                              T.C. Memo. 2012-247



                        UNITED STATES TAX COURT



        KEVIN P. LARIEVY AND AMBER Y. LARIEVY, Petitioners v.
         COMMISSIONER OF INTERNAL REVENUE, Respondent



      Docket No. 10939-11.                         Filed August 28, 2012.



      Kevin P. Larievy and Amber Y. Larievy, pro sese.

      Jonathan N. Kalinski, for respondent.



            MEMORANDUM FINDINGS OF FACT AND OPINION


      GERBER, Judge: Respondent determined a $5,301 deficiency in

petitioners’ 2008 Federal income tax and a $1,060.20 accuracy-related penalty
                                         -2-

[*2] under section 6662(a).1 The income tax deficiency and resulting penalty are

solely attributable to respondent’s proposed disallowance of $17,800 of alimony

deducted by petitioners. We consider here whether petitioners are entitled to deduct

alimony payments and, if not, whether they are liable for the accuracy-related

penalty.

                               FINDINGS OF FACT2

      At the time the petition was filed, petitioners resided in California. They

were married during December 2008 and filed a joint Federal income tax return for

their 2008 taxable year. On that return petitioners deducted alimony of $19,200

paid to Mr. Larievy’s former spouse.

      Mr. Larievy and his former spouse separated by mutual agreement during

2004. No lawyers or other professionals were involved in the separation. Mr.

Larievy and his former spouse reached an oral agreement under which Mr. Larievy




      1
       Unless otherwise indicated, all section references are to the Internal Revenue
Code as amended and in effect for the year in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
      2
       The parties’ stipulation of facts and the attached exhibits are incorporated
herein by this reference.
                                         -3-

[*3] agreed to pay $2,6053 per month for living expenses of his former spouse and

their child. The agreement did not divide this monthly amount into separate

amounts for spousal support and child support.

      Mr. Larievy and his former spouse remained separated until May 2008 when

they filed for divorce in the Superior Court of California. They did not seek the

assistance of a lawyer or other professional to assist them in that filing. On

December 1, 2008, a judgment for dissolution of marriage was entered by the court.

That judgment provided for $1,400 of monthly alimony for Mr. Larievy’s former

spouse, commencing December 1, 2008, and continuing until death of either party.

Any alimony payments beginning on or after June 1, 2009, would be reduced to

$1,100 through June 1, 2013. Mr. Larievy remitted $2,605 by check for each month

of 2008 except for the December check, which was for $2,600.

      Papers filed in the divorce proceeding included a document signed by Mr.

Larievy and his former spouse on September 2, 2008, stating as follows:

             During March of 2004, I Kevin Larievy agreed to pay Renee
      Larievy the amount of $2,605.00 as support (for spouse and children)
      for four years. This would give time for adjustment, job search and or
      Employment training. At the time of our daughter[’]s * * * 18th
      Birthday (May 23, 2008) this amount of $2,605.00 per month would
      end. A new and lesser amount would then be agreed upon. Up to and

      3
     For December 2008 the monthly payment was $2,600, and all other
payments were $2,605.
                                         -4-

      [*4] including this month of September, 2008 the amount of $2,605.00
      has continued until * * * [the divorce proceeding is settled].

This document was a historical narrative of the parties four-year separation and

agreement to make monthly payments. It did not indicate what part of the $2,605

payment was for child support and what part was for alimony.

      Although the parties to the divorce proceeding had an understanding of the

division of each of the $2,600 monthly payments into alimony to the former spouse

and child support, that understanding was not committed to a writing until

December 1, 2008, when it was incorporated in the final decree or judgment. The

filings in the divorce proceeding implied that the parties had reached an

understanding as to amounts for alimony and child support and, to some extent,

alluded to the reasoning supporting the final amounts.

      Petitioners’ 2008 return was prepared by a professional, experienced tax

return preparer. Petitioners were not knowledgeable about taxes and were aware

of the complexity that may occur with respect to claiming deductions from income

for alimony payments. Petitioner wife worked for a company that used an

accountant adviser who prepared all of its income and payroll tax returns.

Petitioner wife was familiar with the accountant’s work, experience, and

professional reputation. Petitioners engaged the accountant to prepare their 2008
                                          -5-

[*5] return and advised the accountant of all of the facts surrounding the payments

to Mr. Larievy’s former spouse and supplied the accountant with copies of the

judgments, decrees, and other documents in the superior court divorce proceeding.

On the basis of that information, the accountant advised petitioners to claim the

payments to the former spouse as alimony on their 2008 return. Petitioners relied on

the accountant’s advice.

      Respondent allowed a deduction for $1,400 of the December 2008 payment

and disallowed the remaining $17,800 petitioners claimed.

                                      OPINION

      Section 215(a) provides for a deduction from gross income for alimony or

separate maintenance payments, as defined in section 71(b). See also sec. 215(b).

Generally, in order to qualify, the payments should meet four conditions, as follows:

(1) the payments are received by (or on behalf of) a spouse under a divorce or

separation instrument; (2) the instrument does not designate the payment as a

payment which is not includible in the payee’s gross income; (3) the payor and

payee are not members of the same household; and (4) the payment obligation ends

upon the death of the payee. Sec. 71(b)

      Even though there may be an agreement between the parties, the agreement

must be reduced to writing before payments can be deductible. See sec. 71(b)(2);
                                       -6-

[*6] sec. 1.71-1(c), Income Tax Regs.; see also Mercurio v. Commissioner, T.C.

Memo. 1995-312. “Congress was interested in requiring a clear statement of the

separation agreement so it could be determined with certainty the amount of

payments to be included in the wife's income and the allowable corresponding

deduction available to the husband.” Garner v. Commissioner, T.C. Memo.

1973-79.

      During 2004 Mr. Larievy and his former spouse agreed to separate and

agreed to the payment of $2,605 per month. At that time no distinction was made

concerning the amount of the payment attributable to child support and the amount

for alimony and separate maintenance. As indicated above, only alimony or

separate maintenance paid to a spouse or former spouse would be deductible from

gross income. Mr. Larievy and his former spouse operated under that oral

agreement, and the monthly payments were made. Accordingly, no amount could

have been deductible until 2008 when the parties commenced a divorce proceeding

and committed their understanding to writing.

      Respondent allowed a deduction for $1,400 of the December 2008 payment,

which was decreed by the superior court to be alimony, but disallowed the

remaining payments during 2008 that were made before the final decree. The

question we consider is whether any other payments during 2008 are deductible.
                                         -7-

[*7] Mr. Larievy made a $2,605 payment for each of the first 11 months of 2008.

Clearly, the payments made before the parties filed for divorce, which were

included in a written memorialization of their oral understanding, did not meet the

statutory requirements and therefore are not deductible. Until the final decree of

divorce was entered on December 1, 2008, no written document contained a

specific amount designated as alimony. The divorce proceeding commenced during

May 2008, but a written document reflecting the specific amounts designated as

alimony and child support was not filed with the superior court until December 1,

2008.

        The parties were seeking a consent or uncontested divorce where the court

merely sanctioned and finalized their existing and operational agreement. Although

the superior court perfunctorily approved the parties’ understanding six months

later, no qualifying written divorce or separation agreement instrument existed until

December 1, 2008. Under those circumstances, petitioners are not entitled to

alimony deductions in addition to the one respondent allowed for the month of

December. Although this result seems unjust where the parties had reached an

understanding of the amounts approved by a court, Congress has required a written

document and the superior court’s decree did not approve a preexisting written

document.
                                         -8-

[*8] Finally, we consider whether petitioners are liable for an accuracy-related

penalty under section 6662(a). The penalty is applicable where there is an

underpayment of tax that is due to negligence and disregard of rules or regulations

or a substantial understatement of income tax. Sec. 6662(b)(1) and (2); see Neely v.

Commissioner, 85 T.C. 934, 947 (1985). Section 6664(c)(1) provides that the

penalty will not apply to any portion of an underpayment if it is shown that there

was reasonable cause for a taxpayer’s position and that the taxpayer acted in good

faith. Reliance on the advice of a tax professional may be sufficient to establish

reasonable cause and good faith for the purpose of avoiding the penalty. United

States v. Boyle, 469 U.S. 241, 250 (1985).

      In order for the reliance to effectively avoid the penalty, the taxpayer must

prove by a preponderance of the evidence that: (1) the adviser was a competent

professional who had sufficient expertise to justify reliance; (2) the taxpayer

provided necessary and accurate information to the adviser; and (3) the taxpayer

actually relied in good faith on the adviser’s judgment. See Neonatology Assocs.,

P.A. v. Commissioner, 115 T.C. 43, 99 (2000), aff’d, 299 F.3d 221 (3d Cir. 2002).

      The record reflects that petitioners selected a competent adviser, provided

him with the full facts, and relied on him in good faith. Accordingly,

petitioners are not liable for the section 6662(a) accuracy-related penalty for 2008.
                                 -9-

[*9] To reflect the foregoing,


                                             Decision will be entered

                                       under Rule 155.
