                  T.C. Memo. 2009-141



                UNITED STATES TAX COURT



         ANDREW MARTIN SPERLING, Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 2475-08.              Filed June 16, 2009.



     In 2005 P deducted as alimony under I.R.C. sec.
215(a) payments of $8,676 made to or on behalf of his
former spouse pursuant to a property settlement
agreement and divorce decree. R disallowed the alimony
deduction, determining that the payments failed to
satisfy the definition of alimony under I.R.C. sec.
71(b)(1) because, under the agreement and divorce
decree, P’s liability to make the payments continues
after the death of P’s former spouse contrary to the
requirement of I.R.C. sec. 71(b)(1)(D).

     Held: Under the agreement and divorce decree, P
would remain liable to make the payments at issue in
the event of his spouse’s death, and therefore such
payments are not alimony under I.R.C. sec. 71(b)(1) and
are not deductible under I.R.C. sec. 215(a).
                                 - 2 -

     Andrew Martin Sperling, pro se.

     Kathleen K. Raup, for respondent.



                MEMORANDUM FINDINGS OF FACT AND OPINION


     GUSTAFSON, Judge:     The Internal Revenue Service (IRS)

determined a $1,373 deficiency in petitioner Andrew Martin

Sperling’s 2005 Federal income tax.      Mr. Sperling petitioned this

Court, pursuant to section 6213(a),1 to redetermine the

deficiency.   The issue for decision is whether Mr. Sperling is

entitled to deduct $8,676 (or any other amount) under

section 215(a), which in turn depends on whether Mr. Sperling was

liable to pay this amount “after the death of” his ex-wife within

the meaning of section 71(b)(1)(D).

                           FINDINGS OF FACT

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

The stipulation of facts filed February 23, 2009, and the

attached exhibits are incorporated herein by this reference.     At

the time that he filed his petition, Mr. Sperling resided in

Pennsylvania.




     1
      Unless otherwise indicated, all citations of sections refer
to the Internal Revenue Code of 1986 (26 U.S.C.), as amended.
                               - 3 -

Divorce Decree and Property Settlement Agreement

     In January 2005 Mr. Sperling filed a complaint in divorce

against his then-wife Ada Sperling.    On January 12, 2005, the

Sperlings executed a “Property Settlement Agreement” (Agreement).

Paragraph 1 provided that the Agreement was “predicated upon a

divorce”; paragraph 3 provided that the Agreement would “continue

in full force and effect after such time as a final decree in

divorce may be entered”; and paragraph 4 provided that the

Agreement would “be incorporated but not merged into any Divorce

Decree which may be entered with respect to them, but the

Agreement shall nevertheless remain in full force and effect and

shall survive such Decree and shall not, in any way, be affected

thereby except as provided herein”.    (Emphasis added.)   By its

terms the Agreement took effect even before any divorce decree

and is said to “survive” and to “continue” in the event of, a

divorce decree.   On June 30, 2005, a divorce decree was entered

in Mr. Sperling’s divorce case, which incorporated the terms of

the Agreement by reference.

Liability To Make Payments After the Death of Either Spouse

     The Agreement (and by extension, the divorce decree, which

incorporated the terms of the Agreement by reference) included

two provisions that govern the rights of Mr. Sperling and his ex-

wife in the event that either or both of them were to die.

Paragraph 8 (“GENERAL MUTUAL RELEASE”) of the Agreement provides
                              - 4 -

that the parties release each other and their respective estates

from all claims except those claims or obligations arising from

the Agreement:

     Husband and Wife each do hereby mutually remise,
     release, quitclaim and forever discharge the other and
     the estate of such other, * * * from any and all
     rights, title and interests, or claims in or against
     the property * * * of the other or against the estate
     of such other * * *; or all other rights of a surviving
     spouse to participate in a deceased spouse’s estate
     * * *, or any rights which either party may have * * *
     for past, present or future support or maintenance,
     alimony, alimony pendente lite, [or] counsel fees,
     * * * except, and only except, all rights, agreements
     and obligations which may arise under this
     Agreement * * *. [Emphasis added.]

Paragraph 22 (“BINDING NATURE OF AGREEMENT”) of the Agreement

provides that the Agreement shall be binding and shall enure to

the benefit of the parties, their respective heirs, executors,

and assigns except as specifically excluded by the Agreement:

     This Agreement shall be binding and shall enure to the
     benefit of the parties hereto, their respective heirs,
     executors, administrators, successors and assigns
     except as where specifically excluded herein. The
     terms of this Agreement which have not been fulfilled
     at the time of death of either party shall become an
     obligation of the executor or administrator of the
     estate of either party unless specifically excluded by
     this Agreement.

Payments Under the Divorce Decree and Property Settlement
Agreement

     Under paragraph 10 of the Agreement, Mr. Sperling was

obligated to pay his ex-wife $55,000 upon the entry of a divorce

decree by (i) purchasing a condominium apartment for her, and

(ii) paying the unused balance of the $55,000 to her.
                               - 5 -

Paragraph 10 described his obligation to execute a deed for a

condominium to his ex-wife by stating that the condominium would

“be in the name of the Husband only until such time as the

divorce decree is entered.   At that point, the property shall be

transferred into Wife’s name only.”    (Emphasis added.)   Likewise,

Mr. Sperling’s obligation as to the unused balance was to deposit

it in an escrow account with Albert Ominksy, his attorney, for

his ex-wife, “pending entry of the divorce decree”.    Evidently,

if no divorce decree had been entered, the $55,000 would not have

been paid, and the condominium would have remained the property

of Mr. Sperling.   By an “Amendment and Addendum to the Property

Settlement Agreement” (executed on January 12, 2005), the

Sperlings agreed that Mr. Sperling’s ex-wife would be

“responsible for the purchase price and closing costs of

$46,823”, so that the unused balance due to her from the $55,000

amount was quantified as $8,177.

     Under paragraph 11 of the Agreement, Mr. Sperling was

obligated to pay certain expenses, including condominium fees,

for the period after the purchase of the condominium and before

the entry of the divorce decree.   Half of these expenses were

solely the responsibility of Mr. Sperling, and the other half

were to be deducted from his ex-wife’s escrow account, which held

the unused balance of the $55,000.     This obligation is not stated

to be contingent upon the entry of a divorce decree.    On the
                               - 6 -

contrary, this term is effective “prior to the date that the

divorce decree is entered”.

     Under paragraph 13 of the Agreement, Mr. Sperling was

obligated to pay $1,500 of his ex-wife’s attorney’s fees.    That

amount was to be deducted in full from his ex-wife’s escrow

account.   This obligation is not stated to be contingent upon the

entry of a divorce decree.

     On January 11, 2005--the day before the Agreement was

executed, but evidently in anticipation of it--Mr. Sperling paid

$1,500 to Michael J. Rutenberg, his ex-wife’s attorney, and

$6,677 to his own attorney to be held in escrow for his ex-wife.

Mr. Sperling thereafter paid $196 of condominium fees for his ex-

wife’s benefit on four separate occasions in 2005--January 20,

February 1, March 4, and March 28--totaling $784.    His attorney

thereafter assumed that $800 in condominium fees had been paid,

rather than $784, and he therefore reduced the escrow account by

$400 (i.e., half of $800) from $6,677 to $6,277 and paid this

reduced amount to Mr. Sperling’s ex-wife on August 5, 2005--more

than a month after the divorce decree was entered.    In summary,

in addition to the transfer of the condominium, Mr. Sperling paid

the following amounts to or for the benefit of his ex-wife

pursuant to the Agreement and the divorce decree:
                                - 7 -

     Property Transferred          Amount       Date of Transfer
 Attorney’s fees                   $1,500          1/11/2005
 Condominium fees                        196       1/20/2005
 Condominium fees                        196        2/1/2005
 Condominium fees                        196        3/4/2005
 Condominium fees                        196       3/28/2005
 Cash from escrow account           6,277           8/5/2005
     Total                         $8,561

Notice of Deficiency

      On his 2005 Form 1040, U.S. Individual Income Tax Return,

Mr. Sperling claimed an alimony deduction of $8,6762 for his

payment from the escrow account and payment of condominium and

attorney’s fees.    By a statutory notice of deficiency dated

October 29, 2007, the IRS disallowed the alimony deduction and

determined a $1,373 deficiency in Mr. Sperling’s 2005 Federal

income tax.

                               OPINION

I.    Definition of Alimony

      Section 215(a) allows a deduction to the paying spouse for

the alimony or separate maintenance payments made during the

paying spouse’s tax year that are includable in the recipient


      2
      Mr. Sperling’s payment from the escrow account of $6,277,
plus his payment of condominium fees of $784 and attorney’s fees
of $1,500 totals $8,561. However, Mr. Sperling apparently
miscalculated the total of these payments as $8,676 when he
claimed an alimony deduction in that amount on his 2005 Form
1040.
                                - 8 -

spouse’s gross income under section 71(a).    Whether a payment

constitutes alimony within the meaning of sections 71(a) and

215(a) is determined by reference to section 71(b)(1), which

provides:


          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. [Emphasis added.]

     Respondent concedes that the Mr. Sperling’s payment from the

escrow account and payment of condominium and attorney’s fees

satisfy the first three subparagraphs of section 71(b)(1).     The

parties agree that the only issue is whether the payments at
                               - 9 -

issue satisfy subparagraph (D), i.e., whether Mr. Sperling’s

liability to make the payments would have survived the death of

his ex-wife.

II.   Payments Would Survive the Recipient Spouse’s Death

      Mr. Sperling’s payment from the escrow account and payment

of condominium and attorney’s fees are not alimony under section

71(b)(1) or deductible under section 215(a) if he would have

remained liable for the payments if his ex-wife had died before

they were made.   Sec. 71(b)(1)(D).    In deciding whether payments

are alimony under section 71(b)(1)(D), we examine the language of

the divorce or separation instrument to ascertain whether it

contains a condition that terminates the paying spouse’s

liability upon the death of the recipient spouse, and, if it does

not, whether State law applies such a condition in cases where

the instrument is silent.   See Hoover v. Commissioner, 102 F.3d

842, 847 (6th Cir. 1996), affg. T.C. Memo. 1995-183; Stedman v.

Commissioner, T.C. Memo. 2008-239.

      Mr. Sperling contends that paragraph 8 of the Agreement

(“GENERAL MUTUAL RELEASE”) contains such a condition and

terminates his liability to make the payments at issue upon the

death of his ex-wife.   However, Mr. Sperling misconstrues

paragraph 8, which merely provides that the parties release each

other and their respective estates from all claims “except, and

only except, all rights, agreements and obligations which may
                                - 10 -

arise under this Agreement”.     (Emphasis added.)   Paragraph 8 does

not even address Mr. Sperling’s obligation to make payments under

the Agreement, let alone release him from that obligation in the

event of his ex-wife’s death.

     Respondent contends that paragraph 22 of the Agreement

(“BINDING NATURE OF AGREEMENT”) explicitly provides that Mr.

Sperling remains liable for the payments at issue upon the death

of his ex-wife.   We agree.   Paragraph 22 provides that the

Agreement “shall be binding and shall enure to the benefit of the

parties hereto, their respective heirs, executors,

administrators, successors and assigns except as where

specifically excluded herein.”    No other provision in the

Agreement specifically excludes any of the payments at issue from

the mandate of paragraph 22.    Therefore, the Agreement provides

that Mr. Sperling’s liability to make the payments at issue

survives the death of his ex-wife.

     It should be noted that Mr. Sperling’s liability to make the

payment from the escrow account to his ex-wife is not governed by

the Agreement per se, because the Agreement’s provision for that

payment was effective only upon the entry of a divorce decree.

Instead, the liability is governed by the divorce decree, which

incorporated the Agreement by reference.    Accordingly, with

respect to that payment, we must determine whether the divorce

decree--not the Agreement--contains a condition that terminates
                              - 11 -

Mr. Sperling’s liability to make the payment upon the death of

his ex-wife.   However, the fact that the payment is governed by

the divorce decree does not alter Mr. Sperling’s liability “after

the death of” his ex-wife, because the divorce decree

incorporated the entire Agreement, including paragraph 22, by

reference.   Therefore, Mr. Sperling’s liability to make the

payment from the escrow account under the divorce decree would

survive the death of his ex-wife.

     It should also be noted that the fact that Mr. Sperling paid

the condominium fees before the entry of the divorce decree and

paid the attorney’s fees before the entry of the divorce decree

and the execution of the Agreement does not, for purposes of

section 71(b)(1)(D), alter his liability to make those payments

“after the death of” his ex-wife.   As stated above, we examine

the language of the divorce or separation instrument to ascertain

whether it contains a termination upon death condition; the fact

that payments were in fact made simultaneously with or

immediately before the issuance of a decree or the execution of

an agreement is irrelevant in determining whether section

71(b)(1)(D) is satisfied.   See Webb v. Commissioner, T.C. Memo.

1990-540.

     Therefore, pursuant to the Agreement and the divorce decree,

Mr. Sperling’s liability to make the payments at issue survives
                             - 12 -

the death of his ex-wife, and those payments are not alimony

under section 71(b)(1) or deductible under section 215(a).

     To reflect the foregoing,


                                      Decision will be entered for

                                 respondent.
