                     T.C. Summary Opinion 2005-60




                       UNITED STATES TAX COURT



                   JOHNY DESAUGUSTE,1 Petitioner v.
             COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 2037-04S.                 Filed May 18, 2005.



     Johny Desauguste, pro se.

     Lauren B. Epstein, for respondent.



         DEAN, Special Trial Judge:   This case was heard pursuant to

the provisions of section 7463 of the Internal Revenue Code in

effect at the time the petition was filed.     Unless otherwise

indicated, all subsequent section references are to the Internal

Revenue Code in effect for the year in issue, and all Rule


     1
      Petitioner’s surname is spelled several different ways in
the various documents comprising the record. The Court uses the
spelling used by petitioner on the petition commencing this case.
                                - 2 -

references are to the Tax Court Rules of Practice and Procedure.

The decision to be entered is not reviewable by any other court,

and this opinion should not be cited as authority.

     Respondent determined for 1999 a deficiency in petitioner’s

Federal income tax of $4,675 and an addition to tax under section

6651(a)(1) of $807.    After a concession,2 the issues remaining

for decision are whether petitioner is:    (1) Entitled to an

alimony deduction for 1999; and (2) subject to an addition to tax

under section 6651(a)(1) for failure to timely file his 1999

Federal income tax return.

     The stipulation of facts and the exhibits received into

evidence are incorporated herein by reference.    Petitioner

resided in Jacksonville, Florida, at the time the petition was

filed.

                             Background

1.   Petitioner’s Separation and Divorce

     Petitioner was married to Marlyn Desauguste (Mrs.

Desauguste) in 1991.    They were divorced on September 25, 2001.

One child was born of the marriage.

     On June 16, 1998, petitioner and Mrs. Desauguste signed an

informal agreement (June Agreement) which stated:

     The said parties have deemed it to their best interest
     that this out-of-court agreement be made requiring the


     2
      Petitioner concedes he is not entitled to claim head of
household filing status for 1999.
                               - 3 -

     first party to make monthly payments of $860.00 (eight
     hundred and sixty dollars), as support to the said
     second party, Marlyn DeAugust. The provisions of this
     agreement shall apply to and bind the heirs of the
     agreement.

     On October 30, 2001, a hearing was held in the State court

of Florida regarding alimony and child support.   The resulting

Report and Recommendation of General Master and Notice of Filing:

Final Judgment on Child Support and Alimony, dated November 20,

2001, specifies that “The issue as to the allowance payments that

are being made by the Respondent is not before the Court.”    In

that proceeding, the “respondent” is petitioner, Mr. Desauguste.

     At petitioner’s request, Mrs. Desauguste wrote a letter

dated May 15, 2003, in which she stated: “Under the maintenance

of this separation agreement, Mr. Desauguste agreed to support me

with the sum of $860.00, a month as provision for our marriage of

five years.   Although this matter was introduced before a judge

through my attorney, there was no judicial resolution made on the

matter.”

2.   Petitioner’s 1999 Tax Return

     When petitioner initially submitted his Form 1040, U.S.

Individual Income Tax Return, for 1999 to the Internal Revenue

Service on August 30, 2000, he failed to sign the document.

Petitioner subsequently signed and returned a Declaration

regarding his 1999 return dated September 15, 2000.   He reported
                                - 4 -

that he had paid alimony of $9,000 to Mrs. Desauguste during

1999.

     Respondent issued a notice of deficiency determining that

petitioner is not entitled to claim head of household filing

status or an alimony deduction for 1999 because he failed to

substantiate his claims.   Respondent also determined petitioner

is liable for an addition to tax for failure to timely file his

1999 tax return.

                            Discussion

     Respondent’s determinations are presumed correct, and

petitioner bears the burden of proving otherwise.     Welch v.

Helvering, 290 U.S. 111, 115 (1933).     Moreover, deductions are a

matter of legislative grace, and petitioner bears the burden of

proving that he is entitled to any deduction claimed.     New

Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934); Welch v.

Helvering, supra.   This includes the burden of substantiation.

Hradesky v. Commissioner, 65 T.C. 87, 90 (1975), affd. per curiam

540 F.2d 821 (5th Cir. 1976).   Under section 7491(a)(1), the

burden of proof may shift to the Commissioner.    Because the

alimony deduction issue is a question of law, section 7491 is

inapplicable, and the Court decides the issue without regard to

the burden of proof.   Under section 7491(c), respondent retains

the burden of production with respect to petitioner’s liability

for any penalties or additions to tax.
                              - 5 -

1.   Deductibility of Petitioner’s Payments to His Former Spouse

     Section 215(a) provides generally that alimony payments are

deductible by the payor spouse.   Under section 215(b), “alimony”

means any alimony, as defined in section 71(b), which is

includable in the gross income of the recipient under section 71.

Under section 71(b), the term “alimony or separate maintenance

payment” is defined in section 71(b)(1) as any payment in cash

meeting the following four criteria:

     (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.

Petitioner’s deduction for alimony is allowable only if the four

criteria of section 71(b)(1) are met.   Jaffe v. Commissioner,

T.C. Memo. 1999-196.

     Section 71(b)(1)(D) requires, as a condition to qualify as

alimony, that the obligation to make payments must terminate upon

the death of the former spouse.   If the payor is liable for even

one otherwise qualifying payment after the recipient’s death,
                                - 6 -

none of the related payments required before death will be

alimony.    Sec. 1.71-1T(b), Q&A-13, Temporary Income Tax Regs., 49

Fed. Reg. 34456 (Aug. 31, 1984).    Whether such obligation exists

may be determined by the terms of the applicable instrument, or

if the instrument is silent on the matter, by looking to State

law.    Morgan v. Commissioner, 309 U.S. 78, 80 (1940); Kean v.

Commissioner, T.C. Memo. 2003-163; Gilbert v. Commissioner, T.C.

Memo. 2003-92, affd. sub nom. Hawley v. Commissioner, 94 Fed.

Appx. 126 (3d Cir. 2004).

       Respondent contends that petitioner’s payments to Mrs.

Desauguste are not deductible as alimony because the language of

their separation agreement states that the agreement is binding

on the “heirs” of the agreement and, therefore, the payments

would not be terminated upon Mrs. Desauguste’s death.

       In deciding whether the payments were alimony, the Court

examines the language of the June Agreement to ascertain whether

it contains a termination upon death condition, and, if it does

not, whether State law supplies such a condition.    Hoover v.

Commissioner, 102 F.3d 842, 847 (6th Cir. 1996), affg. T.C. Memo.

1995-183; see Gonzales v. Commissioner, T.C. Memo. 1999-332; see

also Cunningham v. Commissioner, T.C. Memo. 1994-474.    State law

determines certain rights of the parties, and Federal law

determines the Federal income tax consequences of those rights.
                                - 7 -

Morgan v. Commissioner, supra at 80; Lucas v. Earl, 281 U.S. 111

(1930).

     The June Agreement does not explicitly order that payments

terminate upon Mrs. Desauguste’s death, and, thus, the Court

examines Florida law to determine whether the payments would

terminate by operation of Florida law.      Hoover v. Commissioner,

supra at 847.   When examining a matter of State substantive law,

the Court will look to a State’s highest court to determine the

rights of parties under State law.      See Commissioner v. Estate of

Bosch, 387 U.S. 456, 465 (1967).

     The Supreme Court of Florida has clearly stated that “By

weight of authority and in this state, alimony * * * terminates

upon the death of either of the parties or upon the remarriage of

the wife.”    In re Estate of Freeland, 182 So. 2d 425, 426 (Fla.

1965); see also O’Malley v. Pan Am. Bank, 384 So. 2d 1258 (Fla.

1980); Canakaris v. Canakaris, 382 So .2d 1197 (Fla. 1980).     The

Supreme Court of Florida has determined that an exception to this

general rule applies where there is a contract or an agreement

clearly evidencing the intention of the husband to bind his

estate to continue payments in the nature of alimony after his

death.    In re Estate of Freeland, supra at 426; see also O’Malley

v. Pan Am. Bank, supra at 1260.

     Respondent argues that the provision in the June Agreement

stating that the agreement was binding on the “heirs” of the
                                - 8 -

agreement indicated that petitioner or his estate might be liable

to make payments to Mrs. Desauguste’s estate after her death.

     The Supreme Court of Florida requires very specific language

in order for an agreement to fall into the exception to the

general rule that alimony terminates upon the death of either

spouse.   Compare Underwood v. Underwood, 64 So. 2d 281 (Fla.

1953) and Johnson v. Every, 93 So. 2d 390 (Fla. 1957), with

O’Malley v. Pan Am. Bank, supra.

     Considering the Florida cases, the Court finds the provision

in petitioner’s June agreement to be ambiguous.    This Court

declines to read the provision in petitioner’s June Agreement so

broadly as to constitute a requirement that petitioner continue

to make alimony payments to Mrs. Desauguste’s estate after her

death.    See Pettid v. Commissioner, T.C. Memo. 1999-126.

Therefore, under the Florida rule, the payments to Mrs.

Desauguste would terminate upon petitioner’s death or upon Mrs.

Desauguste’s death, whichever occurs earlier.    The requirement of

section 71(b)(1)(D) is satisfied because there is no liability

for petitioner to make any payments of any kind to Mrs.

Desauguste’s estate after her death.    The Court concludes that

petitioner is entitled to a deduction for alimony paid to Mrs.

Desauguste.
                               - 9 -

2.   Addition to Tax for Failure To Timely File

     Under section 7491(c), respondent has the burden of

production in any court proceeding with respect to the liability

of any individual for any penalty or addition to tax.     Higbee v.

Commissioner, 116 T.C. 438, 446-447 (2001).    In order to meet his

burden of production, respondent must come forward with

sufficient evidence indicating that it is appropriate to impose

the addition to tax for failure to timely file in this case.       Id.

at 446.   Once respondent meets his burden of production, the

taxpayer must come forward with evidence sufficient to persuade a

court that respondent's determination is incorrect.     Id. at 447.

     Respondent contends that petitioner is liable for an

addition to tax pursuant to section 6651(a)(1).    Section

6651(a)(1) imposes an addition to tax for failure to file a

Federal income tax return by its due date, determined with regard

to any extension of time for filing previously granted.      The

addition equals 5 percent for each month that the return is late,

not to exceed 25 percent.   Sec. 6651(a)(1).   Additions to tax

under section 6651(a)(1) are imposed unless the taxpayer

establishes that the failure was due to reasonable cause and not

willful neglect.   Id.; Crocker v. Commissioner, 92 T.C. 899, 912

(1989).   “Reasonable cause” requires the taxpayer to demonstrate

that he exercised ordinary business care and prudence.       United

States v. Boyle, 469 U.S. 241, 246 (1985).     “Willful neglect” is
                               - 10 -

defined as a “conscious, intentional failure or reckless

indifference.”   Id. at 245.

     Petitioner’s 1999 return was filed on August 30, 2000.

Having failed to address this issue at trial, petitioner has not

proven he had reasonable cause or a lack of willful neglect.

Therefore, the Court sustains respondent’s determination as to

the section 6651(a)(1) addition to tax.

     Reviewed and adopted as the report of the Small Tax Case

Division.

     To reflect the foregoing,

                                      Decision will be entered

                                 under Rule 155.
