                                 T.C. Memo. 2014-22



                           UNITED STATES TAX COURT



                   BRADLEY W. WIGNALL, Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 2085-12.                           Filed January 28, 2014.



      Gary P. Compa and Douglas Chiapuzio, for petitioner.

      Nhi T. Luu and Kimberly T. Packer, for respondent.



                             MEMORANDUM OPINION


      KROUPA, Judge: Respondent determined a $5,8821 deficiency in and a

$1,176 accuracy-related penalty under section 6662(a)2 with respect to petitioner’s

      1
          All monetary amounts are rounded to the nearest dollar.
      2
        All section references are to the Internal Revenue Code in effect for 2008,
and all Rule references are to the Tax Court Rules of Practice and Procedure,
                                                                       (continued...)
                                        -2-

[*2] Federal income tax for 2008. We must decide two issues. The first issue is

whether petitioner is entitled to deduct support payments he made to his former

spouse as alimony. We hold that he is. The second issue is whether petitioner is

liable for an accuracy-related penalty. We hold that he is not.

                                    Background

      The parties submitted this case fully stipulated pursuant to Rule 122, and the

facts are so found. The stipulation of facts and its accompanying exhibits are

incorporated by this reference. Petitioner resided in Oregon when he filed the

petition.

      Petitioner married Marci Lee Wignall (Ms. Wignall) in 1993, and the couple

had three children. The couple’s marriage ended in 2006. An Oregon circuit court

entered a stipulated general judgment of marital dissolution (judgment).

      The judgment required petitioner to pay Ms. Wignall spousal support of

$1,900 per month (support provision) from July 2006 through December 2011

(payment term). The support provision did not address whether petitioner had to

continue to make payments if Ms. Wignall died before the payment term ended.




      2
       (...continued)
unless otherwise indicated.
                                        -3-

[*3] Petitioner paid $21,000 in spousal support (support payments) in 2008.

Petitioner filed an individual income tax return for 2008 and claimed an alimony

deduction for the support payments. Respondent issued petitioner a deficiency

notice that disallowed the claimed alimony deduction and determined an accuracy-

related penalty. Petitioner timely filed a petition challenging respondent’s

determinations.

                                    Discussion

      This is another instance where we are required to determine whether the

amount a spouse paid to the former spouse qualifies as alimony. We must decide

whether the support payments meet the definition of alimony under sections 71

and 215.3

      We begin with the alimony deduction. A deduction from gross income is

allowed for alimony payments to the extent such payments are includible in the

gross income of the recipient spouse under section 71. Sec. 215(a) and (b).

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


      3
      The taxpayer generally bears the burden of proving the Commissioner’s
determinations are erroneous. Rule 142(a). The burden of proof may shift to the
Commissioner if the taxpayer satisfies certain conditions. Sec. 7491(a).
Resolution of all factual issues here is based on a preponderance of the evidence.
Therefore, we need not consider which party has the burden of proof. See Estate
of Bongard v. Commissioner, 124 T.C. 95, 111 (2005).
                                        -4-

[*4] 215(a) is determined by reference to section 71(b)(1). A payment that does

not meet the definition is deemed a disguised property division, neither taxable to

the payee nor deductible by the payor. Johanson v. Commissioner, 541 F.3d 973,

976-977 (9th Cir. 2008), aff’g T.C. Memo. 2006-105. The payor must have no

liability to continue payments after the payee’s death (termination requirement) for

a payment to be deductible as alimony.4 Sec. 71(b)(1)(D). We therefore must

decide whether petitioner would have been obligated to continue making the

support payments after Ms. Wignall’s death.

      We apply a three-step approach to decide whether a payment satisfies the

termination requirement.5 See Johanson v. Commissioner, 541 F.3d at 976-977.

The first step is to evaluate whether the divorce decree provides that the payments

terminate upon the payee’s death. Id. at 976. If there is no such provision, then



      4
        Sec. 71(b)(1) has three other requirements. First, the payment must be
received by a spouse under a divorce or separation instrument. Sec. 71(b)(1)(A).
Second, the divorce or separation instrument must not designate the payment as
not includible in gross income or not allowable as a deduction under sec. 215.
Sec. 71(b)(1)(B). Third, the payee and the payor must not be members of the same
household when the payment is made. Sec. 71(b)(1)(C). Respondent concedes
that these requirements have been met.
      5
        An appeal in this case would lie to the Court of Appeals for the Ninth
Circuit absent stipulation to the contrary and, accordingly, we follow the law of
that circuit. See Golsen v. Commissioner, 54 T.C. 742 (1970), aff’d, 445 F.2d 985
(10th Cir. 1971).
                                         -5-

[*5] the Court looks to whether the payments would terminate at the payee’s death

by operation of State law. Id. And if State law is ambiguous, the Court will look

solely to the divorce decree to determine whether the payments would terminate at

the payee’s death. Id.

      Petitioner and respondent agree that the judgment did not expressly

terminate petitioner’s obligation to continue payments if Ms. Wignall died.

Accordingly, we look to Oregon law.

      We now consider whether a spousal support obligation terminates by

operation of Oregon law. We consider both relevant statutes and common law in

deciding this question. See, e.g., DeLong v. Commissioner, T.C. Memo. 2013-70.

The parties agree that Oregon statutes do not address this issue, and we concur.

See, e.g., Or. Rev. Stat. sec. 107.105(1)(d) (2011). Thus, we consider whether

Oregon common law establishes that the obligation to pay spousal support

terminates upon the death of the payee spouse.

      Petitioner argues that this proposition is unambiguously established. See

Prime v. Prime, 139 P.2d 550 (Or. 1943). The Oregon Supreme Court, in Prime,

stated that “[t]he right to receive alimony and the corresponding duty to pay it are

generally considered to have terminated on the death of either of the two parties, at

least where no statute to the contrary exists, and the judgment or decree is silent on
                                         -6-

[*6] the subject.” Id. at 557 (citing 27 C.J.S. Divorce p. 999 sec. 240-b).

Petitioner interprets this as a statement of Oregon law.

      Respondent, on the other hand, suggests this is a statement of

multijurisdictional law and merely dicta. Respondent suggests the court included

a statement of multijurisdictional law because the issue decided in Prime,

according to respondent, was whether the payee’s right to receive alimony

survives the payor’s death. Respondent further contends that Prime did not decide

whether the obligation to pay support terminated upon the payee’s death. Thus,

respondent contends that Oregon courts have not decided this issue. We disagree

with respondent.

      On appeal, the legal issue the Oregon Supreme Court addressed in Prime

was whether a court may modify the equitable portion of a dissolution agreement

that also incorporated contractual elements.6 Id. at 554, 557. Thus, the issue

      6
        In Prime v. Prime, 139 P.2d 550, 554 (Or. 1943), former spouses entered
into a court-approved dissolution agreement with property settlement and alimony
provisions. The spouses had agreed, however, that the payee’s right to support
survived the payor’s death. Id. at 557. Thereafter, the payor husband passed
away, and the payee wife sought a declaratory judgment against the former
husband’s estate. Id. at 553. The estate sought to modify the payment obligation
under equitable principles. Id. at 554.

      If the support was in the nature of a property settlement, then the agreement
could not be modified because it would be governed by contract law. Id. The
                                                                        (continued...)
                                        -7-

[*7] resolved in Prime was not, as respondent suggests, whether the right to

alimony terminates upon the payor’s death. That principle was already established

under Oregon law. The court ultimately held that the equitable component of a

decree could be modified and did terminate the obligation under the relevant

equitable considerations. Id. at 559. The court, in reaching that conclusion, stated

the rule under Oregon law. A complete reading of Prime reveals that the court

considered the termination issue to be already resolved with respect to the death of

both the payor and the payee.

      We conclude that the Oregon Supreme Court has stated Oregon law.

Oregon courts have also interpreted Prime as a statement of Oregon law on the

issue. See In re Marriage of Quenzer, 599 P.2d 1217, 1221 (Or. Ct. App. 1979); In

re Marriage of Carrier, 595 P.2d 827, 829 (Or. Ct. App. 1979); Kemp v. Dep’t of

Revenue, 1998 WL 477958 (Or. T.C. July 27, 1998). And there is no indication

that any Oregon court has adopted a different rule.

      6
        (...continued)
agreement’s support provision, however, was in the nature of alimony. The court
modified the agreement under equitable principles to relieve the estate of the
obligation. Id. at 558. The court in reaching that conclusion noted the obligation
to pay would have ended with the husband’s passing if the agreement had been
silent. This was significant as the agreement called for alimony to survive the
payor’s death in contrast to the default rule. See id. at 557. In other words, the
obligation to pay and the corresponding right to receive alimony terminated upon
the death of either spouse under Oregon law. Id.
                                         -8-

[*8] Respondent emphasizes that the Court of Appeals for the Ninth Circuit has

indicated that Oregon law is ambiguous on this point. See Fithian v. United

States, 45 Fed. Appx. 700, 701 (9th Cir. 2002). In Fithian, the Court of Appeals

concluded that Oregon common law did not directly establish the termination

requirement. Id. The Court of Appeals, however, did not select Fithian for

publication. Thus it is an unpublished disposition predating January 1, 2007 and

not to be cited as precedent. See 9th Cir. R. 36-3(a), (c). Thus, we conclude that

Fithian is not controlling, and the issue remains unresolved in the Ninth Circuit.

      We therefore hold that the obligation to pay support terminates upon the

payee’s death under Oregon common law.7 Thus, petitioner met the termination

requirement under section 71(b)(1)(D). Petitioner is entitled to deduct the support

payments for 2008 as alimony and did not understate his tax.




      7
       We note that the Oregon tax court noted the tension regarding the
termination requirement between decisions by Oregon courts and a decision by the
Court of Appeals for the Ninth Circuit. See Linder v. Dep’t of Rev., 18 Or. Tax
11, 15 n.4 (2004) (comparing Kemp with Fithian). The court in Linder did not
analyze the issue, however, and we disagree that the law is ambiguous for the
reasons stated. Further, we are unaware of any other cases (published or
unpublished) that conclude the termination requirement is ambiguous under
Oregon law.
                                         -9-

[*9] Because we reject respondent’s disallowance of the alimony deduction for

the support payments, there is no underpayment for 2008, and petitioner is

therefore not liable for the accuracy-related penalty.

      We have considered all the arguments of the parties, and, to the extent we

have not addressed them, we find them to be irrelevant, moot or meritless.

      To reflect the foregoing,


                                               Decision will be entered

                                       for petitioner.
