                         T.C. Memo. 2003-12



                       UNITED STATES TAX COURT



                 RICHARD J. MEYER III, Petitioner v.
            COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 5469-01.             Filed January 13, 2003.


     Richard J. Meyer III, pro se.

     Shawna A. Early, for respondent.



               MEMORANDUM FINDINGS OF FACT AND OPINION


     VASQUEZ, Judge:    Respondent determined the following

deficiencies in and additions to petitioner’s Federal income

taxes:1




     1
          All figures are rounded to the nearest dollar.
                                    - 2 -

                                      Additions to Tax
Year       Deficiency   Sec. 6651(a)(1)   Sec. 6651(a)(2)    Sec. 6654

1994         $5,005          $684               --                $128
1995          7,923         1,036               --                 203
1996         11,174         1,408             $1,251               304

Unless otherwise indicated, all section references are to the

Internal Revenue Code in effect for the years in issue, and all

Rule references are to the Tax Court Rules of Practice and

Procedure.

       After concessions,2 the issues for decision are:     (1)

Whether petitioner Richard J. Meyer III (Mr. Meyer) is entitled

to alimony deductions in amounts greater than those conceded by

respondent for 1994, 1995, and 1996; (2) whether Mr. Meyer is

entitled to dependency exemptions for 1994, 1995, and 1996 for

his only child; (3) whether Mr. Meyer is entitled to a child care

credit for 1994, 1995, and 1996; (4) whether Mr. Meyer is liable

for additional tax pursuant to section 72(t) for 1994, 1995, and

1996; (5) whether Mr. Meyer is liable for an addition to tax

pursuant to section 6651(a)(1) for 1994, 1995, and 1996; (6)

whether Mr. Meyer is liable for an addition to tax pursuant to



       2
        Petitioner concedes that (1) he received wage income as
determined by respondent; (2) he received taxable pension
distributions of $1,333, $1,716, and $3,379 in 1994, 1995, and
1996, respectively; and (3) his filing status for 1994 was
married filing separately. Respondent concedes that (1)
petitioner’s filing status for 1995 and 1996 was single; (2)
petitioner did not receive any cancellation of indebtedness
income in 1996; and (3) petitioner is entitled to alimony
deductions of $2,000 for 1995 and $3,000 for 1996.
                                 - 3 -

section 6651(a)(2) for 1996; and (7) whether Mr. Meyer is liable

for an addition to tax pursuant to section 6654(a) for 1994,

1995, and 1996.

                         FINDINGS OF FACT

     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 he filed the

petition, Mr. Meyer resided in New York, New York.      As of the

time of trial, Mr. Meyer was 37 years old.

     In 1987, Mr. Meyer married Patricia Meyer (Ms. Meyer) in San

Francisco, California.   In 1989, Mr. Meyer and Ms. Meyer moved to

Hawaii.   In July 1990, Ms. Meyer gave birth to the couple’s only

child Richard J. Meyer IV (Richard).

     Between February and May 1993, Mr. Meyer, Ms. Meyer, and

Richard moved to Seattle, Washington.      In May 1993, Mr. Meyer and

Ms. Meyer separated.   Mr. Meyer and Ms. Meyer did not enter into

a formal separation agreement.

     After separating, Ms. Meyer and Richard moved back to Hawaii

and lived in Ms. Meyer’s parents’ condominium.      During the years

in issue, Richard resided in Hawaii with Ms. Meyer.

     After separating, Ms. Meyer did not work.      During the years

in issue, Ms. Meyer was unemployed.      Ms. Meyer did not pay

rent, utilities, or any other expenses associated with living in

her parents’ condominium.
                               - 4 -

     After separating in 1993 and until December 1993, Mr. Meyer

paid Ms. Meyer’s bills (including food, car expenses, insurance,

etc.) and Richard’s day care expenses monthly.

     Around December 1993, Ms. Meyer told Mr. Meyer that she

wanted Mr. Meyer to send her cash rather than have him pay her

bills.   From December 1993 until May 1995, Mr. Meyer sent Ms.

Meyer a check for $870 every month.    Additionally, Mr. Meyer paid

Ms. Meyer’s car insurance and Richard’s medical bills.

     The payments Mr. Meyer made from 1993 through May 1995,

however, were not made pursuant to a divorce decree or court

order.

     In March 1995, Ms. Meyer filed for divorce.   In May 1995, a

Hawaii State court ordered Mr. Meyer to pay $250 per month

alimony and $790 per month child support to Ms. Meyer.   Starting

in May 1995, money was taken directly out of Mr. Meyer’s paycheck

for the amounts the Hawaii State court ordered Mr. Meyer to pay

Ms. Meyer.

     In October 1995, the Hawaii State court issued a final

divorce decree.   In the divorce decree, Ms. Meyer was granted

custody of Richard.   The divorce decree ordered Mr. Meyer to pay

$250 per month alimony for 30 months and $580 per month child

support to Ms. Meyer.

     The divorce decree granted Mr. Meyer the dependency

exemption for his son for as long as Mr. Meyer paid alimony and
                               - 5 -

child support.   Ms. Meyer, however, did not execute a written

declaration releasing to Mr. Meyer the dependency exemption for

Richard for 1994, 1995, and 1996.

     During the years in issue, Mr. Meyer suffered from severe

health problems--initially he was diagnosed with HIV; later he

was diagnosed with AIDS.   Mr. Meyer’s infection was very active

and required strong antiviral medication to combat the virus.

During the years in issue, Mr. Meyer also suffered a nervous

breakdown and had to take a leave of absence from his job.

     Mr. Meyer did not timely file Federal income tax returns for

1994, 1995, and 1996.

                              OPINION

Alimony

     In addition to the amounts conceded by respondent, Mr. Meyer

claims he is entitled to deduct his $870 per month payments to

Ms. Meyer from January 1994 through April 1995 as alimony--

$10,440 for 1994 and $3,480 in 1995.

     Section 215(a) permits a deduction for the payment of

alimony or separate maintenance payments during a taxable year.

Section 215(b) defines the term alimony or separate maintenance

payment as alimony or separate maintenance which is includable in

the gross income of the recipient under section 71.   Section

71(b)(1) defines alimony or separate maintenance as any cash

payment meeting the four criteria provided in subparagraphs (A)
                                - 6 -

through (D) of that section.

       Respondent contends that Mr. Meyer is not entitled to any

alimony deduction with respect to payments he made prior to May

1995 because they were not made pursuant to a divorce decree or

separation instrument as required by section 71(b)(1)(A).

Section 71(b)(1)(A) defines alimony or separate maintenance

payments as any payment made in cash if such payment is received

by a spouse under a divorce or separation instrument.    “Divorce

or separation instrument” is defined in section 71(b)(2) as a

decree or written instrument meeting any of the requirements in

subparagraphs (A), (B), or (C).    Payments not received under a

divorce or separation instrument are not deductible under section

215.    Healey v. Commissioner, 54 T.C. 1702 (1970), affd. without

published opinion 71-2 USTC par. 9536, 28 AFTR 2d 71-5217 (4th

Cir. 1971); Jachym v. Commissioner, T.C. Memo. 1984-181; see also

White v. Commissioner, T.C. Memo. 1984-65.

       The payments Mr. Meyer made before May 1995, the date of the

Hawaii State court order, were voluntary in nature as they were

not mandated by a qualifying divorce or separation instrument at

the time they were made.    Accordingly, the payments Mr. Meyer

made before May 1995 are not deductible.

Dependency Exemptions

       Section 151(a) and (c) allows a deduction for a “dependent”

as defined in section 152.    Sons or daughters of the taxpayer,
                              - 7 -

more than half of whose support during the calendar year is

provided for by the taxpayer, are “dependents”.   Sec. 152(a).

     Section 152(e)(1), however, further provides that if a child

receives more than half of his support during the calendar year

from parents who are divorced or legally separated, or who live

apart at all times during the last 6 months of the calendar year,

and if the child is in the custody of one or both of his parents

for more than one-half of the calendar year, then the child is

treated as receiving more than half of his support during the

year from the parent having custody for a greater portion of the

calendar year (custodial parent).   Section 152(e)(2) provides an

exception to this rule where the custodial parent releases his

claim to the exemption for the year.   The custodial parent must

sign a written declaration that the custodial parent will not

claim such child as a dependent for such taxable year, and the

noncustodial parent3 must attach such written declaration to the

noncustodial parent’s return for that taxable year.   Sec.

152(e)(2).

     Mr. Meyer and Ms. Meyer lived apart during all of 1994,

1995, and 1996; they were divorced in 1995.   During the years in

issue, Richard resided in Hawaii with Ms. Meyer, and in the

divorce decree Ms. Meyer was granted custody of Richard.



     3
        The noncustodial parent is the parent who is not the
custodial parent. Sec. 152(e)(2).
                              - 8 -

Accordingly, Ms. Meyer was the custodial parent.

     Ms. Meyer never executed a written declaration releasing to

Mr. Meyer the dependency exemption for Richard for 1994, 1995, or

1996, and Mr. Meyer did not attach to a return for 1994, 1995, or

1996 anything purporting to be a written declaration signed by

Ms. Meyer releasing the dependency exemption for Richard to him.

Therefore, we conclude that Mr. Meyer is not entitled to a

dependency exemption for 1994, 1995, or 1996 for Richard.    Sec.

152(e); see Miller v. Commissioner, 114 T.C. 184 (2000) (section

152(e)(2) requires the custodial parent to sign a written

declaration releasing the dependency exemption for his or her

child to the noncustodial parent).

Child Care Credit

     In the case of an individual who maintains a household which

includes as a member one or more qualifying individuals, there

shall be allowed as a credit against tax an amount equal to the

applicable percentage of employment-related expenses paid by such

individual during the taxable year.   Sec. 21(a)(1).   A

“qualifying individual” includes a dependent of the taxpayer

under the age of 13 and with respect to whom the taxpayer is

entitled to a deduction under section 151(c).4   Sec. 21(b)(1)(A).

     Mr. Meyer is not entitled to a deduction for Richard under



     4
        Additional definitions of “qualifying individual” are not
applicable herein. Sec. 21(b)(1)(B) and (C).
                               - 9 -

section 151(c) for 1994, 1995, or 1996.    Accordingly, Richard is

not a qualifying individual.   Therefore, we conclude that Mr.

Meyer is not entitled a credit pursuant to section 21(a) for

1994, 1995, and 1996.

Additional Tax Pursuant to Section 72(t)

     Section 72(t)(1) provides for a 10-percent additional tax on

the taxable amount of an early distribution from a qualified

retirement plan.   Mr. Meyer conceded that he received the taxable

pension distributions of $1,333, $1,716, and $3,379 for 1994,

1995, and 1996, respectively; however, Mr. Meyer contends that an

exception provided by section 72(t)(2) applies.

     Section 72(t)(2) provides exceptions to the 10-percent

additional tax for certain types of distributions.   Section

72(t)(1) does not apply to distributions attributable to a

taxpayer’s being disabled within the meaning of section 72(m)(7).

Sec. 72(t)(2)(A)(iii).   Section 72(m)(7) provides that an

individual is disabled if he is unable to engage in any

substantial gainful activity by reason of any medically

determinable physical or mental impairment which can be expected

to result in death or to be of long-continued and indefinite

duration.   Primary consideration should be given to the nature

and severity of the impairment.   Sec. 1.72-17A(f)(1), Income Tax

Regs.   Whether or not the impairment constitutes a disability is

to be determined with reference to all the facts in the case.
                               - 10 -

Sec. 1.72-17A(f)(2), Income Tax Regs.

     On the basis of the particular facts and circumstances

present in this case, namely petitioner’s severe health problems

and mental condition which incapacitated him during the years in

issue, we conclude that an exception provided in section 72(t)(2)

is applicable to Mr. Meyer for the years in issue.    Accordingly,

we conclude that Mr. Meyer is not liable for the additional tax

imposed by section 72(t)(1).

Additions to Tax

     Section 6651(a)(1) imposes an addition to tax for failure to

file a return on the date prescribed (determined with regard to

any extension of time for filing), unless the taxpayer can

establish that such failure is due to reasonable cause and not

due to willful neglect.    Section 6651(a)(2) provides for an

addition to tax where payment of tax is not timely “unless it is

shown that such failure is due to reasonable cause and not due to

willful neglect”.

     On the basis of the particular facts and circumstances

present in this case, namely petitioner’s severe health problems

and mental condition which incapacitated him during the years in

issue, we conclude that Mr. Meyer’s failure to file for the years

in issue and failure to pay for 1996 were due to reasonable cause

and not willful neglect.    See Shaffer v. Commissioner, T.C. Memo.

1994-618.   Accordingly, we conclude that Mr. Meyer is not liable
                              - 11 -

for additions to tax pursuant to section 6651(a)(1) and (2).

     Section 6654 imposes an addition to tax for failure to pay

estimated income tax.   Section 6654(e), however, provides that

the addition to tax pursuant to section 6654(a) shall not be

imposed when:   (1) By reason of casualty, disaster, or other

unusual circumstances the imposition of such addition to tax

would be against equity and good conscience, or (2) when the

taxpayer became disabled in the taxable year for which estimated

payments were required to be made (or in the taxable year

preceding such year) and such underpayment was due to reasonable

cause and not willful neglect.   Sec. 6654(e)(3)(A) and (B).

     On the basis of the particular facts and circumstances

present in this case, namely petitioner’s severe health problems

and mental condition which incapacitated him during the years in

issue, we conclude that an exception provided in section 6654(e)

is applicable to Mr. Meyer for the years in issue.    See Shaffer

v. Commissioner, supra.   Accordingly, we conclude that Mr. Meyer

is not liable for the addition to tax pursuant to section 6654.

     To reflect the foregoing,

                                         Decision will be entered

                                    under Rule 155.
