                         T.C. Summary Opinion 2017-48



                         UNITED STATES TAX COURT



                   GARY LEE MCINTEE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 30701-15S.                         Filed July 11, 2017.



      Gary Lee McIntee, pro se.

      Jerry M. Innocent, for respondent.



                              SUMMARY OPINION


      RUWE, Judge: This case was heard pursuant to the provisions of section

7463 of the Internal Revenue Code in effect when the petition was filed.1



      1
      Unless otherwise indicated, all 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.
                                        -2-

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.

      Respondent determined a $2,588 deficiency in petitioner’s Federal income

tax for the taxable year 2012. At the time the petition was filed, petitioner resided

in New York.

      After a concession, the only issue before the Court is whether petitioner is

entitled to deduct a $10,000 payment to his ex-wife 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 this reference.

      On November 15, 2010, petitioner’s ex-wife filed an action for divorce

against petitioner in the Supreme Court of the State of New York.

      On May 19, 2011, that court issued a temporary order noting that petitioner

and his ex-wife had stipulated regarding temporary support and, pursuant to that

agreement, ordered petitioner to pay his ex-wife $750 per month as and for

temporary spousal maintenance, the first payment to be made on May 1, 2011, and

to continue each month until further order of the court.
                                         -3-

      On January 17, 2012, a hearing was held in the Supreme Court of the State

of New York. In the transcript of that hearing, petitioner and his ex-wife stated to

the court that they had resolved all issues as follows:

      The parties have agreed that the wife will take the judgment of
      divorce as if by default and the husband will withdraw his answer
      and/or counterclaims on the condition that no allegation of the
      complaint is used for any purpose other than the establishment of
      grounds.

             We’re here today, as you have indicated, to try this case with
      the issues before the Court being spousal maintenance, equitable
      distribution of assets and liabilities, spousal maintenance and counsel
      fees.

            As a resolution of all of those issues, the parties have agreed
      that within 30 days of today’s date the husband will pay to the wife
      the sum of $10,000. Effective February 1st, 2012, the husband will
      pay to the wife as and for spousal maintenance the sum of $500 a
      month. That sum of money will be paid to the wife each and every
      month by either wage deduction order against the husband’s earnings
      or against his retirement.

             The term of spousal maintenance shall be lifetime with the only
      terminating event being the death of the wife. In the event the wife
      remarries, from the date of her remarriage spousal maintenance will
      continue for a period of ten years and will then terminate. And but
      for the wife’s remarriage or her death, the spousal maintenance would
      otherwise continue for her life.

              In exchange for that lifetime payment, and upon the parameters
      that have been placed upon the record, the wife would waive any
      right, title or interest, legal or equitable, in any real property in the
      name of the husband, in his pension or other retirement asset and in
      any personal property that he now possesses.
                                         -4-

            In exchange for the wife’s acceptance of the terms of this offer,
      the husband is waiving any equitable right, title or interest, legal or
      otherwise, in any other asset in the name of the wife in any personal
      property she now possesses or in any retirement asset that she may
      have.

      On February 15, 2012, petitioner wrote a check payable to his ex-wife for

$10,000. The check contained the notation “Lump Sum as per divorce

agreement”.

      On April 4, 2012, the New York supreme court judge signed a judgment of

absolute divorce (divorce decree) regarding petitioner and his ex-wife that

references the January 17, 2012, stipulation, and

            Ordered, plaintiff [petitioner’s ex-wife] is granted a Judgment
      of Absolute Divorce pursuant to DRL §170(7); and it is further

             Ordered, defendant [petitioner] shall pay to plaintiff the sum of
      five hundred ($500.00) dollars per month as and for spousal
      maintenance and said sum shall be paid by wage deduction order
      against defendant’s wages, or, retirement payments as the case may
      be; and it is further

              Ordered, defendant shall pay the aforesaid spousal maintenance
      to plaintiff for plaintiff’s lifetime with the only terminating events
      being the death of plaintiff, or, if the plaintiff remarries for a period of
      ten (10) years after plaintiff’s remarriage. But for plaintiff’s death or
      plaintiff’s remarriage, the spousal maintenance shall continue for the
      life of plaintiff; and it is further

             Ordered, defendant must maintain a policy of life insurance
      sufficient to cover the cost of spousal maintenance through the
      actuarial life expectancy of plaintiff, and, defendant must provide
                                         -5-

      proof to plaintiff of the existence of said policy or policies of life
      insurance naming plaintiff beneficiary for said amount; and it is
      further

             Ordered, in exchange for the payment of spousal maintenance
      as hereinbefore set forth, plaintiff waives all her right, title and
      interest, both legal and equitable, in any real property in the name of
      defendant, in defendant’s pension, and in any personal property
      defendant possesses; and it is further

              Ordered, in exchange for plaintiff’s acceptance of spousal
      maintenance, defendant waives all his right, title and interest, both
      legal and equitable, in any asset including retirement assets in the
      name of plaintiff and in any personal property plaintiff possesses; and
      it is further

             Ordered, that the Oral Stipulation entered into by the parties in
      Open Court on January 17th, 2012 as evidenced by the Adoption of
      Oral Stipulation executed and acknowledged by the parties on the
      17th day of January 2012, shall be incorporated but not merged in the
      Judgment of Divorce and shall survive the same and be as if each and
      every term, covenant and condition were set out in full and separate
      decretal paragraphs, and the parties be and hereby are ordered to obey
      each and every term, covenant and condition of said oral stipulation
      as are lawful and capable of specific performance at all times and
      places; and the Court retains jurisdiction of the matter concurrently
      with Family Court for the purpose of specifically enforcing such of
      the provisions as are capable of specific performance to the extent
      permitted by law; * * *

                                     Discussion

      In the notice of deficiency respondent allowed a deduction of $6,500 in

monthly payments petitioner paid to his ex-wife during 2012 as alimony. The only
                                          -6-

issue is whether the $10,000 payment that petitioner made on February 15, 2012,

also qualifies as an alimony deduction.

      Payments incident to divorce generally fall into one of two categories:

alimony or property settlements. In general, alimony is a division of income, and

property settlements are a division of marital property. A property settlement is

not a taxable event and does not give rise to any gain or loss. In contrast, alimony

payments give rise to a deduction for the payor and to income for the payee. Secs.

71(a), 215(a).

      An alimony payment is a cash payment that satisfies the four requirements

of section 71(b)(1): (A) the 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 the payment as one that is not includible in gross income of the

payee and not allowable as a deduction to the payor; (C) the payor and payee

spouses are not members of the same household at the time the payments are made

if they are legally separated; and (D) the payments or substitutes end after the

payee spouse’s death. See Mudrich v. Commissioner, T.C. Memo. 2017-101, at

*8.

      Respondent agrees that petitioner’s $10,000 payment satisfies the first three

subparagraphs of section 71(b)(1). The only issue according to respondent is
                                        -7-

whether the $10,000 payment obligation would survive the death of petitioner’s

ex-wife. The divorce decree and stipulation are silent as to whether the $10,000

payment obligation would survive death of petitioner’s ex-wife.

      Respondent seems to argue that the $10,000 payment was in the nature of a

property settlement. But the aforementioned divorce documents do not say that. It

is true that the divorce documents provide that each party waives any property

rights of the other party. In the divorce decree, the New York supreme court judge

stated as follows:

             Ordered, in exchange for the payment of spousal maintenance
      as hereinbefore set forth, plaintiff waives all her right, title and
      interest, both legal and equitable, in any real property in the name of
      defendant, in defendant’s pension, and in any personal property
      defendant possesses; and it is further

              Ordered, in exchange for plaintiff’s acceptance of spousal
      maintenance, defendant waives all his right, title and interest, both
      legal and equitable, in any asset including retirement assets in the
      name of plaintiff and in any personal property plaintiff possesses; and
      it is further

The waiver in the first quoted paragraph is in exchange for the monthly

maintenance payments. There is no specific mention of the $10,000 payment in

the divorce decree. That payment had already been made when the divorce decree

was entered. However, the January 17, 2012, stipulation stated petitioner’s and

his ex-wife’s intentions to finalize any disputes between them by providing:
                                        -8-

            As a resolution to all of those issues, the parties have agreed
      that within 30 days of today’s date the husband will pay to the wife
      the sum of $10,000. Effective February 1st, 2012, the husband will
      pay to the wife as and for spousal maintenance the sum of $500 a
      month. That sum of money will be paid to the wife each and every
      month by either wage deduction order against the husband’s earnings
      or against his retirement.

             The term of spousal maintenance shall be lifetime with the only
      terminating event being the death of the wife. In the event the wife
      remarries, from the date of her remarriage spousal maintenance will
      continue for a period of ten years and will then terminate. And but
      for the wife’s remarriage or her death, the spousal maintenance would
      otherwise continue for her life.

              In exchange for that lifetime payment, and upon the parameters
      that have been placed upon the record, the wife would waive any
      right, title or interest, legal or equitable, in any real property in the
      name of the husband, in his pension or other retirement asset and in
      any personal property that he now possesses.

      The ex-wife’s waiver in the last paragraph appears to be in return for the

$500 monthly maintenance payments, which is not in issue. There is nothing in

the written record designating the $10,000 payment as part of a property

settlement as opposed to spousal maintenance. We find these documents to be

ambiguous as to the nature of the $10,000 payment and whether it was part of the

spousal maintenance or whether the obligation to pay it would have terminated if

the ex-wife were to pass away during the very short interval between the January

17, 2012, stipulation and the February 15, 2012, payment.
                                        -9-

      The documentary record was supplemented by petitioner’s testimony.

Petitioner explained that, pursuant to the temporary order of May 19, 2011, he was

required to pay $750 per month as temporary spousal maintenance. Petitioner

testified that after negotiations to reduce the spousal maintenance, he and his ex-

wife stipulated on January 17, 2012, that the $750 monthly maintenance would be

reduced to $500 in return for a $10,000 upfront payment that was intended to

supplement the maintenance obligation. Petitioner testified that neither the

January 17, 2012, stipulation nor the divorce decree was intended to assign that

$10,000 payment to a property settlement. He further testified that he believed

and intended that he had no obligation to make any payments due after the death

of his ex-wife. While the January 17, 2012, stipulation is not clear on this point,

this may be due to the fact that the $10,000 was due and actually paid within

weeks of the January 17, 2012, stipulation and before the divorce decree was

entered.

      We find petitioner’s testimony to be a plausible explanation of what was

intended in the January 17, 2012, stipulation and the final divorce decree. We also

find that petitioner was a credible witness and that no witnesses were produced to

contradict his testimony. After due consideration, we hold that the $10,000
                                       - 10 -

payment qualifies as alimony and that petitioner is entitled to the alimony

deduction.

      To reflect the foregoing,


                                                Decision will be entered under

                                       Rule 155.
