 1986; and AR, born in

1988.

     Before March 25, 1998, Mr. Randich filed a petition with the

Circuit Court of the Twelfth Judicial Circuit, Will County,

Illinois (circuit court), to commence divorce proceedings.1    On

March 25, 1998, an order for temporary maintenance and support

(temporary order) was entered by the circuit court with respect

to petitioners’ divorce case.   The temporary order provides, in

pertinent part:




     1
      The caption of this matter was: In re: The Marriage of
Steven M. Randich, Plaintiff and Geralyn M. Randich, Defendant,
Case No. 98 D 0286.
                              - 4 -

     It is ordered:
     (1) * * * [Mr. Randich] shall pay by agreement * * * for
     unallocated temporary maintenance and support, by Order for
     Support, the sum of $2,350 per month.

     Petitioners were legally divorced in 2000.   A judgment for

dissolution of marriage pertaining to petitioners’ divorce was

entered in the circuit court on April 12, 2000.   The judgment for

dissolution of marriage provides, in pertinent part:

     The Respondent [Ms. Randich] shall be the residential
     custodian of the three children of the Parties, * * * [CR],
     [AR], and * * * [SR].

               *    *    *    *       *   *   *

     IT IS HEREBY ORDERED:
     A. CUSTODY OF * * * [LR]: The custody of minor child * * *
         [LR] is at issue in this cause

          The Court considered the criteria set forth in Section
     602 of the Illinois Marriage and Dissolution of Marriage
     Act. The Court acknowledges that both parents wish to have
     custody of the child. The Court conducted an in camera
     interview of the child and her siblings and took into
     consideration * * * [LR’s] request to remain with her Father
     [Mr. Randich]. The Court further considered the the [sic]
     relationship and interaction of * * * [LR] with her siblings
     and her parents. The Court finds that the minor children
     get along with each other very well and they love and care
     for each other.

          The Court considered the relationship between the
     parents and finds that the Mother was the primary care giver
     for a great period of time and was * * * [LR’s] care giver
     until September, 1999. * * * [LR] has ended up residing
     with her Father as a result of her running away a couple of
     times and she has lived with him since September, 1999.

               *    *    *    *       *   *   *

          Therefore, after weighing all the considerations, it is
     in the best interest of the minor child * * * [LR] that she
     be placed in the custody of her Mother [Ms. Randich].
                                   - 5 -


                  *      *    *    *       *    *      *

          Respondent [Ms. Randich] is awarded unallocated family
     support in the amount of $1,200 per paycheck. Said
     unallocated family support shall commence immediately upon
     entry of the Judgment for Dissolution and shall be
     reviewable at the end of two years. Petitioner’s [Mr.
     Randich’s] obligation to pay unallocated family support
     terminates upon Respondent’s [Ms. Randich’s] death, her
     remarriage or cohabitation with another person on a
     resident, continuing conjugal basis. Respondent [Ms.
     Randich] shall be entitled to claim the children as her tax
     exemptions as long as she is receiving unallocated family
     support. Thereafter, the issue of tax exemptions shall be
     presented to the Court.

     On April 12, 2000, a separate order for the modification of

maintenance and support was entered by the circuit court with

respect to petitioners’ divorce case.          This order for the

modification of maintenance and support gave credit to Mr.

Randich for the sum of $376 to offset an obligation for a joint

furnace bill and left a balance of $424.            This offset was the

result of petitioners’ daughter, LR, staying with Mr. Randich for

several months.       The offset was to compensate for an amount

previously provided to Ms. Randich from Mr. Randich for the

support of their daughter, LR, during these months in which LR

was supposed to be residing with Ms. Randich.

     On or about September 2000, Mr. Randich filed a motion for

modification of support with the circuit court.            The motion for

modification of support states, in pertinent part:

     3.   That pursuant to the Judgment [for Dissolution of
     Marriage] Petitioner [Mr. Randich] was ordered to pay
     Respondent [Ms. Randich] the sum of $1,200 per paycheck,
     equivalent to $2,400 per month as unallocated support.
                               - 6 -


     4.   That subsequent to the entry of the Judgment For
     Dissolution Of Marriage there has been a substantial change
     of circumstances in:

           A.   That the eldest child * * * [CR] is emancipated.

           B.   That there has been a change of custody from
           Respondent [Ms. Randich] to Petitioner [Mr. Randich] as
           to the minor child * * * [LR] pursuant to an Order
           entered July 20, 2000.

     WHEREFORE, Petitioner, [Mr. Randich] and by his attorney,
     BRUCE D. FALK, respectfully request this Honorable Court as
     follows:

           A.   For an Order modifying the unallocated support
           obligation commensurate with the change of
           circumstances of the parties.

           D.   For such other and further relief as the Court may
           deem appropriate.

     On March 5, 2001, an order relating to the September 2000

motion for modification of support was entered by the circuit

court.   In this order, the circuit court found that the “change

of custody of minor child * * * [LR] constitutes a change of

circumstances regarding support”.   However, the circuit court did

not modify the unallocated family support in this order.

     On March 14, 2001, Mr. Randich filed with the circuit court

a letter addressed to the judge presiding over petitioners’

divorce case and a brief and argument on behalf of petitioner

Steven Randich in support of the September 2000 motion for

modification of support.   The brief states, in pertinent part:

          Petitioner [Mr. Randich] has filed a motion for
     modification of child support. Respondent [Ms. Randich] has
     filed a motion concerning payment of college expenses. The
                         - 7 -

underlying factual situation involved in this case is that
the eldest child attends college, the next eldest resides
with Petitioner [Mr. Randich] and that the two youngest
reside with Respondent [Ms. Randich].

     The Court has ordered that the Petitioner [Mr. Randich]
pay to Respondent [Ms. Randich] one-half of the loan
obligation she incurred on behalf of the minor child * * *
[CR] for college expenses. It should be noted that the
listed college expenses for the child include all costs
associated with education, being not only room, board,
tuition, and fees but also transportation, and living
expenses. Respondent’s [Ms. Randich’s] loans are based upon
a cost of attendance for the minor child at Illinois State
University not merely the cost of room, board, and tuition.
It is Petitioner’s [Mr. Randich’s] position that since by
assuming one-half of the parental cost for the child’s
attendance at college as opposed to one-half of the costs
merely for tuition, room, and board that Petitioner [Mr.
Randich] should no longer have to pay any additional
expenses on behalf of the minor child. Petitioner [Mr.
Randich] further notes that he still maintains health
insurance for the benefit of the child and that Respondent
[Ms. Randich] has submitted no specific expenses for the
child other than those associated with attendance at
college.

          *    *    *    *       *   *   *

     In summary it is Petitioner’s [Mr. Randich’s] position
that child support pursuant to the statutory guidelines can
include only three children since the eldest is now
emancipated and attending college. It is within the Trial
Court’s discretion to order the monies paid for education
expenses for the eldest child. Since the educational
expenses sought by Respondent [Ms. Randich] included living
expenses for which the parties are equally sharing the costs
Petitioner [Mr. Randich] requests that no further support be
ordered concerning the eldest child.

     As to the remaining three children, considering the
split-custody situation and the fact that both parties are
employed on a full-time basis Petitioner [Mr. Randich]
requests that the award be based on Petitioner [Mr. Randich]
paying 25% of his net income to Respondent [Ms. Randich]
after reducing that amount by 20% of Respondent’s [Ms.
Randich’s] net income that would be paid to Petitioner
[Mr. Randich]. * * *
                               - 8 -

     On April 3, 2001, Ms. Randich filed with the circuit court a

response to brief and argument on behalf of petitioner Steven

Randich.   The response states, in pertinent part:

          In response to Mr. Falk’s (Mr. Randich’s attorney)
     petition for modification of child support, I must first
     address Mr. Falk’s statement in his brief, that “the listed
     college expenses for the child include all costs associated
     with education, being not only room, board, tuition, and
     fees but also transportation, and living expenses.” Your
     Honor, this assertion is false. I am including a copy of
     Illinois State University’s “Award Letter” from the
     Financial Aid Office, which clearly states that the
     student’s financial aid package is based on the ACADEMIC
     YEAR at the university. Also, the financial package is, to
     quote Financial Aid, “based on tuition and fees and on-
     campus room and board costs set by the University’s Board of
     Trustees”. The Financial Aid Office explains further
     regarding OFF-CAMPUS students, stating that the cost of
     attendance is based on “off-campus room and board, book,
     transportation and miscellaneous costs determined from a
     survey of average student expenses and adjusted for class
     standing, living arrangement and (if appropriate) family
     size.” * * * In any case, * * * [CR] is a full-time, on-
     campus student.

          The second crucial fact to note is that the Academic
     Year at ISU began August 21, 2000 and will end May 11, 2001.
     This is approximately 8½ months. It must also be noted that
     there is a 1 week “Fall Break”; and 5 week Christmas Break;
     which brings the school year down to a total of
     approximately 7 months in length. This does not count the
     numerous weekends that * * * [CR] returns home. Therefore,
     you can see that my son is indeed NOT emancipated and still
     needs a home and support for the 5 months remaining in the
     year (again not counting the weekends he is at home). * * *

                *    *    *    *       *   *   *

          It is my position, Your Honor, that the educational
     expenses most certainly do NOT include living expenses for
     my eldest child, * * * [CR], and that his father should
     continue to contribute to his support for the time of
     approximately 5 months and also the numerous weekends that
     * * * [CR] resides at his home with me and his siblings.
                               - 9 -

          The next issue which the Court must address is the
     issue of the change of support which is currently paid to me
     for our second child, * * * [LR], who is currently 17 years
     old and will turn 18 years of age in 3 and one-half months.
     First, I make it clear, Your Honor, that I am now receiving
     “unallocated family support” and although both Your Honor
     and Mr. Falk referred several times to the figure of 40% for
     child support, I do not even receive that percentage from my
     former husband. I receive 35.5% which Judge Kuhar based on
     [Mr. Randich’s] W-2 income of $75,000 plus his side-job
     earnings (from heating and air-conditioning jobs) of $6,000
     which totals $81,000 in earnings.

                *    *    *    *       *   *   *

          It is agreed on all of our parts that the “Temporary
     Change of Custody” of * * * [LR] constitutes a change of
     circumstances regarding support. I stated in court, Your
     Honor, that 1 year ago, in April 2000, after our Divorce
     Judgment was entered, Mr. Falk also asked for a modification
     of support due to the fact that * * * [LR] had been staying
     with [Mr. Randich] for about 4 months. It was ordered that
     I reimburse [Mr. Randich] for this time. * * *

     On April 18, 2001, a decision was entered by the circuit

court with respect to the September 2000 motion for modification

of support.   The decision provides, in pertinent part:

          This cause coming on to be heard on the Defendant’s
     [Mr. Randich’s] Petition for Reduction of Unallocated
     Support due to the change of physical custody of * * * [LR],
     and the attendance at college of * * * [CR], and the Court
     having considered the facts, affidavits and arguments, finds
     that a substantial change of circumstances has occurred
     warranting a review of Unallocated Family Support.

          THEREFORE, the Court orders that Unallocated Family
     Support be reduced from its current level to $25,200 per
     year retroactive to October 1, 2000. The Court further
     allocates the Dependent Deductions as follows: beginning in
     the year 2001, [Ms. Randich] will claim the deduction for
     * * * [CR, SR, and AR]. [Mr. Randich] will claim the
     deduction for * * * [LR] if allowable under the Tax Code.

          IT IS FURTHER ORDERED that any credits due [Mr.
     Randich] because of retroactivity of this order is to be
                             - 10 -

     offset against the sum of $3,812.95 which is currently due
     to [Ms. Randich] and the net balance is to be paid in six
     equal installments with the first to be paid on June 1, 2001
     and the first of each succeeding month until paid. * * *

     On or about February 2002, an affidavit for wage deduction

order and interrogatories/answer to wage deduction proceedings

was filed with the circuit court.

     On March 14, 2002, Mr. Randich filed with the circuit court

a motion to adjust child support and a notice of motion.

     On April 3, 2002, Mr. Randich filed with the circuit court a

motion to adjust child support and to address non payment issues

and a notice of motion.

     On August 30, 2002, Mr. Randich filed with the circuit court

a motion for modification of support.

     On September 11, 2002, Mr. Randich again filed with the

circuit court a motion to adjust child support and a notice of

motion.

     On October 30, 2002, an order relating to Mr. Randich’s

motion to adjust child support was entered by the circuit court.

The order provides, in pertinent part:

          This matter coming before the Court on motion of
     Petitioner [Mr. Randich] to set child support and the Court
     hearing arguments and representations and being fully
     advised in the premises and based on the Court’s finding of
     Petitioner’s [Mr. Randich’s] gross income of approximately
     $78,000, it is hereby ordered as follows:

          1. That child support is set in the sum of $525.86 bi-
     weekly as of June 22, 2002. * * *
                               - 11 -

     On February 5, 2004, an order with respect to a petition for

rule to show cause was entered by the circuit court.2   The order

provides, in pertinent part:

          That this Matter coming on to be heard on the Petition
     for Rule to Show Cause previously entered against GERALYN M.
     RANDICH on January 8, 2004, for failure to include
     unallocated support on her 2000 tax return as ordered in the
     judgment for dissolution of marriage; Petitioner [Mr.
     Randich] present and represented by counsel and respondent
     Geralyn M. Randich appearing pro se:

          The Court finds:

          1. That GERALYN M. RANDICH is found to be in indirect
     civil contempt for failure to characterize the unallocated
     support as maintenance on her 2000 Federal and State tax
     return, as ordered by the Court on April 12, 2000, in the
     judgment for dissolution of marriage.

          2. That GERALYN M. RANDICH shall have the opportunity
     to purge herself from contempt by filing an appropriate
     amended Federal and State tax return for 2000 properly
     characterizing the payments received in 2000 as maintenance
     or unallocated support.

          3. That sentencing is stayed for 60 days pending the
     filing of the amended 2000 Federal and State tax returns.




     2
      Ms. Randich objects to this document’s being entered into
evidence on the grounds of relevance, in that the information
contained therein is not related to the matter at issue, is
unfair and prejudicial, and promotes confusion of the matter at
issue. A ruling on Ms. Randich’s objection was delayed for
consideration. This document will be received into evidence
subject to Ms. Randich’s objection noted in the record.
                             - 12 -

     On April 5, 2004, an order with respect to a petition for

rule for contempt of court was entered by the circuit court.3

The order provides, in pertinent part:

          This Matter coming on to be heard on the Petition for
     Rule for Contempt of Court previously entered against
     Geralyn Randich on February 5, 2004, and the purge of that
     contempt; Geralyn Randich appearing in open Court and
     producing her amended 2000 Federal and State Income Tax
     Return filed with the Internal Revenue Service on March 27,
     2004, the Court being fully advised in the matter:

          It is Hereby Ordered:

          1. That Geralyn Randich having filed the Amended 2000
     Federal and State Tax Return the contempt of Court
     previously entered is hereby held for naught.

          2. That Geralyn Randich is Ordered to pay $750 as and
     for attorney’s fees to Theresa M. Malysa in monthly
     installments as follows: May 1, 2004, $150 to be paid and
     thereafter on the first day of the month $100 until the
     balance is paid in full; and judgment is entered against
     Geralyn Randich in said amount.

     On April 15, 2001, Ms. Randich timely filed her Federal

income tax return for taxable year 2000.   On her return, Ms.

Randich did not report as income the $28,800 in payments made to

her by Mr. Randich pursuant to the judgment for dissolution of

marriage in petitioners’ divorce because she considered the full

amount to be nontaxable child support.



     3
      Ms. Randich objects to this document’s being entered into
evidence on the grounds of relevance, in that the information
contained therein is not related to the matter at issue, is
unfair and prejudicial, and promotes confusion of the matter at
issue. A ruling on Ms. Randich’s objection was delayed for
consideration. This document will be received into evidence
subject to Ms. Randich’s objection noted in the record.
                              - 13 -

     On April 15, 2001, Mr. Randich timely filed his Federal

income tax return for taxable year 2000.   On his return, Mr.

Randich claimed a deduction of $28,800 as alimony paid during tax

year 2000 to his former spouse, Ms. Randich, pursuant to the

judgment for dissolution of marriage in petitioners’ divorce.

     Following the examination by the Internal Revenue Service

(IRS) of Ms. Randich’s and Mr. Randich’s 2000 Federal income tax

returns, Ms. Randich took the position that the payments made by

her former spouse, Mr. Randich, to her are nondeductible child

support for the taxable year 2000 and are not includable in her

income pursuant to section 71(c)(2).   Mr. Randich, however, took

the position that the payments made to his former spouse, Ms.

Randich, constitute alimony paid during taxable year 2000, which

he is entitled to deduct pursuant to section 215 and which is

taxable to Ms. Randich pursuant to section 71.

     As a result, respondent issued notices of deficiency to both

Ms. Randich and Mr. Randich to avoid the possibility of being in

a whipsaw position.   On December 4, 2002, respondent issued Ms.

Randich a notice of deficiency for taxable year 2000.   In the

notice of deficiency, respondent determined Ms. Randich had

unreported alimony income of $28,800 and was liable for a

deficiency of $6,091.   On October 15, 2003, respondent issued Mr.

Randich a notice of deficiency for taxable year 2000.   In the

notice of deficiency, respondent disallowed Mr. Randich’s claimed
                                  - 14 -

deduction of $28,800 for alimony paid during tax year 2000,

determining that the payments were nondeductible child support

and that Mr. Randich was liable for a tax deficiency of $6,683.

                                Discussion4

       In the present circumstance, respondent is caught in a

potential “whipsaw” position.       A whipsaw occurs when different

taxpayers treat the same transaction involving the same items

inconsistently, thus creating the possibility that income could

go untaxed or two unrelated parties could deduct the same

expenses on their separate returns.        In such circumstances, the

Commissioner is fully entitled to defend against inconsistent

results by determining in notices of deficiency that both parties

to the transaction are liable for the deficiency.        Estate of

Dooley v. Commissioner, T.C. Memo. 1992-557; Moore v.

Commissioner, T.C. Memo. 1989-306.

       The deductibility of alimony is governed by sections 71 and

215.       The Deficit Reduction Act of 1984 (DEFRA), Pub. L. 98-369,

sec. 422, 98 Stat. 795, applicable to divorce instruments

executed after December 31, 1984, amended both sections.       The

parties have stipulated that the judgment for dissolution of

marriage was entered by the circuit court on April 12, 2000.



       4
      We decide the issues in this case without regard to the
burden of proof. Accordingly, we need not decide whether the
general rule of sec. 7491(a)(1) is applicable in this case. See
Higbee v. Commissioner, 116 T.C. 438 (2001).
                               - 15 -

Consequently, sections 71 and 215, as amended by DEFRA, govern

the payments in issue.

     Section 215(a) allows an individual, in computing adjusted

gross income, to deduct amounts paid during the year if those

amounts are includable in the gross income of the recipient under

section 71(a).   Section 215 provides in relevant part:

     SEC. 215.   ALIMONY, ETC., PAYMENTS.

          (a) General Rule.--In the case of an individual, there
     shall be allowed as a deduction an amount equal to the
     alimony or separate maintenance payments paid during such
     individual’s taxable year.

          (b) Alimony or Separate Maintenance Payments Defined.--
     For purposes of this section, the term “alimony or separate
     maintenance payment” means any alimony or separate
     maintenance payment (as defined in section 71(b)) which is
     includible in the gross income of the recipient under
     section 71.

Therefore, any disqualification from inclusion by the recipient

spouse under section 71 will automatically preclude deduction by

the payor under section 215.   Consequently, the recipient of

alimony payments must include those payments when calculating his

or her gross income.   Sec. 61(a)(8).   However, payments to

support children generally are not deductible.    Sec. 71(c)(1).

Therefore, a determination that a payment is or is not “alimony”

is also a determination of who must shoulder the tax burden of

that payment.

     Section 71(a) provides that “Gross income includes amounts

received as alimony or separate maintenance payments.”    As
                              - 16 -

previously stated, alimony or separate maintenance payments are

defined by section 71(b), which provides in part:

          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 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.

     It is clear that in this case both the temporary order for

maintenance and support and the judgment for dissolution meet the

criteria of section 71(b), and payments made therefore are

alimony.

     However, section 71(c)(1) provides that section 71(a) “shall

not apply to that part of any payment which the terms of the

divorce or separation instrument fix * * * as a sum which is

payable for the support of children of the payor spouse.”
                              - 17 -

     In general, child support cannot be inferred from intent,

surrounding circumstances, or other subjective criteria for

purposes of section 71.   Rather, the statutory directive that

child support payments be “fixed” is taken literally.   The

inflexibility of this requirement was recognized by the Supreme

Court in Commissioner v. Lester, 366 U.S. 299 (1961).   In that

case, the Court refused to find by inference that the statutory

requirement was met where the parties’ agreement provided for

percentage reduction of payments by a husband to a wife upon the

marriage, emancipation, or death of any of their three children.

The Court examined the legislative history of the statutory

predecessor of section 71(c)(1) and quoted from the report of the

Office of the Legislative Counsel to the Senate committee which

said:

     “If an amount is specified in the decree of divorce
     attributable to the support of minor children, that amount
     is not income of the wife .... If, however, that amount
     paid the wife includes the support of children, but no
     amount is specified for the support of the children, the
     entire amount goes into the income of the wife ....” * * *

Commissioner v. Lester, supra at 303 (quoting Hearings before

Senate Committee on Finance on H.R. 7378, 77th Cong., 2d Sess.

48) (emphasis supplied)).   The Court went on to conclude:

     This language leaves no room for doubt. The agreement must
     expressly specify or “fix” a sum certain or percentage of
     the payment for child support before any of the payment is
     excluded from the wife’s income. The statutory requirement
     is strict and carefully worded. It does not say that “a
     sufficiently clear purpose” on the part of the parties is
     sufficient to shift the tax. It says that the “written
                               - 18 -

      instrument” must “fix” that “portion of the payment” which
      is to go to the support of the children. Otherwise, the
      wife must pay the tax on the whole payment. We are obliged
      to enforce this mandate of the Congress.

Id.   Consequently, in the case of unallocated or undifferentiated

support for a wife and children, none of the amount is treated as

child support under section 71(c)(1).

      In applying the principle of Lester, this Court has

repeatedly refused to allow inference, intent, or other

nonspecific designations of payments as child support to override

the clear rule of section 71(c)(1).     See, e.g., Mass v.

Commissioner, 81 T.C. 112, 123 (1983); Blakey v. Commissioner, 78

T.C. 963 (1982); Giordano v. Commissioner, 63 T.C. 462 (1975);

Grummer v. Commissioner, 46 T.C. 674 (1966).

      DEFRA changed the portion of the Lester decision that held

that no amount would be considered child support unless it was

specifically designated as such in the divorce or separation

agreement.

      Under the current statute, if any amount specified in the

instrument will be reduced:    (1) Upon the happening of a

contingency related to a child of the payor, or (2) at a time

which can clearly be associated with such a contingency, then the

amount of the specified reduction will be treated as child

support rather than alimony.    Sec. 71(c).   The above principle

was recognized in Berry v. Commissioner, T.C. Memo. 2005-91,

where we stated:
                               - 19 -

     While the exception (to the general rule of inclusion)
     for amounts “fixed” as child support remained
     essentially unchanged, see sec. 71(c)(1), Congress did
     overturn the result in Commissioner v. Lester, supra,
     see sec. 71(c)(2) (reduction in support that is clearly
     associated with a contingency, specified in the divorce
     or separation instrument, that relates to a child will
     be treated as an amount fixed as payable for child
     support). Lester continues, however, to stand for the
     proposition that, subject to section 71(c)(2), amounts
     will not be treated as child support for purposes of
     section 71 unless specifically designated as such in
     the governing divorce document.* * *

     We must decide, therefore, whether the support terms of the

temporary order and the judgment for dissolution of marriage,

under which Ms. Randich received the payments at issue for the

2000 taxable year, fixed a sum as payable for the support of

petitioners’ minor children.

     Neither the temporary order entered on March 25, 1998, nor

the judgment for dissolution of marriage entered on April 12,

2000, provided for a fixed amount payable for the support of

petitioners’ children.   Ms. Randich was awarded unallocated

family support of $1,200 per paycheck, or $2,400 per month.

Furthermore, the provision for unallocated family support did not

contain any of the contingencies set forth in section 71(c)(2).

     Therefore, normally we would hold that all of the $28,800

annual payment made by Mr. Randich to Ms. Randich would be

considered alimony deductible by Mr. Randich, the payor, and

taxable to Ms. Randich, the payee.
                               - 20 -

     However, in September 2000, Mr. Randich filed a motion for

modification of support.    The grounds for his motion were that

after the divorce judgment entered on April 12, 2000, the oldest

son, CR, became emancipated, and there was a change of custody

for a minor child, LR, from Ms. Randich to Mr. Randich.    The

circuit court, having jurisdiction over this matter, entered an

order on March 5, 2001, finding that “the change of custody of

the minor child, CR, constitutes a change of circumstances

regarding support.”    At that time, the circuit court did not

modify the amount of the unallocated family support set forth in

the April 12, 2000, judgment of divorce.

     The circuit court, on April 18, 2001, entered a decision and

order with respect to the motion for modification of support and

found that after consideration of the facts, affidavits, and

arguments of the parties, a substantial change of circumstances

had occurred warranting a review of unallocated family support.

The circuit court ordered that unallocated family support be

reduced from its then-current level of $28,800 to $25,200 per

year retroactive to October 1, 2000.    The monthly amount was

reduced to $2,100.    Because of the retroactive effect of the

order, Mr. Randich was due an offset of $3,812.95.

     Because of the circuit court’s order of April 18, 2001,

retroactively reducing the unallocated family support to $25,200

effective October 1, 2000, we hold that for the taxable year
                             - 21 -

2000, Ms. Randich must include $27,900 (9 months x $2,400 =

$21,600 + 3 months x $2,100 = $6,300) as alimony income under

section 71, and Mr. Randich is entitled to a deduction for

alimony pursuant to section 215 in the like amount.

     Reviewed and adopted as the report of the Small Tax Case

Division.


                                   Decisions will be entered

                              under Rule 155.
