                  T.C. Memo. 1997-359



                UNITED STATES TAX COURT



          KIRK A. KEEGAN, JR., Petitioner v.
     COMMISSIONER OF INTERNAL REVENUE, Respondent



Docket No. 3458-96.                     Filed August 5, 1997.



     After requesting a legal separation from his wife,
but before a Stipulation and Order to Show Cause was
filed on May 6, 1992, in State court, P made certain
payments to, or on behalf of, his wife in the nature of
support. P deducted these payments, together with
payments made after May 6, 1992, from his gross income
as alimony pursuant to sec. 215, I.R.C., on his Federal
income tax return for 1992. R limited P's alimony
deduction to those payments made after May 6, 1992. On
the facts, Held: No alimony deduction is allowed under
sec. 215, I.R.C., for payments made by petitioner to
his wife prior to May 6, 1992, since these payments did
not stem from a written separation agreement within the
ambit of sec. 71(b)(2)(B), I.R.C.



Kirk A. Keegan, Jr., pro se.
                                - 2 -

     Christine V. Olsen, for respondent.



                          MEMORANDUM OPINION

     NIMS, Judge:    Respondent determined a deficiency in the

Federal income tax of Kirk A. Keegan, Jr. (petitioner) for the

tax year ended December 31, 1992, in the amount of $8,698, and an

accuracy-related penalty pursuant to section 6662(a) in the

amount of $1,740.

     All section references are to sections of the Internal

Revenue Code in effect for the year in issue, unless otherwise

indicated.   All Rule references are to the Tax Court Rules of

Practice and Procedure.

     After concessions, the sole remaining issue for decision is

whether petitioner is entitled to a section 215 alimony deduction

in excess of that allowed by respondent for amounts paid for the

support of petitioner's wife, Barbara C. Keegan (Mrs. Keegan).

     This case was submitted fully stipulated, and the facts as

stipulated are so found.    This reference incorporates herein the

stipulation of facts and attached exhibits.    Petitioner resided

in Newport Beach, California, at the time he filed his petition.

                              Background

     Petitioner requested a legal separation from Mrs. Keegan on

January 27, 1992.   Later that month, petitioner began making

payments of between $4,817 and $9,914 a month to, or on behalf

of, Mrs. Keegan.    An Order to Show Cause scheduled for March 4,
                               - 3 -

1992, was postponed because petitioner was out of town on

business.   An Order to Show Cause scheduled for April 1, 1992,

was postponed at the request of opposing counsel.

     On May 6, 1992, a Stipulation and Order to Show Cause was

filed in the Superior Court of the State of California.   In the

Stipulation and Order to Show Cause, the parties agreed that

petitioner would make spousal support payments in the amount of

$9,000 per month commencing June 1, 1992.

     During 1992, petitioner made payments to, or on behalf of,

Mrs. Keegan in the total amount of $96,100.   Of that amount,

$34,306 was paid prior to the entry of the Stipulation and Order

to Show Cause.   Petitioner deducted the entire $96,100 as alimony

on line 29 of his Form 1040, U.S. Individual Income Tax Return,

for 1992.

     Respondent issued a notice of deficiency on December 7,

1995.   Among other things, respondent limited petitioner's

deduction for alimony to $61,794, which amount represents support

payments made by petitioner to Mrs. Keegan subsequent to the

filing of the Stipulation and Order to Show Cause.   Respondent

also determined that petitioner was liable for an accuracy-

related penalty under section 6662(a) for negligence in the

amount of $1,740.   Respondent has since conceded that petitioner

is not liable for this penalty.
                               - 4 -

                            Discussion

     We must decide whether petitioner may deduct as alimony

under section 215 payments to, or on behalf of, Mrs. Keegan in

the total amount of $17,934 that were made prior to the entry of

the Stipulation and Order to Show Cause on May 6, 1992.

Petitioner has conceded that additional payments totaling $16,372

made prior to that date are not deductible.

     As a preliminary evidentiary matter, we must decide whether

to reopen the record in this case to permit petitioner to include

two letters which are attached to petitioner's Memorandum of

Authorities filed in lieu of a posttrial brief by direction of

the Court.   Pursuant to the Court's Order dated June 19, 1997,

directing respondent to file, on or before July 9, 1997, any

objection to the record's being reopened to receive the letters

in evidence, respondent has filed a Notice of Objection to the

record's being reopened for this purpose on the grounds of

hearsay and undue prejudice.   Reopening the record for the

submission of additional proof lies within the discretion of the

Court.   Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S.

321, 331 (1971).   Petitioner is not represented by counsel in

this case, and in the interest of justice and for completeness we

deem it appropriate to receive the two letters in evidence.

Respondent is not prejudiced, however, because, as discussed
                               - 5 -

infra, petitioner has not established that he may deduct under

section 215 or any other section the $17,934 of payments

remaining in dispute.

     One of the letters, dated March 30, 1992 (the March 30,

1992, letter), is from Steven E. Briggs (Briggs), petitioner's

attorney in his domestic relations matter, to Mrs. Keegan's

attorney.   It states in pertinent part that




     In an effort to resolve this pending Order to Show Cause,
     Dr. Keegan would propose to pay Mrs. Keegan, as and for
     spousal support the sum of $9,000 per month. * * * If this
     arrangement is acceptable to your client let me know and I
     will be happy to write up a stipulation, which would then
     enable us to take the Order to Show Cause off calendar.
     [Emphasis added.]


     The other letter, dated June 12, 1996 (the June 12, 1996

letter), is from Briggs to petitioner.   It states in relevant

part that the March 30, 1992, letter


     set forth in writing that we would continue to make the
     support payments as previously agreed, which you made.
     * * * All of the payments made between February and
     May of 1992, were agreed upon by the parties and were
     the subject of understandings in connection with which
     the Order to Show Cause hearings were continued * * *.

     As has often been stated, deductions are a matter of

legislative grace, and taxpayers bear the burden of proving that
                                - 6 -

they are entitled to any deductions claimed.    Rule 142(a);

INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992).

     Section 215 provides generally in the case of an individual

that "there shall be allowed as a deduction an amount equal to

the alimony or separate maintenance payments paid during such

individual's taxable year."    Sec. 215(a).   Section 215(b) further

provides that "the term 'alimony or separate maintenance payment'

means any alimony or separate maintenance payment (as defined in

section 71(b)) which is includible in the gross income of the

recipient under section 71."

     Section 71(b)(1) defines the term "alimony or separate

maintenance payment" in pertinent part as any payment in cash

received by (or on behalf of) a spouse under a divorce or

separation instrument.   Section 71(b)(2) defines the term

"divorce or separation instrument" as follows:

          (A) a decree of divorce or separate maintenance or
     a written instrument incident to such a decree,

          (B) a written separation agreement, or

          (C) a decree (not described in subparagraph (A))
     requiring a spouse to make payments for the support or
     maintenance of the other spouse.

     No decree within the meaning of section 71(b)(2)(A) or (C)

was in effect when petitioner made the payments at issue.

Rather, petitioner asserts that he is entitled to deduct the
                               - 7 -

amount of all payments from April 1, 1992, to May 6, 1992

($17,934), since, he argues, a written separation agreement

existed on April 1, 1992, within the meaning of section

71(b)(2)(B), in the form of the March 30, 1992, letter.

Respondent contends, on the other hand, that there was no written

agreement prior to the entry of the Stipulation and Order to Show

Cause.   On that basis, respondent maintains that no alimony

deduction for the period prior to May 6, 1992, is allowable.

     We have no doubt that the payments at issue were intended to

be in the nature of alimony; nevertheless, for reasons which

follow, we agree with respondent that the facts of this case show

that there was no written separation agreement within the ambit

of section 71(b)(2)(B) prior to May 6, 1992.

     The term "written separation agreement" is not defined by

the Code, the legislative history, or applicable regulations.

Bogard v. Commissioner, 59 T.C. 97, 100 (1972); Ewell v.

Commissioner, T.C. Memo. 1996-253.     However, we have stated

previously that a written separation agreement is a clear,

written statement of the terms of support for separated parties.

Bogard v. Commissioner, supra at 101.     It must be a writing that

constitutes an agreement.   Grant v. Commissioner, 84 T.C. 809,

823 (1985), affd. without published opinion 800 F.2d 260 (4th

Cir. 1986).   An agreement requires mutual assent or a meeting of
                               - 8 -

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

letter which does not show that there was a meeting of the minds

is not a written separation agreement under the statute.     Grant

v. Commissioner, supra at 823; Estate of Hill v. Commissioner, 59

T.C. 846, 856-857 (1973).   To be given effect under section

71(b)(2), a written separation agreement "at least requires more

than a written statement by one spouse offering to make support

payments, and the acceptance of those payments by the other

spouse."   Nemeth v. Commissioner, T.C. Memo. 1982-646.    A letter

may satisfy the requirements of section 71(b)(2) even in the

absence of the parties' signatures if it embodies the terms of a

prior oral agreement or understanding.   See Jefferson v.

Commissioner, 13 T.C. 1092, 1097-1098 (1949); Osterbauer v.

Commissioner, T.C. Memo. 1982-266.

     Petitioner cites Azenaro v. Commissioner, T.C. Memo. 1989-

224, in support of his position that the March 30, 1992, letter

constitutes a written separation agreement.   However, that case

is distinguishable from the case at hand.   In Azenaro v.

Commissioner, supra, we held that a letter from the attorney for

the taxpayer's husband, 1 year after the couple separated, which

offered a monthly payment and which was subsequently received and

signed by the recipient taxpayer, constituted a valid written

separation agreement.   The letter, as acknowledged and accepted
                               - 9 -

by the taxpayer by her signature on the assent form, was a clear

and concise agreement, in written form, delineating the terms

under which the husband would support the taxpayer.   The payor-

husband's signature on the letter was not necessary for the

agreement to be valid, as his attorney acted as his agent and the

husband in fact carried out the terms of the agreement.

     In contrast to the letter in Azenaro v. Commissioner, supra,

the language of the March 30, 1992, letter is unequivocally that

of a proposal or offer to negotiate.   ("If this arrangement is

acceptable * * *.")   The March 30, 1992, letter was not signed by

Mrs. Keegan, nor was any other writing acceding to its terms

executed on her behalf.   See Estate of Hill v. Commissioner,

supra at 856-857; Harlow v. Commissioner, T.C. Memo. 1984-393 ("A

unilateral written statement by a party stating that he is

willing to pay his spouse certain sums for her support clearly

does not meet the statutory requirement of a written separation

agreement.")

     Petitioner next cites Jefferson v. Commissioner, supra, in

support of his contention that "though the letter itself

constituted a proposal, its acceptance made it an enforceable

agreement and a 'written instrument' within the meaning of

section 71."   However, Jefferson v. Commissioner, supra, is

distinguishable from the facts of this case.   In Jefferson v.
                                - 10 -

Commissioner, supra, we stated that the letter from the taxpayer

to his wife "embodied the terms of a prior oral agreement or

understanding * * * with reference to periodic payments to be

made for the wife's support and maintenance, and that the letter

confirmed that oral agreement or understanding."     Id. at 1097.

(Emphasis added.)   The letter relied upon by the taxpayer

therein, although it did not bear his wife's signature and no

other writing was executed on her behalf, nonetheless clearly

recited the parties' prior oral agreement that he would pay his

wife a specified sum of support and thus sufficed for purposes of

the statutory predecessor of section 215.

     In contrast, in the instant case, the March 30, 1992, letter

does not memorialize any prior agreement between petitioner and

Mrs. Keegan.   To the extent that the June 12, 1996, letter from

Briggs (purporting to summarize events that occurred 4 years

earlier) implies that the March 30, 1992, letter embodies the

terms of a previous oral understanding, we think that Briggs

mischaracterizes the contents of the earlier letter.     In any

event, the March 30, 1992, letter fails to confirm such an oral

agreement.   See id. at 1097.

     Petitioner himself acknowledges that the March 30, 1992,

letter was a mere proposal, albeit one that was accepted by his

wife "on or prior to April 1, 1992."     Yet, as mentioned above,
                              - 11 -

her signature was not on the March 30, 1992, letter, nor was

there any other writing executed on her behalf evidencing an

agreement.   Moreover, it is well settled that the subsequent

acceptance of support payments by a spouse, without more, does

not transform a unilateral offer into a bilateral agreement.      See

Harlow v. Commissioner, supra; Nemeth v. Commissioner, supra;

Greenfield v. Commissioner, T.C. Memo. 1978-386.

     We conclude that, taken together, the March 30, 1992, letter

and the fact that petitioner provided support for Mrs. Keegan

prior to May 6, 1992, do not rise to the level of a written

separation agreement for purposes of sections 71(b)(2) and 215.

See Grant v. Commissioner, supra at 822-823; cf. Ewell v.

Commissioner, supra.   Therefore, we hold that none of the

payments that petitioner made before the Stipulation and Order to

Show Cause was filed on May 6, 1992, may be deducted by

petitioner as alimony under section 215.

     To reflect the foregoing,



                                           An appropriate order

                                    will be issued, and a decision

                                    will be entered under

                                    Rule 155.
