                        T.C. Memo. 2006-116




                      UNITED STATES TAX COURT



                WILLIAM E. JOHNSON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 20357-04.              Filed June 6, 2006.


     William E. Johnson, pro se.

     Mary A. Waters, for respondent.



                        MEMORANDUM OPINION


     WELLS, Judge:   Respondent determined a $1,110 deficiency in

income tax for petitioner’s taxable year 2002.   The issue we must

decide is whether certain expenses claimed by petitioner are

deductible as alimony under sections 71 and 215.   Unless

otherwise indicated, all section references are to the Internal

Revenue Code, as amended.
                               - 2 -

                            Background

     At the time of filing the petition in the instant case,

petitioner resided in Chesapeake, Virginia.    Petitioner and his

former spouse were under an order pendente lite of the Circuit

Court of the City of Chesapeake, Virginia (divorce court), from

February 2, 2000, until the final divorce decree was issued on

March 22, 2002.   The order pendente lite provided, inter alia, as

follows:

     2. That William Edmund Johnson, the defendant,
     [petitioner] shall pay the sum of $250.00 to the
     plaintiff [his former spouse], commencing February 1,
     2000, and continuing in a like sum on the first and
     fifteenth of each month thereafter, as temporary child
     support, the total sum being $500.00 per month.

     *        *         *        *         *        *         *

     4. That the defendant shall have exclusive possession
     of the marital premises * * * during the pendency of
     this cause and the defendant shall be responsible for
     all mortgage payments due on said premises during the
     pendency of this cause.

     5. That plaintiff and defendant be and each hereby are
     restrained from selling, conveying, transferring,
     mortgaging or otherwise disposing of any of their
     property without further order of this Court in order
     that said property may be forthcoming to meet any
     decree which the court may enter herein.

The order pendente lite further ordered:   “Temporary spousal

support is reserved”, and that “Defendant shall continue existing

medical insurance coverage.”

     Pursuant to a divorce decree entered March 22, 2002 (divorce

decree), petitioner was ordered to pay $360 per month in child
                              - 3 -

support and to maintain medical insurance for the minor children.

The divorce decree did not order petitioner to maintain medical

insurance for his former spouse.   Pursuant to Virginia law, the

divorce decree designated the marital residence, petitioner’s

Thrift Savings Plan, valued at $63,445.46,1 and petitioner’s

Civil Service Retirement Plan as marital property and granted

petitioner’s former spouse a 50-percent interest in the marital

property.

     The divorce decree further ordered that $31,722.73 was to be

transferred immediately from petitioner’s Thrift Savings Plan

into the sole name of petitioner’s former spouse.   Regarding

petitioner’s Civil Service Retirement Plan, the divorce decree

ordered the following:

     7. The plaintiff is hereby awarded fifty percent of the
     marital share of the defendant’s [petitioner’s] pension
     acquired through his employment with the United States
     Government, Civil Service, Department of the Navy. The
     plaintiff [sic] share of retirement shall be calculated
     using a fraction where the numerator shall be 22.5,
     representing the number of years of the marriage, and
     the denominator shall be the total number of years
     during which creditable retirement benefits were
     acquired by the defendant, times fifty percent.

     Petitioner timely filed a tax return for his taxable year

2002, characterizing on that return $6,724 as deductible alimony



     1
      The Thrift Savings Plan had a gross value of $88,487.21,
less $10,902.22 (borrowed from the plan to pay off the mortgage
on the marital residence), less $14,139.53 (borrowed from the
plan to pay off the mortgage on other marital property), for a
net value of $63,445.46.
                                     - 4 -

expenses.       In a letter dated January 30, 2004, respondent

informed petitioner that respondent was examining petitioner’s

2002 tax return and requested that petitioner provide additional

documentation to support the claimed $6,724 alimony deduction.

During February 2004, petitioner sent respondent a letter in

which he stated that the following payments were deductible

alimony expenses:

                     Payment to                    Amount
                 Thrift Savings Plan             $3,868.42
                 Government Pension Plan         $1,977.93
                 Medical Insurance                 $933.53
                 Homeowner’s Insurance             $344.00
                                                 $7,123.881

            1
           We note that this amount is greater than the
     $6,724 deduction claimed by petitioner on his 2002
     tax return. This inconsistency is of no consequence
     because we find, for reasons stated below, that
     petitioner is not entitled to deduct any of the
     claimed expenses as alimony.

     On August 6, 2004, respondent sent petitioner a notice of

deficiency disallowing petitioner’s $6,724 alimony deduction,

resulting in a $1,110 deficiency for taxable year 2002.

Respondent did not determine any additions to tax or penalties.

Petitioner timely petitioned this Court.

                                  Discussion

     Whether a payment is characterized as a property settlement

or alimony determines whether such payment is deductible by the
                                - 5 -

payor spouse.    Payments representing a division of marital

property are not deductible by the payor spouse and are not

includable in income by the payee spouse.      See sec. 1041.   On the

other hand, individuals are allowed a deduction equal to alimony

or separate maintenance payments made during the taxable year.

Sec. 215(a).    Alimony or separate maintenance payments are

defined in section 71(b) and must be included in the gross income

of the recipient under section 71.      Sec. 215(b).   An alimony or

separate maintenance payment is any payment in cash if:      (a) Such

payment is received by, or on behalf of, a former spouse under a

divorce or separation instrument;2 (b) the divorce or separation

instrument does not state that the payment is not includable in

income under section 71 and not allowable as a deduction under

section 215; (c) the payee and payor spouses are not members of

the same household at the time of the payment; and (d) there is

no liability to make any such payments 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.    Sec. 71(b)(1)(A)-(D).    The test under

section 71(b)(1) is conjunctive; a payment is deductible as



     2
      A divorce or separation instrument means: (a) A decree of
divorce or separate maintenance or any written instrument
incident to such decree, (b) a written separation agreement, or
(c) a decree (not described in (a)) requiring a spouse to make
payments for the support or maintenance of the other spouse.
Sec. 71(b)(2)(A)-(C).
                                   - 6 -

alimony only if all four requirements of section 71(b)(1) are

present.   See Jaffe v. Commissioner, T.C. Memo. 1999-196.

Payments not made under a divorce or separation instrument may

not be deducted by the payor spouse.       See Taylor v. Commissioner,

55 T.C. 1134, 1138 (1971).       We decide the instant case on the

record without regard to the burden of proof or section 7491.

     Petitioner contends that his payments to his thrift savings

plan are deductible for the following reasons:

     From the divorce instrument, the Thrift Savings Plan
     (TSP) portion of petitioner’s retirement was composed
     of a deferred compensation of $88,487.21 with a loan
     payoff debt of $25,041.75. The court allotted fifty
     percent interest [sic] in the deferred compensation
     plan to spouse/former spouse. Clearly this represents
     $44,243.60 of deferred compensation with $12,520.88 of
     loan payoff debt that are spouse/former spouse’s
     interest.

     *          *            *             *         *          *

     When deferred compensation is withdrawn from a deferred
     compensation plan it is taxable income in the year it
     is withdrawn. * * * $44,243.60 being deferred
     compensation, when withdrawn must be reported on former
     spouse’s tax return. $12,520.88 going to pay a loan
     would be considered a withdrawal of deferred
     compensation for income tax purposes. The divorce
     instrument does direct petitioner to pay off the loan
     portion. The petitioner is the only person eligible to
     payoff the debt according to TSP rules. Therefore
     transfer of the former spouse’s portion of the loan is
     only accomplished through payments of the petitioner.
     The former spouse’s debt is being paid off and these
     payments are a form of income to the former spouse.
     I.R.C. Section 71(b)(1) provides that “the term
     ‘alimony or separate maintenance payment’ means ‘any
     payment’ in cash if such payment is received by (or on
     behalf of) a spouse under a divorce or separation
     instrument.” Were it not for the divorce instrument
                               - 7 -

     this circumstance would not occur. Note that I.R.C.
     Section 71(b)(1) provides nowhere therein that the
     payment actually be “required.”

We understand petitioner to be contending that, even though the

divorce court designated petitioner’s Thrift Savings Plan as

marital property and awarded petitioner’s former spouse a 50-

percent interest in the Thrift Savings Plan, petitioner is the

only person who can pay off a loan against the plan pursuant to

the Thrift Savings Plan rules,3 and therefore, because petitioner

is paying off his former spouse’s 50-percent interest in the loan

against the Thrift Savings Plan, that payment is deductible

alimony.

     Respondent contends that the interest in the Thrift Savings

Plan allotted to petitioner’s former spouse is merely a property

settlement, not deductible alimony.    We agree with respondent.

The divorce decree stated that the Thrift Savings Plan was

marital property and granted petitioner’s former spouse a 50-

percent interest.   By repaying the loan, petitioner does not make

alimony payments.   Petitioner’s former spouse received her share

of the Thrift Savings Plan through an outright transfer.    What

remains in the plan is petitioner’s and is burdened with the

whole of the outstanding loans.   As petitioner pays down these

loans the net value of his share increases and inures to his


     3
      Contrary to petitioner’s assertions, we found no specific
order in the divorce decree directing petitioner to pay off the
loan against the Thrift Savings Plan.
                               - 8 -

benefit, not his former spouse’s.   Accordingly, we hold that

petitioner’s payments to his Thrift Savings Plan are not

deductible alimony.

     Similarly, petitioner contends that his contributions to his

retirement plan are deductible alimony payments.   Petitioner

contends that, because he must contribute to his retirement plan,

and because creditable benefits continue to accrue after the

marriage, he essentially is being forced to make alimony

payments.   Petitioner further contends that the formula set forth

in the divorce decree is incorrect because it does not fix the

number of years of creditable benefits and that wages are not

property.   Respondent argues that the interest in the retirement

plan allotted to petitioner’s former spouse is part of the

property settlement.   We agree with respondent.

     Petitioner fails to understand the function of the formula

set forth in the divorce decree.    The divorce decree provides as

follows:

     The plaintiff [sic] share of retirement shall be
     calculated using a fraction where the numerator shall
     be 22.5, representing the number of years of the
     marriage, and the denominator shall be the total number
     of years during which creditable retirement benefits
     were acquired by the defendant, times fifty percent.

The total number of years of creditable benefits (years of

service) does not have to be fixed; that is the purpose of

numerator, 22.5 years, the duration of the marriage.   The

numerator in the equation limits the percentage of the funds to
                               - 9 -

be paid to petitioner’s former spouse when distributions are made

from the plan in the future.   The formula merely fixes the share

of retirement funds that is to be allotted to petitioner’s former

spouse.   Accordingly, we hold that petitioner’s contributions to

his Government retirement plan are not deductible alimony

payments.

     Additionally, petitioner contends that he may deduct medical

insurance payments because the order pendente lite directed him

to maintain medical coverage which was in effect during the

entire taxable year 2002.   Petitioner contends that he elected

his coverage during the open enrollment period at the end of 2001

and that his election was effective for 2002.   At trial,

petitioner testified as follows regarding the manner in which he

calculated the amount of the deduction for medical insurance:

     When I determined my taxes I went ahead and put in half
     of what I paid for medical insurance because I figured
     I am half, she’s half. She also had custody of the
     children, so I looked at that as making the difference
     between family plan and single plan would have given me
     a bigger value, but at the time I didn’t pay attention
     to the difference. I just took half, prorated it for
     the year. I put that in as alimony per the example in
     the IRS publication. I was under court order to
     provide the insurance.

     Respondent contends that, while the order pendente lite

ordered petitioner to maintain existing medical coverage, the

order was superseded by the March 22, 2002, divorce decree which

ordered petitioner to maintain medical insurance for the minor

children but did not mention petitioner’s former spouse.
                              - 10 -

Respondent further contends that petitioner could have purchased

separate insurance for the children without violating the divorce

decree and that it was petitioner’s voluntary decision to

continue existing coverage which included his former spouse.

     We believe petitioner’s testimony that he could not change

his insurance coverage after he elected his 2002 plan during the

open enrollment period in late 2001.    The fact that he could not

elect another plan, however, does not mean half of all the

medical insurance payments made by petitioner during taxable year

2002 is deductible alimony.   There still must be an order

directing petitioner to make the payments.   See Taylor v.

Commissioner, supra at 1138 (stating alimony is confined to

situations where there is a written agreement or court decree

requiring certain payments to be made).   The February 2, 2000,

order pendente lite provided that the “Defendant shall continue

existing medical insurance coverage.”   The March 20, 2002,

divorce decree stated:   “This decree supplants the provisions of

all prior decrees or orders entered in this cause, and all

obligations imposed thereby which are still executory are hereby

discharged”.   The divorce decree did not order petitioner to

maintain medical insurance for his former spouse.   The divorce

decree only stated:   “Defendant shall maintain medical insurance

for the use and benefit of the minor children of the parties.”

Accordingly, petitioner would be entitled to a deduction for only
                               - 11 -

medical insurance payments covering his former spouse made during

the first 3 months of taxable year 2002; i.e., the period covered

by the order pendente lite.    Although we conclude that petitioner

would be entitled to deduct a portion of his medical insurance

payments made during the first 3 months of taxable year 2002 as

alimony, petitioner did not produce any documentary evidence

substantiating the amounts paid for his former spouse’s medical

insurance.   Petitioner’s testimony at trial regarding how he

calculated his deduction for medical insurance was a rough

estimate of what petitioner believed his deduction should be.

Petitioner, however, did not substantiate the payments made on

behalf of his former spouse.   Accordingly, we hold that

petitioner may not deduct the amounts he claimed for his former

spouse’s medical insurance.

     Petitioner contends that he may deduct the homeowner’s

insurance payments because, under the order pendente lite, he was

obligated to make all mortgage payments on the marital home that

petitioner and his former spouse were each restrained from

selling, conveying, mortgaging, or otherwise disposing of so that

the property would be available to satisfy any decree the divorce

court might later enter.   In essence, petitioner argues that the

order pendente lite’s direction not to sell, mortgage, or dispose

of any marital property is tantamount to an order to insure the

marital home so that the home would remain available to satisfy
                              - 12 -

any later divorce decree.   Respondent contends that the language

in the order pendente lite is not an express directive to make

homeowner’s insurance payments.   We agree with respondent.

     A taxpayer may not deduct specific payments as alimony

absent a divorce or separation instrument requiring such

payments.   See Taylor v. Commissioner, supra at 1138.4

Petitioner invites us to read a command into the order pendente

lite that is not contained in the order.   While we agree that a

prudent homeowner might purchase insurance to protect his

residence, that does not automatically qualify the homeowner’s

insurance payments as deductible alimony expenses.   Because the

order pendente lite did not expressly direct petitioner to make

homeowner’s insurance payments, we hold that petitioner may not

deduct the payments as alimony.

     Based on the foregoing, we hold that petitioner’s payments

to his Thrift Savings Plan, retirement plan, medical insurance

carrier, and homeowner’s insurance carrier were not deductible

alimony expenses for taxable year 2002.    We have considered all




     4
      We note that the regulations permit cash payments to a
third party on behalf of the other spouse to qualify as alimony,
provided such payments are “under the terms of the divorce or
separation instrument”. Sec. 1.71-1T(b), Q&A-6, Temporary Income
Tax Regs., 49 Fed. Reg. 34455 (Aug. 31, 1984).
                               - 13 -

of petitioner’s contentions.     To the extent not addressed herein,

those contentions are without merit or unnecessary to reach.

     To reflect the foregoing,


                                             Decision will be entered

                                        for respondent.
