                              T.C. Memo. 2019-11



                        UNITED STATES TAX COURT



          JEFFREY SIEGEL AND SANDRA SIEGEL, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 27572-16.                        Filed February 14, 2019.



      Peter J. Tomao and Lawrence J. Scherer, for petitioners.

      Jerry M. Innocent and Gennady Zilberman, for respondent.



           MEMORANDUM FINDINGS OF FACT AND OPINION


      COLVIN, Judge: Respondent determined that petitioners had a $44,281

deficiency in Federal income tax for 2012. This determination resulted from

respondent’s disallowance of $115,618 of petitioners’ $242,137 deduction of

payments of alimony arrearages for 2012.
                                         -2-

[*2] We granted respondent’s motions to remove the small tax case designation

and for leave to file an amended answer asserting an increased deficiency against

petitioners based on the denial of $225,000 instead of $115,618 of petitioners’

alimony deduction. Thus, the issue for decision is whether petitioners are entitled

to deduct as alimony arrearages $242,137 (as petitioners claimed and contend) or

$17,137 (as respondent contends). We hold that petitioners are entitled to deduct

alimony of $242,137 for 2012.1

                               FINDINGS OF FACT

      Some of the facts have been stipulated and are so found.2

A.    Mr. Siegel’s Prior Marriage

      Jeffrey Siegel (petitioner) and Belinda Johnson (his ex-spouse) were

married on September 16, 1989, and have two daughters.

      Petitioner and his ex-spouse were divorced pursuant to a judgment of

divorce entered in the Supreme Court of New York, County of Nassau, on May



      1
       Under the Tax Cuts and Jobs Act of 2017, Pub. L. No. 115-97, sec. 11051,
131 Stat. at 2089-2090, alimony paid is no longer deductible if paid pursuant to a
divorce instrument executed after December 31, 2018. That statutory change does
not apply to the tax year before the Court in this case.
      2
        Petitioners resided in Florida when the petition was filed. Unless otherwise
indicated, section references are to the Internal Revenue Code in effect for the year
in issue. Rule references are to the Tax Court Rules of Practice and Procedure.
                                        -3-

[*3] 23, 2003. Under the judgment of divorce, petitioner was required to make

monthly spousal maintenance payments to his ex-spouse of $10,110 per month

and child support payments of $5,000 per month.

B.    Petitioner’s Maintenance Obligations From 2003 to 2007

      After the divorce petitioner’s business went into bankruptcy, his income fell

drastically, and he fell behind in making the payments required by the judgment of

divorce. In May 2004 his ex-spouse obtained an order from a judge of the

Supreme Court of New York, County of Nassau, for entry of a money judgment3

of $228,483 against petitioner. On December 19, 2006, the Family Court of New

York, County of New York, found petitioner to be in arrears of $253,622. On

September 14, 2007, the Family Court issued a money judgment of $216,625

against petitioner.

C.    Petitioner’s Maintenance Obligations From 2008 to 2012

      On August 15, 2008, petitioner’s ex-spouse filed a motion in the Supreme

Court of New York, County of Nassau, to hold petitioner in contempt and to

enforce the financial provisions of the judgment of divorce. Petitioner filed a

motion on September 17, 2008, seeking (1) to reduce his child support and obtain

      3
       “Money judgment” has been defined as “[a] judgment for damages subject
to immediate execution, as distinguished from equitable or injunctive relief.”
Black’s Law Dictionary 920 (9th ed. 2009).
                                         -4-

[*4] other relief and (2) to consolidate those requests with his ex-spouse’s

contempt petition. Those cases were consolidated and a hearing was held before a

special referee of the Supreme Court of New York, County of Nassau, who issued

a report dated November 23, 2010.

      From the entry of the 2007 money judgment until the issuance of the

November 23, 2010, report, petitioner made 92 child support and alimony

payments to his ex-spouse totaling $255,410.

      The special referee recommended that the Supreme Court of New York,

County of Nassau, grant petitioner’s motion to reduce the amount of petitioner’s

child support payments and also concluded that petitioner had willfully failed to

comply with a lawful order of support. Taking into account the reduction of

petitioner’s support obligations, the special referee calculated that from July 2006

to August 2010 petitioner owed his ex-spouse $567,991 in child support, alimony,

and attorney’s fees. Taking into account payments made by petitioner from July

2006 through August 2010, the total remaining arrearages were $242,137. The

referee also recommended that the Supreme Court of New York, County of

Nassau, award attorney’s fees of $156,000 to petitioner’s ex-spouse. Finally, the

special referee found that petitioner owed $25,000 to a financial account held by

one of his daughters.
                                         -5-

[*5] D.       2012 Order

       By order dated February 12, 2012 (2012 order), the Supreme Court of New

York found petitioner to be in contempt and sentenced him to 150 days in jail

unless he paid $25,000 to his daughter’s account and $225,000 to his former

spouse. The order also confirmed all of the findings of the special referee. In this

order, the court stated that it is

              ORDERED and ADJUDGED, that Defendant, Jeffrey Siegel, is
       found to be in contempt for his wilful violations of the terms of orders
       of the court * * *. Having the opportunity to be fully heard on the
       issue at hearing, the Defendant, Jeffrey Siegel, is sentenced to
       incarceration in the Nassau County Correctional Facility for a period
       of one hundred and fifty (150) days. The court hereby stays this
       provision for Defendant’s incarceration and permits the contemnor to
       purge his contempt by the payment of $25,000 to the 529 Account of
       * * * [daughter] and naming the Wife the Trustee of this Account and
       the payment of $225,000 to Plaintiff. Both of these purge provisions
       shall be made on or before May 30, 2012. Payment to the Plaintiff of
       the sum of $225,000 shall be by bank or certified check, delivered to
       Plaintiff’s attorney. The failure to make the payments directly to the
       Plaintiff and to the * * * [daughter’s account] and to name the wife as
       Trustee as directed herein on or before May 30, 2012 shall result in
       the issuance of a warrant of arrest for the contemnor, Jeffrey Siegel.

       Petitioner submitted a check for $250,000 to the attorneys for his ex-spouse

on June 6, 2012. The Office of Child Support Enforcement applied $225,000 of

this payment to arrearages petitioner owed to his ex-spouse.
                                         -6-

[*6] E.       Petitioners’ Tax Return for 2012

      On their jointly filed Form 1040, U.S. Individual Income Tax Return, for tax

year 2012, petitioners deducted $242,137 for alimony paid.

                                     OPINION

      The sole issue for decision is whether petitioners may deduct alimony paid

of $242,137 (as petitioners contend) or only $17,137 (as respondent contends),

i.e., whether $225,000 that petitioner paid in response to the 2012 order is

deductible.

A.    Burden of Proof

      The Commissioner’s determinations in a notice of deficiency are generally

presumed correct, and the taxpayer bears the burden of proving them erroneous.

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933). However, if the

Commissioner raises a new issue or seeks an increase in the deficiency, the

Commissioner has the burden of proof as to the new issue or the increased

deficiency. Rule 142(a)(1). Petitioners contend that the burden of proof on all

amounts in dispute shifts to respondent under section 7491(a). We need not

consider the burden of proof further because no fact is in dispute relating to

petitioners’ claim.
                                           -7-

[*7] B.       Section 71(b)

        “Alimony or separate maintenance payment” is defined in section 71(b) as

any payment in cash if (1) such payment is received by a spouse under the divorce

decree, (2) the divorce or separation agreement does not designate such payment

as a payment which is not includible in gross income under section 71 and not

allowed as a deduction under section 215, (3) the spouses are not living in the

same household at the time of the payment, and (4) there is no liability to make the

payments 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. The parties agree that the payments

made pursuant to the 2012 order meet the first three criteria, but they dispute

whether petitioner would have remained liable for making the payments after his

ex-spouse’s death.

C.      The Parties’ Primary Contentions

        Petitioners contend that they may deduct $225,000 because the amount was

payment of alimony arrearages pursuant to petitioner’s maintenance obligations

and lump-sum payments of alimony arrearages retain their character as alimony

paid.
                                         -8-

[*8] Respondent contends that the 2012 order should be treated as a money

judgment because the New York court which issued it was authorized only to

issue a money judgment to enforce the payment of alimony arrearages. Petitioners

respond to that contention by citing authority under New York law for the

issuance of a contempt order to achieve the payment of alimony arrearages.

D.    Discussion

      1.     Whether Alimony Arrearages Petitioner Paid Retain Their Character
             as Alimony Paid

      Petitioner paid $250,000 of arrearages relating to the termination of his

prior marriage to avoid imposition of a 150-day jail term under the 2012 order. Of

that amount, $225,000 was arrearages in alimony payments. Lump-sum payments

of alimony or child support arrearages generally retain their character as alimony

or child support for Federal tax purposes. Barrett v. United States, 74 F.3d 661

(5th Cir. 1996); Bernard v. Commissioner, 87 T.C. 1029, 1036 (1986); Davis v.

Commissioner, 41 T.C. 815, 820 (1964); Berry v. Commissioner, T.C. Memo.

2005-91; see also Rev. Rul. 55-457, 1955-2 C.B. 527.

      2.     Whether the 2012 Order Is a Money Judgment

      The 2012 order found petitioner in contempt and provided a choice to

petitioner: go to jail for 150 days or pay $250,000 in arrearages relating to his
                                         -9-

[*9] divorce. It did not require any payment if petitioner decided to accept the jail

term.

        The 2012 order can be contrasted with the 2007 money judgment. The 2007

money judgment states that “judgment be entered in favor of * * * [petitioner’s ex-

spouse] against * * * [petitioner] in the amount of $216,625”. The 2007 money

judgment also states that “a certified copy of said judgment may be filed in the

county clerk’s office in accordance with [s]ection 460 of the Family Court Act”.

Under New York law, a “certified copy of the order directing the entry of a money

judgment shall be entered in the office of the clerk of the county in which the

proceeding was commenced.” N.Y. Fam. Ct. Act (FCA) sec. 460(2) (McKinney

2018). In contrast with the 2007 money judgment, the 2012 order enters no

judgment in favor of petitioner’s ex-spouse and by its terms provided her with no

means of enforcing the judge’s order. By its terms the 2012 order clearly is not a

money judgment. The 2012 order is a contempt order to achieve the payment of

alimony arrearages, as petitioner contends.

        3.    Whether the 2012 Order Should Be Treated as a Money Judgment

        Respondent contends that the 2012 order was (or should be treated as) a

money judgment because FCA sec. 454(2)(a) (McKinney 2018) provides that the

judge, upon a finding of failure by a party to comply with a lawful support order,
                                        -10-

[*10] “shall” enter a money judgment under FCA sec. 460. FCA sec. 454 provides

in pertinent part:

             1. If a respondent is brought before the court for failure to
      obey any lawful order of support and if, after hearing, the court is
      satisfied by competent proof that the respondent has failed to obey
      any such order, the court may use any or all of the powers conferred
      upon it by this part. The court has the power to use any or all
      enforcement powers in every proceeding brought for violation of a
      court order under this part regardless of the relief requested in the
      petition.

            2. Upon a finding that a respondent has failed to comply with
      any lawful order of support:

           (a) the court shall enter a money judgment under section four
      hundred sixty of this article; and

                     *   *      *     *        *    *     *

             3. Upon a finding by the court that a respondent has willfully
      failed to obey any lawful order of support, the court shall order
      respondent to pay counsel fees to the attorney representing petitioner
      pursuant to section four hundred thirty-eight of this act and may in
      addition to or in lieu of any or all of the powers conferred in
      subdivision two of this section or any other section of law:

           (a) commit the respondent to jail for a term not to exceed six
      months. * * *

FCA sec. 460 provides in pertinent part:

             1. Where the family court enters an order:

             (a) requiring any party to provide for the support of another
      party, or child, or both; or
                                          -11-

[*11]          (b) providing for the support or maintenance of a spouse or
        former spouse, or child, or both, on a referral from the supreme court
        in an action for divorce, separation, annulment or a proceeding for the
        determination of the custody of a minor by writ of habeas corpus or
        by petition and order to show cause; or

             (c) enforcing or modifying an order or decree of a court of
        competent jurisdiction not of the state of New York providing for the
        support of the petitioner and/or child support; or

              (d) awarding support under article five-B of this Act; or

               (e) awarding counsel fees under this act; and the party defaults
        in paying any sum of money due as required by the order directing the
        payment thereof, the court, without regard to the amount due, shall
        make an order directing the entry of judgment for the amount of child
        support arrears, together with costs and disbursements. The court
        shall make an order directing the entry of judgment for the amount of
        arrears of any other payments so directed, together with costs and
        disbursements, unless the defaulting party shows good cause for
        failure to make application for relief from the judgment or order
        directing such payment prior to the accrual of such arrears. * * *

Thus, respondent contends, in essence, that because FCA sec. 454 provides that

the judge “shall” enter a money judgment, the 2012 order is (or should be treated

as) a money judgment.

        We disagree. First, as just discussed, by its terms the 2012 order is not a

money judgment. Second, and more fundamentally, beyond the authority provided

by FCA sec. 454, a judge of the Supreme Court of the State of New York, which

issued the 2012 order, also has authority to find a party in contempt under the
                                       -12-

[*12] circumstances present here and to impose a jail sentence if a mandated

payment is not made. N.Y. C.P.L.R. 5210 (McKinney 2018) provides that

“[e]very court in which a special proceeding to enforce a money judgment may be

commenced, shall have power to punish a contempt of court committed with

respect to an enforcement procedure.” N.Y. Jud. Law sec. 753 (McKinney 2018)

provides:

            A. A court of record has power to punish, by fine and
      imprisonment, or either, a neglect or violation of duty, or other
      misconduct, by which a right or remedy of a party to a civil action or
      special proceeding, pending in the court may be defeated, impaired,
      impeded, or prejudiced, in any of the following cases:

                   *     *      *     *       *    *      *

            3. A party to the action or special proceeding, an attorney,
      counselor, or other person, for the non-payment of a sum of money,
      ordered or adjudged by the court to be paid, in a case where by law
      execution can not be awarded for the collection of such sum except as
      otherwise specifically provided by the civil practice law and rules; or
      for any other disobedience to a lawful mandate of the court.

As a court of record with the authority to enforce a money judgment, the Supreme

Court of the State of New York, Nassau County, had contempt authority under

both N.Y. C.P.L.R. 5210 and N.Y. Jud. Law sec. 753.4

      4
       Respondent relies on Iglicki v. Commissioner, T.C. Memo. 2015-80, which
involved a payment made pursuant to a money judgment. Having decided that the
2012 order was not a money judgment, see supra pp. 8-13, we need not consider
                                                                  (continued...)
                                      -13-

[*13] 4.     Conclusion

      On the basis of the foregoing, we hold that petitioners may deduct alimony

paid of $242,137 for 2012.


                                             Decision will be entered

                                     for petitioners.




      4
        (...continued)
Iglicki.
