                       T.C. Memo. 2000-165



                     UNITED STATES TAX COURT



                 THOMAS B. BENHAM, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 9703-98.                       Filed May 22, 2000.



     Thomas B. Benham, pro se.

     Clinton M. Fried, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION

     DEAN, Special Trial Judge:   Respondent determined

deficiencies in petitioner's Federal income taxes of $6,409 for

1994 and $1,596 for 1995 and an accuracy-related penalty under

section 6662(a)1 of $1,282 for 1994.


     1
      Unless otherwise indicated, section references are to the
Internal Revenue Code in effect for the years at issue. All Rule
references are to the Tax Court Rules of Practice and Procedure.
                                - 2 -

     Petitioner has conceded that he is not entitled to deduct

attorney's fees and legal costs associated with his divorce and

that he may not deduct in 1994 State taxes paid in 1993.      The

issues remaining for decision are:      (1) Whether petitioner is

entitled to deduct payments to his former wife as alimony, and

(2) whether part of petitioner's underpayment of tax is due to

negligence.

                           FINDINGS OF FACT

     Petitioner resided in the State of Georgia at the time the

petition in this case was filed.

     Petitioner is an attorney.    He was married to his wife,

Leslie Benham, from 1972 until their divorce became final in July

of 1996.   They have a son.

     By 1994, petitioner had for several years provided Leslie

Benham with about $2,000 a month by check from his individual

account, deposited into a joint checking account, for the payment

of household expenses.   The household expenses included

groceries, utilities, and the mortgage payment on the marital

residence.

     In the spring of 1994, Leslie Benham threatened to file for

divorce from petitioner.    Petitioner, however, filed for divorce

against Leslie Benham in May of 1994.      A "Temporary Agreement"

(Agreement) prepared by Leslie Benham's attorney was signed by

Leslie Benham and petitioner in July of 1994.      The Agreement
                                - 3 -

included a provision for conditional joint use and possession of

the marital residence.    The Agreement granted Leslie Benham, upon

10 days' notice to petitioner, exclusive use of the residence.

The Agreement also provided for an "alimony" payment of $2,000 a

month to Leslie Benham, "contingent on her death", and a payment

by petitioner of $700 a month in child support, both beginning

July 15, 1994.    The Agreement went on to provide, in addition,

that petitioner would pay property taxes and insurance for the

marital residence and that Leslie Benham would be responsible for

paying the utility bills and would pay the monthly mortgage

beginning with the amount due in August of 1994.

     During the interim between the filing of the divorce action

in May and the signing of the Agreement in July of 1994,

petitioner and Leslie Benham discussed attempting to reconcile

their marriage.    As an aid to their reconciliation efforts,

petitioner and Leslie Benham signed an agreement on July 15,

1994, in which they both waived the defense of condonation "in

this action or any subsequent action" except upon future notice.

The condonation agreement provided that it was not to be deemed

"a termination of any separation of the parties."

     Petitioner remained in the family residence throughout 1994

and most of 1995.    During that time there were several periods of

reconciliation followed by estrangement.    On several occasions,

Leslie Benham asked petitioner to vacate the marital residence.
                                 - 4 -

It was Leslie Benham's belief during the entire period that she

and petitioner were attempting a reconciliation of their

marriage.

     From July of 1994 through January of 1995, petitioner made

the total monthly payments of $2,700 provided for by the

Agreement.   Out of the monthly payments she received under the

Agreement, Leslie Benham continued to pay the same household

expenses she had paid in preceding years.

     In February of 1995, petitioner dismissed his divorce suit

against Leslie Benham and at the same time entered into a third

agreement with her in which the parties agreed to a division of

the marital property in the event of a divorce.   Leslie Benham

subsequently filed for divorce in 1995, and petitioner thereupon

left the marital residence.

     On his separate individual Federal income tax returns for

1994 and 1995, petitioner deducted $12,000 and $2,000,

respectively, as alimony payments to Leslie Benham.   He also

deducted State income tax paid in 1993 on his return for 1994 and

attorney's fees and legal costs associated with his divorce

action on both year's returns.

                              OPINION

     Because petitioner and Leslie Benham resided in the same

household in 1994 and in January of 1995, respondent maintains
                                - 5 -

that petitioner is not entitled to deduct payments made to Leslie

Benham under the Temporary Agreement as alimony.

     Petitioner argues that because the payments in question were

made pursuant to a written separation agreement, it does not

matter that he and Leslie Benham resided in the same household

while the payments were made.

     Section 215 states that "there shall be allowed as a

deduction an amount equal to the alimony or separate maintenance

payments [defined in section 71(b)] paid during such individual's

taxable year."   Whether petitioner's payments qualify for

deduction therefore hinges on their meeting the definition of

"alimony" contained in section 71(b)(1).   Section 71(b)(1)

defines the term "alimony or separate maintenance payment"

     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.
                               - 6 -

     Respondent points to the requirements of section 71(b)(1)(C)

as disqualifying petitioner's payments from deductibility since

(in the case of individuals legally separated under a decree of

divorce or of separate maintenance) the payee spouse and the

payor spouse cannot be members of the same household.      In making

his argument, however, respondent has failed to consider the

effect of the requirement under section 71(b)(1)(A), and the

definition contained in section 71(b)(2).

     A payment may be "alimony" if it is a cash payment "under a

divorce or separation instrument".     Sec. 71(b)(1)(A).   A divorce

or separation instrument can be any of three types:     (1) A decree

of divorce or separate maintenance; (2) a written separation

agreement; or (3) a decree requiring payments for support or

maintenance, other than a decree of divorce or separate

maintenance.   See sec. 71(b)(2).   The separate household

requirement of section 71(b)(1)(C) applies by its terms only to

an individual legally separated under a decree of divorce or of

separate maintenance.

     Respondent insists that the parties were never "separated",

citing sec. 1.71-1T(b), Q&A-9, Temporary Income Tax Regs., 49

Fed. Reg. 34451, 34455 (Aug. 31, 1984).     The regulation states

that "a dwelling unit formerly shared by both spouses shall not

be considered two separate households" in the case of spouses

legally separated under a decree of divorce or separate
                                 - 7 -

maintenance.   But respondent overlooks language in the very same

provision that states:

     If the spouses are not legally separated under a decree
     of divorce or separate maintenance, a payment under a
     written separation agreement or a decree described in
     section 71(b)(2)(C) may qualify as an alimony or
     separate maintenance payment notwithstanding that the
     payor and payee are members of the same household at
     the time the payment is made.

     Petitioner argues, and we agree, that his payments were made

under a written separation agreement.

     The term "written separation agreement" is not defined by

the Code, the legislative history, or applicable regulations.

Jacklin v. Commissioner, 79 T.C. 340, 346 (1982); Leventhal v.

Commissioner, T.C. Memo. 2000-92; Keegan v. Commissioner, T.C.

Memo. 1997-359.   We have stated, however, that a written

separation agreement is a clear, written statement of the terms

of support for separated parties.    See Bogard v. Commissioner, 59

T.C. 97, 101 (1972).     It must be a writing that constitutes an

agreement.   See Grant v. Commissioner, 84 T.C. 809, 823 (1985),

affd. per curiam without published opinion 800 F.2d 260 (4th Cir.

1986).   An agreement requires mutual assent or a meeting of the

minds.   See Kronish v. Commissioner, 90 T.C. 684, 693 (1988).

But a written agreement does not have to be legally enforceable.

See Richardson v. Commissioner, T.C. Memo. 1995-554, affd. 125

F.3d 551, 554 (7th Cir. 1997).    It is sufficient that it was
                               - 8 -

entered "in contemplation of a separation status" and includes a

statement of the terms of support.     Bogard v. Commissioner, supra

at 101.

     We find that the Agreement between the petitioner and Leslie

Benham was a written separation agreement and that petitioner's

payments were made pursuant to the Agreement.

     We find that petitioner's payments2 to Leslie Benham,

characterized as alimony under the Temporary Agreement, meet the

requirements of section 71(b)(1).    Since the payments by

petitioner are alimony, they are deductible under section 215(a).

     Respondent has also determined that petitioner underpaid a

portion of his income tax due to negligence or intentional

disregard of rules or regulations.     Section 6662 imposes a

penalty equal to 20 percent of the portion of the underpayment

attributable to negligence or disregard of rules or regulations.

See sec. 6662(a) and (b)(1).   Negligence is defined as any

failure to make a reasonable attempt to comply with the

provisions of the Internal Revenue Code, and the term "disregard"

includes any careless, reckless, or intentional disregard.      See

sec. 6662(c).




     2
      Respondent did not raise any issue concerning, and the
record does not reflect, whether the payments by petitioner
served to satisfy part of an obligation of petitioner with
respect to the marital property. We therefore do not reach that
issue.
                               - 9 -

     The accuracy-related penalty will apply unless petitioner

demonstrates that there was reasonable cause for the under-

payment and that he acted in good faith with respect to the

underpayment.   See sec. 6664(c).   Section 1.6664-4(b)(1), Income

Tax Regs. specifically provides:    "Circumstances that may

indicate reasonable cause and good faith include an honest

misunderstanding of fact or law that is reasonable in light of

the experience, knowledge and education of the taxpayer."

Whether a taxpayer acted with reasonable cause and good faith

depends on the pertinent facts and circumstances.    See McCallson

v. Commissioner, T.C. Memo. 1993-528; sec. 1.6664-4(b)(1), Income

Tax Regs.   Petitioner must show that he was not negligent.    See

Cluck v. Commissioner, 105 T.C. 324, 339 (1995).

     Petitioner explained at trial that he claimed on his return

attorney's fees and other litigation costs associated with his

divorce action as miscellaneous deductions based on his "literal

reading" of section 212, governing expenses for the production of

income.   He testified that he was in error when he made "an

inadvertent computation" and deducted 1993 State taxes on his

1994 Federal tax return.

     The record here shows that petitioner is a highly educated

individual who has demonstrated some income tax knowledge.     We

find it unreasonable that petitioner, an attorney, would

interpret "literally" a provision allowing the deduction of
                               - 10 -

expenses for the production of income to permit the deduction of

legal expenses for his suit for divorce.     See United States v.

Gilmore, 372 U.S. 39 (1963)(finding that expenditures

attributable to litigating a divorce are personal regardless of

the potential consequences upon the taxpayer's fortunes because

the nature of the expense is determined by the origin and

character of the claim).    Nor do we accept his explanation for

the deduction of his taxes in the wrong year as being with

reasonable cause and in good faith.     We find that his

explanations do not demonstrate an honest misunderstanding of

fact or law that is reasonable in light of his experience,

knowledge, and education.

     We have considered the other arguments of the parties, and

they are either without merit or not necessary in view of our

resolution of the issues in this case.

     To reflect the foregoing,

                                           Decision will be entered

                                      under Rule 155.
