             In the United States Court of Federal Claims
                                          No. 15-714T

                                     (Filed: March 4, 2016)

                                              )      Tax case; payments to former spouse
 GARY A. WOLENS,                              )      pursuant to English divorce decree;
                                              )      statutory test for alimony; I.R.C.
                       Plaintiff,             )      § 71(b)(1); IRS’s inconsistent position
                                              )      in tax case involving former spouse
        v.                                    )      pending before the Tax Court
                                              )
 UNITED STATES,                               )
                                              )
                       Defendant.             )
                                              )

       Anson H. Asbury, Asbury Law Firm, Atlanta, Georgia, for plaintiff.

        Margaret E. Sheer, Trial Attorney, Court of Federal Claims Section, Tax Division, United
States Department of Justice, Washington, D.C., for defendant. With her on the briefs were
Caroline D. Ciraolo, Acting Assistant Attorney General, Tax Division, David I. Pincus, Chief,
Court of Federal Claims Section, and G. Robson Stewart, Assistant Chief, Court of Federal
Claims Section, Tax Division, United States Department of Justice, Washington, D.C.

                                    OPINION AND ORDER

LETTOW, Judge.

        In this tax-refund case, plaintiff Gary Wolens seeks a refund of $353,751 in income taxes
allegedly overpaid for tax year 2007. Mr. Wolens asserts that a payment he made in 2007 (the
“2007 payment”) to his former spouse (“Ms. Wolens”) pursuant to their divorce decree in the
amount of £441,667 (equivalent to $877,076) was an alimony payment, and therefore deductible
from his taxable income for the 2007 tax year. The government contends that this payment fails
the statutory test for alimony under 26 U.S.C. (Internal Revenue Code or “I.R.C.”) § 71(b)(1)
because, under the terms of the divorce decree and by application of relevant law, Mr. Wolens
would still have been liable for the payment in the event of the death of Ms. Wolens.
Consequently, the government asserts that the payment was a division of marital assets that is not
deductible from plaintiff’s taxable income for 2007.

       Pending before the court is the government’s motion to dismiss for failure to state a claim
upon which relief can be granted, pursuant to Rule 12(b)(6) of the Rules of the United States
Court of Federal Claims (“RCFC”). The government argues that Mr. Wolens has not stated a
plausible claim for relief because the 2007 payment cannot be considered alimony under the
relevant law. Conversely, Mr. Wolens has moved for summary judgment in his favor under
RCFC 56(a), asserting that he has pled sufficient, uncontested facts to establish that the 2007
payment was in fact alimony under the relevant law. The court concludes that both the
government’s motion to dismiss and the plaintiff’s motion for summary judgment should be
denied. Although Mr. Wolens has pled sufficient facts to plausibly allege that the 2007 payment
was deductible alimony, there remains a genuine dispute about those facts that cannot be
resolved without further proceedings.

                                           BACKGROUND

        Mr. Wolens and Ms. Wolens were married in New York in 1986. See Pl.’s Supplemental
Br. in Opp’n to Def.’s Mot. to Dismiss and in Support of Pl.’s Mot. for Summary Judgment
(“Pl.’s Cross-Mot.”) at 7, ECF No. 17. They later moved to London, England and resided there
together through the time of their divorce on January 24, 2006, which divorce was granted by
order of the United Kingdom High Court of Justice, Family Division. Id.; Compl. ¶¶ 11-12. 1
Neither Mr. Wolens nor Ms. Wolens established a domicile in the United Kingdom, nor did they
domesticate their marriage under U.K. law. See Pl.’s Cross-Mot. at 7. Mr. Wolens still claims
domicile in New York. See Hr’g Tr. 33:13-17 (Jan. 6, 2016), ECF No. 16. 2

        The divorce decree issued by the High Court of Justice consists of three sections: (1) the
undertakings required of Mr. Wolens; (2) the agreements by both parties relative to the decree;
and (3) the court’s orders. Compl. Ex. A (“Divorce Decree”). 3 The first section (numbered as
Paragraphs I-III) specifies that Mr. Wolens will (1) obtain a “get” (a Jewish bill of divorce) and
deliver it to Ms. Wolens on the date of sale of their marital residence (the “payment date”); 4
(2) obtain life insurance in an amount sufficient to secure the payments owed to Ms. Wolens
under Subparagraphs 5(c) through (e) of the decree; and (3) make payments to Ms. Wolens under
an interim financial arrangement until the payment date, except that after the first “lump sum”
payment specified in Subparagraph 5(a) of the decree, he will no longer be liable for the payment
of £6000 per month under that arrangement. Divorce Decree at 2. The second section
(designated as Paragraphs A through E) states, in relevant part, that “the provisions of this order
       1
         The jurisdiction of the United Kingdom High Court of Justice, Family Division with
regard to divorce proceedings is defined by European Union Council Regulation No. 1347/2000,
adopted on May 29, 2000. See Domicile and Matrimonial Proceedings Act 1973, c. 45, § 5(2)
(Eng. & Wales). Under the Council Regulation, the courts of a member state have jurisdiction
over divorces where both spouses are “habitually resident” in that state. 2000 O.J. (L 160)
30/06/2000, at ch. II, § 1, art. 2.1(a). A person is “habitually resident” in a state when he or she
resided there for at least a year immediately before the application for divorce was made. Id.
       2
           The date of the hearing will be omitted from further citations to the transcript.
       3
        The complaint and its exhibits were filed under seal by leave of the court to protect the
personally identifiable information of plaintiff and his family. Order of July 10, 2015, ECF No.
6. This opinion omits protected personally identifiable information.
       4
         The payment date is a defined term in the decree, meaning “the date of the completion of
the sale of the property[, i.e., the former matrimonial home ‘Beaulieu,’] or, in the event that
[Mr. Wolens] exercises [an] option [to purchase Ms. Wolens’ interest in the property], 42 days
after he gives notice thereof.” Divorce Decree at 1.
                                                    2
are to be in full and final satisfaction of all claims in any jurisdiction that either party may have
against the other arising out of their marriage.” Id.

        Paragraphs 1 through 4 of the third section govern the sale of the marital property and
the division of the proceeds and associated chattels. Divorce Decree at 3-5. Paragraph 5 is of
particular relevance to the present case, and orders Mr. Wolens to pay five “lump sums” to
Ms. Wolens as follows:

        a.   £1,000,000 by 15 February 2006;
        b.   £2,300,000 upon the payment date;
        c.   £441,667 by 15 April 2007;
        d.   £441,667 by 15 April 2008;
        e.   £441,666 by 15 April 2009.

Id. at 5. Paragraph 6 orders the transfer of Mr. Wolens’ interest in two individual retirement
accounts and certain airline miles to Ms. Wolens. Id. at 5. Paragraphs 7 through 9 pertain to
Mr. Wolens’ financial obligations with respect to his four children, including “periodical
payments” of £12,500 per year for a specified time. Id. at 5-6. Finally, Paragraph 10 states:

        Save as aforesaid (and subject to delivery of the get) all of the claims of
        [Ms. Wolens] against [Mr. Wolens] and of [Mr. Wolens] against [Ms. Wolens]
        for any sort of provision in respect of this marriage shall stand dismissed and
        neither would be entitled to apply for an order under the Inheritance (Provision
        for Family and Dependents) Act 1975 even if, by the date of their death, the other
        party had become domiciled in England and Wales (neither being so domiciled at
        present).

Id. at 6.

        Mr. Wolens made the 2007 payment of £441,667 ($877,076) to Ms. Wolens pursuant to
Subparagraph 5(c) of the divorce decree. Compl. ¶ 17. He did not report this payment as
deductible alimony on his original 2007 U.S. tax return. Compl. Ex. B. Mr. Wolens claimed the
payment made to Ms. Wolens in April 2008 (pursuant to Subparagraph 5(d) of the divorce
decree) as deductible alimony on his original 2008 U.S. tax return. Pl.’s Cross-Mot. at 4. The
Internal Revenue Service (“IRS”) did not challenge this deduction at the time the return was
filed. Id. The government considers that the statute of limitations has now expired for the IRS to
review this deduction. Def.’s Resp. to Pl.’s Supp. Br. in Opp’n to Def.’s Mot. . . . and Resp. in
Opp’n to Pl.’s Mot. for Summary Judgment (“Def.’s Opp’n”) at 3, ECF No. 18.

        Mr. Wolens also claimed the payment made to Ms. Wolens in 2009 (pursuant to
Subparagraph 5(e) of the divorce decree) as deductible alimony on his 2009 U.S. tax return; this
deduction was disallowed and is the subject of a pending case in the United States Tax Court,
Wolens v. Commissioner, Docket No. 10853-15, filed April 27, 2015. See Brief in Support of
Def.’s Mot. for an Order Dismissing the Compl. (“Def.’s Mot.”) at 5 n.5, ECF No. 10; see also
Hr’g Tr. at 5:11-18, 8:18-25, 9:1, 25:5-10 (explaining that the pending Tax Court case only
pertains to the 2009 tax year and involves the same question of alimony as in the present case).

                                                   3
       Mr. Wolens filed an amended 2007 tax return in December 2011 claiming a refund of
$277,077 based on the payment in 2007, which he now reported as alimony. Compl. ¶ 25 & Ex.
B. Mr. Wolens filed a second amended return for the 2007 tax year in February 2012, adding a
claim for carryback of excess foreign tax credits from 2008 in the amount of $313,227 and
consequently claiming an additional refund of $283,147. Compl. ¶ 28 & Ex. D.5

        On February 10, 2015, the IRS disallowed Mr. Wolens’ first amended return and partially
disallowed his second amended return. Compl. ¶¶ 27, 30 & Exs. C and E. With regard to the
first amended return, the IRS stated that the 2007 payment to Ms. Wolens was not deductible
alimony. Compl. Ex. C. The IRS refunded $206,473 to plaintiff based on the foreign tax credit
claimed in the second amended return, but disallowed $76,674 of his claim because the taxable
income reported by plaintiff in the second amended return reflected the disallowed deduction for
the purported alimony payment. Compl. ¶ 30 & Ex. E.6 Separately, the IRS issued a notice of
deficiency to Ms. Wolens on January 23, 2015 stating that she owed a total of $807,066 in
additional taxes for the 2007, 2008, and 2009 tax years based on the payments made to her by
Mr. Wolens pursuant to Subparagraphs 5(c) through (e) of the divorce decree. Pl.’s Br. in Opp’n
to Def.’s Mot. to Dismiss (“Pl.’s Opp’n”) Ex. 2, ECF No. 11-2. The notice of deficiency
characterizes these payments as alimony, which are therefore considered taxable income to
Ms. Wolens. Id. These assessments are the subject of another case pending in the United
States Tax Court, Wolens v. Commissioner, Docket No. 15774-15, filed June 17, 2015. Id. at
4-5 & Ex. 1. The government acknowledges that its position in Ms. Wolens’ case in the Tax
Court, i.e., that the payments are alimony, is inconsistent with the position it is taking in this case
and in Mr. Wolens’ case in the Tax court. Hr’g Tr. 7:8-15. It considers that the inconsistentcy is
necessary to avoid a “whipsaw” attributable to divergent results. Hr’g Tr. 7:8-10.

        Mr. Wolens filed his refund suit in this court on July 9, 2015, approximately five months
after the notice of disallowance. On October 8, 2015, the government responded with a motion
to dismiss for failure to state a claim upon which relief can be granted pursuant to RCFC
12(b)(6), asserting that the 2007 payment fails the test for alimony under I.R.C. § 71(b)(1).
Def.’s Mot. at 3-4. At the hearing on the government’s motion on January 6, 2016, Mr. Wolens’
counsel raised a new argument that the case should be decided by applying New York law to the
question of whether the 2007 payment was alimony, and that doing so would dispose of the case


       5
       Mr. Wolens’ second amended return applied the foreign tax credit to the previously
amended taxable income reported on the first amended return ($10,928,961), not the taxable
income from the original return ($11,720,407). Compl. Ex. D.
       6
         In its motion to dismiss, the government questions why Mr. Wolens is claiming a refund
in this case of $353,751 and asserts that, at most, he is only entitled to the $76,674 that was
disallowed by the IRS respecting his second amended return. Def.’s Mot. at 6 n.6. However,
because the second amended return already reflected a reduced taxable income based on the
purported alimony payment, the court understands Mr. Wolens’ present claim to include both the
disallowed refund from the first amended return ($277,007) and the disallowed portion of the
second amended return ($76,674) that would otherwise have been refunded to him but for the
disallowance of the first amended return. That said, by adding these two claims, the court
considers the total refund claim to be $353,681.
                                                  4
as a matter of law in plaintiff’s favor. Hr’g Tr. 33:4-17, 34:20-25, 35:1-8. The court ordered
both parties to submit supplemental briefs on this choice of laws issue. Order of Jan. 6, 2016,
ECF No. 14. Plaintiff’s supplemental brief included a motion for summary judgment claiming
that under both New York and United Kingdom law, the 2007 payment qualified as deductible
alimony. Pl.’s Cross-Mot. at 1, 5. The government’s supplemental brief filed January 29, 2016,
responded to Mr. Wolens’ cross-motion. Both motions are now ready for disposition.

                                           ANALYSIS

                                          A. Jurisdiction

        The Tucker Act, 28 U.S.C. § 1491(a)(1), grants this court jurisdiction over federal tax
refund cases. Smith v. United States, 495 Fed. Appx. 44, 48 (Fed. Cir. 2012); Ledford v. United
States, 297 F.3d 1378, 1382 (Fed. Cir. 2002); McCann v. United States, 105 Fed. Cl. 120, 122
(2012), aff’d, 2012 WL 6839761 (Fed. Cir. Nov. 27, 2012) (order granting summary affirmance).
I.R.C. § 7422 governs the specific procedural requirements for such cases. See Herrmann v.
United States, 124 Fed. Cl. 56, 63 (2015); Sandoval Lua v. United States, 123 Fed. Cl. 269, 272
(2015), appeal pending, No. 2016-1313 (Fed. Cir. Dec. 14, 2015). Taxpayers must first pay the
assessed tax in full and file a tax refund claim with the IRS before bringing suit in federal court.
I.R.C. § 7422(a); see also Ledford, 297 F.3d at 1382. If the refund claim is denied, the taxpayer
generally must file suit within two years, see I.R.C. § 6532(a)(1), and then may only raise the
claims and arguments previously presented to the IRS. See Duffy v. United States, 120 Fed. Cl.
55, 60 (2015) (citing Lockheed Martin Corp. v. United States, 210 F.3d 1366, 1371 (Fed. Cir.
2000)), aff’d, __ Fed. Appx. __, 2016 WL 98514 (Fed. Cir. Jan. 8, 2016).

         The court has jurisdiction over Mr. Wolens’ tax refund claim. He timely filed his 2007
U.S. tax return without deducting the 2007 purported alimony payment from his taxable income
for the year, and paying the full tax liability without this deduction. Compl. Ex. B. His first and
second amended returns filed in December 2011 and February 2012 raised the alimony and tax-
carryback claims, Compl. ¶¶ 25, 28 & Exs. B and D, and the IRS addressed and decided those
claims, Compl. ¶¶ 27, 30 & Exs. C and E. Mr. Wolens’ tax refund claim in this court has the
same factual and legal basis as his previous claims to the IRS, i.e., that the 2007 payment to
Ms. Wolens was deductible alimony. Compl. ¶ 3. These circumstances satisfy the requirements
for a tax refund suit in this court. I.R.C. §§ 6532(a)(1), 7422; see also, e.g., Duffy, 120 Fed. Cl.
at 62-63 (finding jurisdiction over a refund claim where the taxpayer fully paid tax for a given
year, filed an amended return claiming a refund, and later filed a complaint when that refund was
disallowed).

                   B. Government’s Motion to Dismiss Under RCFC 12(b)(6)

         As an affirmative defense, a party may move to dismiss a claim for “failure to state a
claim upon which relief can be granted.” RCFC 12(b)(6). When such a motion is made, the
court must examine whether the complaint “contain[s] sufficient factual matter, accepted as true,
to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678




                                                 5
(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 7 A claim is plausible
“when the plaintiff pleads factual content that allows the court to draw the reasonable inference
that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly,
550 U.S. at 556). The court must “draw on its judicial experience and common sense” when
evaluating, in the context of a motion to dismiss under RCFC 12(b)(6), whether a claimed right
to relief is plausible. Iqbal, 556 U.S. at 679. In doing so, the court “must accept as true the
complaint’s undisputed factual allegations and should construe them in a light most favorable to
the plaintiff.” Cambridge v. United States, 558 F.3d 1331, 1335 (Fed. Cir. 2009) (citing
Papasan v. Allain, 478 U.S. 265, 283 (1986); Gould, Inc. v. United States, 935 F.2d 1271, 1274
(Fed. Cir. 1991)). The court is not, however, similarly bound to accept legal conclusions
contained in the same allegations. Twombly, 550 U.S. at 555.

        Here, the government in essence argues that the factual matter provided by Mr. Wolens in
his complaint, when viewed in light of the provisions of I.R.C. § 71(b)(1), cannot as a matter of
law establish a claim for relief. Def.’s Mot. at 4, 7. Under the Internal Revenue Code, an
individual taxpayer is allowed a deduction from his or her taxable income in “an amount equal to
the alimony or separate maintenance payments paid during such individual’s taxable year.”
I.R.C. § 215(a). The term “alimony or separate maintenance payment” is defined as 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.

IRC § 71(b)(1) (emphasis added). The government concedes that the 2007 payment meets the
requirements of Subparagraphs (A) through (C) of this statute. Def.’s Mot. at 6. However, the
government contends that it does not meet the requirement of Subparagraph (D) because under
the terms of the divorce decree, Mr. Wolens would still have been obligated to make the 2007
payment, as well as all the payments specified in Paragraph 5 of the decree, in the event of
Ms. Wolens’ death. Def.’s Mot. at 6-7.




       7
         RCFC 12(b)(6) mirrors the equivalent rule in the Fed. R. Civ. P. Consequently,
decisions interpreting the Fed. R. Civ. P. are relevant to interpretation of the comparable
provisions of the RCFC. See Duffy, 120 Fed. Cl. at 61 n.9; Palafox St. Assocs., L.P. v. United
States, 114 Fed. Cl. 773, 780 n.2 (2014).

                                                6
       The government and Mr. Wolens concur that in determining whether the 2007 payment
meets the requirements of I.R.C. § 71(b)(1)(D), the court should:

       (1) . . . look[] for an unambiguous termination provision in the divorce decree;
       (2) if there is no unambiguous termination provision, . . . look[] to whether the
       payments would terminate at the payee’s death by operation of State law; and
       (3) if State law is unclear, . . . look[] solely to the divorce decree to determine
       whether the payments would terminate at the payee’s death.

Def.’s Mot. at 7; Pl.’s Opp’n at 3 (both quoting Rood v. Commissioner, 103 T.C.M. (CCH) 1668,
1670 (2012) (in turn citing Kean v. Commissioner, 407 F.3d 186, 191 (3d Cir. 2005); Fithian v.
United States, 45 Fed. Appx. 700, 701 (9th Cir. 2002); Lovejoy v. Commissioner, 293 F.3d 1208,
1212-13 (10th Cir. 2002); Hoover v. Commissioner, 102 F.3d 842, 847-48 (6th Cir. 1996);
Leventhal v. Commissioner, 79 T.C.M. (CCH) 1670 (2000))).

        As to the first step, the government argues not only that the divorce decree does not have
an unambiguous termination provision for the 2007 payment, but that it conversely provides that
the obligation to make the 2007 payment would not terminate upon Ms. Wolens’ death. Def.’s
Mot. at 7. As evidence of this, the government points to Paragraph 10 of the decree, which states
that “save as aforesaid” neither of them “would be entitled to apply for an order under the
Inheritance (Provision for Family and Dependents) Act 1975 even if, by the date of their death,
the other party had become domiciled in England and Wales (neither being so domiciled at
present).” Def.’s Mot. at 8 (quoting Divorce Decree at 6). The government asserts that because
the 2007 payment is ordered in Paragraph 5 of the decree, it falls under the “save as aforesaid”
exception set out in Paragraph 10, and therefore Ms. Wolens’ estate would be entitled to apply
for an order to enforce the payment under the Inheritance (Provision for Family and Dependents)
Act 1975 (“Inheritance Act”). Def.’s Mot. at 8. The government cites the 10th Edition of
Black’s Law Dictionary as defining “aforesaid” as “[m]entioned above; referred to previously.”
Id. 8 n.7. The government consequently asserts that the phrase “save as aforesaid” operates to
exclude any prior portion of the decree (including the payments directed in Paragraph 5) from
the provisions of Paragraph 10. Id. at 8; see also Def.’s Reply in Further Support of Def.’s Mot.
(“Def.’s Reply”) at 4, ECF No. 12. In short, as the government would have it, the parties would
not be precluded from applying for an order under the Act relating to any of the items
enumerated in the divorce decree; they would only be precluded from raising any new claims
under the Act relating to their former marital property or obligations.

        The Inheritance Act allows the estate of a person domiciled in England and Wales to seek
a court order for payment on behalf of the deceased. Inheritance (Provision for Family and
Dependents) Act 1975, c. 63, §§ 1-2 (Eng. & Wales). This authorization encompasses a request
for a court order to vary or revoke the continuation either of “periodical payments” under the
Matrimonial Causes Act 1973 or of payments under a “maintenance agreement” between former
spouses. Id. §§ 16-17. The Act states that a divorce decree can specify that, in the event of the
death of one party, the other party is not entitled to apply for an order under the Act. Id. § 15.
Paragraph 10 of the Wolens divorce decree does just that: it prevents either party from bringing
an action under the Act “even if, by the date of their death, the other party had become domiciled
in England and Wales (neither being so domiciled as present).” The government acknowledges

                                                 7
that neither Mr. Wolens nor Ms. Wolens had or has established a domicile in England or Wales,
and that this additional hurdle would apply even to the “save as aforesaid” exception set out in
Paragraph 10 of the decree (including the payments specified in Paragraph 5). Def.’s Reply at 5.

        Respecting the second step in the I.R.C. § 71(b)(1)(D) inquiry, the government asserts
that the appropriate law to apply to the question of whether the payments in Paragraph 5 would
terminate upon the death of Ms. Wolens is the law of the United Kingdom, because the decree
was issued by the United Kingdom’s High Court of Justice. Def.’s Mot. at 9. Accordingly, the
government argues that under U.K. law, the 2007 payment, as well as the other payments
specified in Paragraph 5, would be considered lump-sum distributions of marital assets, and not
alimony or maintenance payments. Id. The government asserts that lump-sum payments are
intended to be distinct from “periodical payments”—which are more typically associated with
maintenance payments—as demonstrated by their separate listing in the Matrimonial Causes Act.
Id. at 10 (citing Matrimonial Causes Act 1973, c. 18, § 23(1)(a) through (c) (Eng. & Wales)
(stating that financial provision orders can be for periodical payments, secured periodical
payments, or lump-sum payments)). As evidence that the 2007 payment was a lump-sum
payment and not a periodical payment, the government points not only to the use of the term
“lump sum” in Paragraph 5, but also the fact that the language and structure of Paragraph 5
closely mirrors the sample language adopted by the U.K. Family Division’s Financial Remedies
Working Group for a series of lump sum orders:

       The [applicant]/[respondent] shall pay to the [respondent]/[applicant] the
       following lump sums:

       a.      £[insert] by [insert time] on [insert date];
       b.      £[insert] by [insert time] on [insert date]; and
       c.      £[insert] by [insert time] on [insert date].

Def.’s Opp’n at 5 (citing Financial Remedy Omnibus, The Orders Project, U.K. Family Division
at ¶ 52).

        The government cites several United Kingdom cases in support of the contention that
lump-sum payments, as contrasted to periodical payments, are considered a division of marital
assets and are often ordered to achieve a “clean break” divorce. Def.’s Reply at 8 (citing White
v. White, [2001] 1 AC (H.L.) 596 (appeal taken from Eng.) (describing the use of a lump-sum
payment to achieve a “clean break” divorce); Pearce v. Pearce, [2003] EWCA (Civ) 1054 [39]
(Eng.) (discussing the use of lump-sum payments to achieve a “clean break,” and the preference
for use of a lump-sum payment to achieve a clean break rather than periodical (maintenance)
payments)); see also Def.’s Mot. at 10-11 (citing Cowan v. Cowan [2001] EWCA (Civ) 679 [8]
(Eng.) (applying the White case to a lump-sum division of assets, in part attributable to the wife’s
financial needs)). There is precedent in the United Kingdom suggesting that because lump-sum
payments are considered a division of assets, the obligation to make them does not terminate
upon the payee spouse’s death. See Def.’s Mot. at 11-12 (citing Barder v. Barder [1988] 1 A.C.
(H.L.) 20 (appeal taken from Eng.) (holding that a former spouse’s entitlement to a lump-sum
payment survived her death); Richardson v. Richardson [2011] EWCA (Civ.) 79 [8b] (Eng.)
(holding that the estate of a deceased former spouse was entitled to receive a lump-sum payment

                                                 8
ordered in a divorce decree because of the continued need for the husband and wife to “share
equally in the assets”); Purse v. Purse [1981] 2 All ER 465 (stating, in dicta, that “an appeal
against an order for a lump sum or a property adjustment order” would have to proceed in the
event of the payee spouse’s death because “important property rights are at stake”)). Based on
these precedents, the government argues that Paragraph 5 is a division of marital assets achieved
through a series of lump-sum payments created, in part, because Mr. Wolens and Ms. Wolens
did not have sufficient liquidated assets available at the time of their divorce to make an
immediate “clean break.” Def.’s Mot. at 12; Def.’s Opp’n at 7-8; Hr’g Tr. at 15:1-8.

        Finally, with regard to the third step in the I.R.C. § 71(b)(1)(D) inquiry, the government
argues that the plain language of the divorce decree supports the conclusion that the obligation to
make the payments in Paragraph 5 would not have ended in the event of Ms. Wolens’ death.
Def.’s Mot. at 13-14. In doing so, that government points not only to the previously discussed
language of Paragraph 10—which, as the government would have it, would allow Ms. Wolens’
estate to seek an order under the Inheritance Act to enforce the payments in Paragraph 5—but
also the provisions in Paragraph II of the divorce decree requiring Mr. Wolens to obtain life
insurance to secure the obligations in Paragraph 5. Id. at 13. The government argues that
because the decree inferentially addresses the continuation of payments upon Mr. Wolens’ death,
but does not mention termination of payments upon Ms. Wolens’ death, no termination provision
was intended with regard to Paragraph 5. Id. at 13-14 (citing Fithian, 45 Fed. Appx. at 701-02
(concluding that a payment under a divorce decree could not be alimony when it did not contain
a termination-on-death provision, but other forms of support in the decree did have such a
provision); Crabtree v. Commissioner, 110 T.C.M. (CCH) 219, (2015) (same); Laremore v.
Commissioner, No. 15737-12S, 2014 WL 4652901, at *4 (T.C. Sept. 18, 2014) (same)).

        The salient question becomes whether, notwithstanding the government’s arguments,
Mr. Wolens has pled sufficient factual allegations to state a plausible claim for relief. Iqbal, 556
U.S. at 678-79; Twombly, 550 U.S. at 557. When construed in the light most favorable to
Mr. Wolens, the facts alleged plausibly establish that the 2007 payment to Ms. Wolens could
have been an alimony payment under I.R.C. § 71(b)(1), and therefore he could have been entitled
to deduct that payment from his 2007 taxable income. First, as the plaintiff notes in his response,
the divorce decree does not contain an “unambiguous” termination-on-death provision for the
payments specified in Paragraph 5, nor does it contain an unambiguous provision that the
payments will not terminate upon the payee’s death. Pl.’s Opp’n at 6-7; see also, e.g., Fithian,
45 Fed. Appx. at 701 (finding that where there is no “express termination” language, “the
divorce decree as a whole is ambiguous as to whether a termination-on-death condition
applie[s]”). 8 Therefore, resolution of the termination question under I.R.C. § 71(b)(1)(D) turns


       8
        The government suggests in its original motion to dismiss that Paragraph 10 of the
divorce decree contained an unambiguous non-termination provision. Def.’s Mot. at 7-8.
However, at most Paragraph 10 establishes that if Ms. Wolens had died before receiving the
2007 payment, her estate would not have been precluded from seeking an order to enforce the
payment under the Inheritance Act, assuming Ms. Wolens had established domicile in England
or Wales prior to her death. See supra, at 7. In its reply in support of its motion, the government
appears to concede that the divorce decree “lack[s] express termination language” (and
conversely, lacks express non-termination language), but it nevertheless asserts that the
                                                 9
on application of the pertinent source of law. If under that law the result is still ambiguous, the
court looks to the language of the divorce decree to resolve the ambiguity. See supra, at 7
(reciting the three-part inquiry under I.R.C. § 71(b)(1)(D) established in Rood, et al.).

         The government argues that under United Kingdom law, the 2007 payment would be
deemed a lump-sum division of marital assets, and therefore the obligation to pay it would not
terminate upon Ms. Wolens’ death. Def.’s Mot. at 9-12. However, although the government has
shown that the term “lump sum” is typically associated in the United Kingdom with a division of
marital assets, it has not established that this is the only reasonable interpretation of Paragraph 5.
In particular, questions of fact arise regarding the operation of Paragraph III of the divorce
decree, which states that Mr. Wolens will cease to be liable for the “interim financial
arrangements” related to his “contribution to [Ms. Wolens’] costs” of £6000 per month once he
makes the first lump-sum payment referred to in Paragraph 5. Compl. Ex. A at 2. It is possible
that, as the government argues, Paragraph 5 operated as a division of marital assets that replaced
the need for the regular support payments specified in Paragraph III. See Hr’g Tr. at 15:20-25.
Nonetheless, it is also possible that the payments contemplated by Paragraph 5, or at least most
of them, served as a continuation of these support payments, and therefore the 2007 payment is
properly viewed as alimony. The only evident exception is the payment provided in
Subparagraph 5(b), which was to be made on the date of the sale of the matrimonial home or
Mr. Wolens’ exercise of an option to purchase the home. The payment under that Subparagraph
evidently relates to a division of assets. Additionally, the court must take into account the fact
that a division of assets occurred pursuant to Paragraph 6 of the Divorce Decree which ordered
the transfer to Ms. Wolens of all of Mr. Wolens’ interest in two individual retirement accounts.
Divorce Decree at 5.

        Questions of fact also remain as to the operation of Paragraph II of the decree, which
required Mr. Wolens to work with Ms. Wolens to obtain “life insurance on his life sufficient to
secure the payments due to [Ms. Wolens] under [Subparagraphs 5(c) through (e)] in the event of
his death.” Compl. Ex. A at 2. Again, it is possible that the reference to Mr. Wolens’ death in
this paragraph, coupled with the lack of any termination-on-death provision in Paragraph 5,
signifies that the parties did not intend for there to be a termination provision in the decree. See
Def.’s Mot. at 13-14. However, it is also possible that Paragraph II was meant to signify that that
payments in Subparagraphs 5(c) through (e) were only meant to continue in the event of
Mr. Wolens’ death, but not meant to continue in the event of Ms. Wolens’ death. In the context


appropriate inquiry under the first step in interpreting I.R.C. § 71(b)(1)(D) is “whether the
divorce instrument is silent” as to a termination-on-death provision. Def.’s Reply at 3 (citing
Nye v. Commissioner, 106 T.C.M. (CCH) 32 (2013)). While it is true that in Nye, the Tax Court
noted that the instrument in question was silent as to whether there was a termination provision,
this was in the context of finding that there was no unambiguous termination provision (the first
step of the three-part inquiry) and then moving on to the second and third step. Nye, 106 T.C.M.
(CCH) 32, __, 2013 WL 3581969, at *5. As a result, the government’s arguments with respect
to Paragraph 10 are more relevant to the third step of this inquiry, i.e., if there is no unambiguous
termination provision and the question is still ambiguous under operation of pertinent law, the
court will rely solely on the language of the divorce decree.


                                                 10
of the government’s motion to dismiss, the court need not look further into the resolution of
these questions, except to state that based solely on context of the divorce decree, and the facts
currently alleged, the government has failed to establish that Mr. Wolens cannot plausibly state a
claim for relief. Iqbal, 556 U.S. at 678.

          Accordingly, the court has concluded that the government’s motion to dismiss should be
denied.

                  C. Plaintiff’s Motion for Summary Judgment Under RCFC 56(a)

        Summary judgment may be granted when “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” RCFC 56(a). A fact is material
if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986). A genuine dispute is one that “may reasonably be resolved in
favor of either party.” Id. at 250. “The inferences to be drawn from the underlying facts . . .
must be viewed in the light most favorable to the party opposing the motion.” Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986) (quoting United States v.
Diebold, Inc., 369 U.S. 654, 655 (1962)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323
(1986).

        Mr. Wolens asserts that under the second step of the three-step inquiry for a termination-
on-death provision under I.R.C. § 71(b)(1)(D), see supra, at 7, the court should apply New
York state law instead of the law of the United Kingdom. Pl.’s Cross-Mot. at 5-7. Mr. Wolens
argues that under New York law, the 2007 payment would have terminated upon the death of
Ms. Wolens because the payment is appropriately characterized as a maintenance payment and
not an “equitable distribution” of assets. Id. at 9-10 (citing Leventhal, 79 T.C.M. (CCH) 1670
(finding under New York law that, in the absence of a clear divorce order, recurring payments to
a former spouse were support payments that would terminate upon the payee spouse’s death)).
Mr. Wolens points out that the Tax Court in Leventhal distinguished its earlier decision in
Megibow v. Commissioner, 76 T.C.M. (CCH) 1072 (1998), which had found that a one-time
payment was an equitable distribution, the obligation for which would not have terminated upon
the payee spouse’s death. See Leventhal, 79 T.C.M. (CCH) 1670, __ n.13, 2000 WL 288277, at
*12.

        Whether New York law or the law of the United Kingdom is applied in this case, factual
questions remain regarding the operation of Paragraph 5 of the divorce decree in conjunction
with its other provisions, including Paragraphs II and III. Therefore, there are genuine disputes
of material fact at this time such that the court cannot determine whether plaintiff is entitled to
judgment as a matter of law. See RCFC 56(a); Anderson, 477 U.S. at 248; see also, e.g.,
Sundance Helicopters, Inc. v. United States, 104 Fed. Cl. 1, 11 (2012) (denying a motion for
summary judgment because genuine disputes of material facts remained regarding tax liability).

       Accordingly, the court has concluded that the plaintiff’s motion for summary judgment
should also be denied.




                                                11
                                        CONCLUSION

     For the reasons stated, the government’s motion to dismiss under RCFC 12(b)(6) is
DENIED. Plaintiff’s motion for summary judgment under RCFC 56(a) is also DENIED.

        The government is requested to file its answer to plaintiff’s complaint by March 25,
2016.

        It is so ORDERED.
                                                  s/ Charles F. Lettow
                                                  Charles F. Lettow
                                                  Judge




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