                        T.C. Memo. 1999-102



                      UNITED STATES TAX COURT



                GORDON B. COLOGNE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12298-97.               Filed March 31, 1999.



     Erla Elizabeth Arnold, for petitioner.

     Christine V. Olsen, for respondent.



                        MEMORANDUM OPINION


     COHEN, Chief Judge:    Respondent determined a deficiency in

petitioner's Federal income tax in the amount of $11,032 for the

taxable year 1994.   By amendment to the answer, respondent

asserts an increased deficiency in the amount of $14,297.     The

issue for decision is whether petitioner is entitled to deduct as
                                - 2 -


alimony certain amounts paid in accordance with a marital

settlement agreement.

     This case was submitted fully stipulated under Rule 122.

Unless otherwise indicated, all section references are to the

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

Rule references are to the Tax Court Rules of Practice and

Procedure.    The stipulated facts are incorporated herein by this

reference.    Petitioner's brief contains statements and

attachments that were not stipulated and are not evidence.     See

Rule 143(b).    We disregard these in making our decision.

Background

     Petitioner resided in La Quinta, California, at the time he

filed the petition in this case.     Petitioner formerly was married

to Patricia R. Cologne (Ms. Cologne).      Petitioner and Ms. Cologne

separated on March 21, 1993.    On November 19, 1993, petitioner

and Ms. Cologne entered into a marital settlement agreement (the

agreement), which was filed with the Superior Court of the State

of California for the County of San Diego on December 29, 1993.

     Pertinent portions of the agreement are as follows:

                               RECITALS

          *        *      *      *        *     *      *

          6.   Husband is presently the sole proprietor of
     Gordon Cologne and Associates. This business has an
     estimated pre-tax net income of $19,500.00 per month.
     Wife is presently unemployed and has no earned income.
     Husband will retire on or about September 1, 1994,
                         - 3 -


after reaching the age of 70, and anticipates receiving
no earned income after that date.

     *      *      *      *      *      *      *

            DIVISION OF COMMUNITY PROPERTY

     *      *      *      *      *      *      *

     12. The real property commonly known as * * *
Rancho Santa Fe, California, shall be disposed of
according to the following terms:

     A.   The residence shall be listed for sale * * *
on or before February 1, 1994. * * * The residence
shall remain listed until sold. * * *

      *      *      *      *      *      *      *

     C.   Wife may have the use and possession of the
residence on the condition that she maintain the
residence and yard in satisfactory condition, normal
wear and tear excepted. Husband shall have the right
to occupy the residence for principal residential use
purposes including sleeping, cooking and eating and
attending to his personal hygiene needs. In case of
any dispute, Wife shall have the first right to occupy
the premises. Husband shall also have the right to
store any items of personal property awarded to him in
the premises until the sale is consummated.

     *      *      *      *      *      *      *

     E.   Until the sale of the residence is
consummated or until September 1, 1994, whichever first
occurs, Husband shall pay on a current basis, without
the right to reimbursement, real property taxes,
principal and interest payments on the notes secured by
deeds of trust on the residence and fire and liability
insurance for the residence. In addition, Husband
shall pay on a current basis all charges for trash
pickup, the water bill, and the gardener for one day a
week, and pool maintenance. If the house is not sold
by September 1, 1994, and the Wife continues to reside
in the house, the Wife shall pay all the aforesaid
taxes, principal and interest on the notes, insurance
and maintenance costs as and for reasonable rental for
such use or the actual fair rental value, whichever is
                         - 4 -


less. If the sale of the residence is not consummated
on or before September 1, 1994, the court shall have
the jurisdiction to make further orders regarding
occupancy and the payment of the mortgages, real
property taxes, insurance, trash pickup, water,
gardener and pool maintenance * * *.

     *      *      *      *      *      *      *

     H.   The net proceeds of sale, * * * shall be held
in escrow and disbursed as follows:
          (1) Husband shall be paid a sum equal
     to all payments made by him on or after
     April 1, 1993, on * * * [certain charge,
     credit card, and loan balances, except for
     purchases made by petitioner after April 1,
     1993];
          (2) The Wife shall be paid a sum equal
     to all payments made by her on or after
     April 1, 1993, on * * * [certain charge,
     credit card, and loan balances, except for
     purchases made by Ms. Cologne after April 1,
     1993].
          (3) Any remaining balance due on the
     obligations described in paragraphs (1) and
     (2) above shall be paid in full.
          (4) Any balance remaining shall be paid
     one-half to each party and Wife shall pay to
     Husband from her one-half, her share of the
     1993 income tax obligation as set forth in
     Paragraph 16.

     *      *      *      *      *      *      *

     13. The real property in Blue River, Wisconsin,
shall be disposed of according to the following terms:

     A.   The parties shall continue to hold such
property as joint tenants with right of survivorship.
Either party may terminate the joint tenancy at any
time. At such time both parties shall make
testamentary provisions so that the property will pass
to the children of this marriage if a party should die
prior to its sale.

     *      *      *      *      *      *      *
                         - 5 -


     C.   Both parties shall have the right of use and
possession of the residence. In case of a conflict,
Wife shall have the first right to any two-week period
she chooses upon providing Husband thirty days' advance
written notice.

     *      *      *      *      *      *      *

     E.   Wife shall pay on a current basis, without
the right to reimbursement, principal and interest
payment on the note secured by the first deed of trust.
Husband shall pay on a current basis, without the right
to reimbursement, real property taxes on the residence,
fire and liability insurance for the residence,
utilities, maintenance and repairs. All income
received on account of the property shall be applied to
the obligation owed to W. Southard and any remaining
balance shall be paid one-half by each party. Any
earnings remaining after payment to W. Southard shall
be divided equally between the parties.

     *      *      *      *      *      *      *

     15. The Husband's interest in the Judge's
Retirement Plan and in the Legislator's Retirement Plan
shall be divided equally between the parties. * * *
Pending each plan's direct payment of benefits to Wife,
Husband shall allow the Wife to receive for deposit in
a joint account the entire retirement benefits in lieu
of the division of these benefits and the spousal
support as provided in paragraph 34 of this agreement.
She may withdraw all such sums for her personal use as
an assignment in satisfaction of spousal support.

     *      *      *      *      *      *      *

     16. The parties shall file joint federal and
state tax returns for the calendar year ending 1993.
* * * Any tax liability due and unpaid upon the filing
of the tax return shall be paid by the Husband, and the
Wife shall reimburse the Husband her share of the tax
based on the net income (retirement income actually
received) received by her during the year. * * *

     *      *      *      *      *      *      *
                                  - 6 -


                                  DEBTS

          *       *      *        *       *    *     *

          30. Husband and Wife shall each pay fifty percent
     (50%) of all liabilities and expenses (including
     accounting and legal fee) relating to any tax
     liabilities asserted by Federal, State or local taxing
     authorities arising out of any review of the parties'
     personal income tax returns for any period when they
     filed joint returns except for tax year 1993 which is
     governed by paragraph 16. Each party shall, however,
     be solely responsible for the liabilities and expenses
     resulting from income known only to and solely
     benefiting said party.

          *       *      *        *       *    *     *

                             SPOUSAL SUPPORT

          34. Husband shall pay Wife * * *, as and for
     spousal support the sum of $3,000.00 per month on the
     1st day of each month commencing November 1, 1993, and
     continuing until Husband dies, Wife dies, Wife
     remarries, Wife commences residing with an unrelated
     member of the opposite sex, or until Husband retires on
     September 1, 1994, whichever shall first occur.

     During 1994, petitioner made the following payments pursuant

to the agreement:

     $25,950.00       Spousal support
       1,920.00       Life insurance premiums
       3,030.00       Gardener for home during pendency of sale
         675.83       Pool service
       1,804.02       Waste management
       6,790.77       January and February pensions
       1,221.54       Utilities (electric and water conditioning)
                        for house in Wisconsin
      33,625.50       One-half of petitioner and Ms. Cologne's 1993
                        State and Federal income taxes.
     $75,017.66

Petitioner deducted $71,273 as alimony on his 1994 Federal income

tax return.
                               - 7 -


     The parties have stipulated that an alimony deduction is

allowed for the following payments totaling $36,465:    Spousal

support of $25,950, life insurance premiums of $1,920, waste

management of $1,804, and January and February pension payments

of $6,791.   Remaining in dispute are the payments of

Ms. Cologne's half of the 1993 Federal and State income taxes and

payment of the utilities for the Wisconsin property.

Discussion

     Section 215 allows as a deduction an amount equal to the

alimony or separate maintenance payments paid during the year.

For purposes of section 215, the term "alimony or separate

maintenance payment" means any alimony or separate maintenance

payment (as defined in section 71(b)) that is includable in the

gross income of the recipient under section 71.   See sec. 215(b).

Section 71(a) provides that gross income generally includes

amounts received as alimony or separate maintenance payments.

Section 71(b)(1) defines alimony or separate maintenance payment

as 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
                               - 8 -


     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.

California Family Code section 4337 (West 1994) provides:

"Except as otherwise agreed by the parties in writing, the

obligation of a party under an order for the support of the other

party terminates upon the death of either party or the remarriage

of the other party."

     The parties dispute whether the payments at issue meet the

requirement of section 71(b)(1)(D).    The parties agree that the

agreement does not provide any conditions for the termination of

these payments.   Respondent's position is that petitioner's

obligations to pay Ms. Cologne's share of their 1993 income taxes

and for the utilities for the Wisconsin property survive her

death.   Petitioner argues that petitioner's liability for the

payments terminates at her death pursuant to California Family

Code section 4337.

     Federal and State Income Tax Payments

     Because the income tax liabilities are joint and several, if

Ms. Cologne died, petitioner would remain liable for the full

amount of their taxes to the respective tax collectors.    See sec.

6013(d)(3).   Normally, however, petitioner would be entitled to

the right of contribution for Ms. Cologne's half of the taxes.
                               - 9 -


Petitioner, through the agreement, has given up that right

(beyond the limited share specified).    The question we must

decide is whether, if Ms. Cologne died, petitioner would still be

obligated for Ms. Cologne's half of the joint liabilities without

the right of contribution (beyond the share specified).    As this

question is not answered by the agreement and the payment of

taxes is not the usual type of support expense, such as food,

shelter, or medical care, that necessarily ends with the payee

spouse's death, we look to State law.

     California Family Code section 4337 (West 1994) serves to

terminate spousal support at the payee spouse's death, where the

parties have not otherwise agreed.     California law distinguishes

payments for support from those for property settlement.    In

setting spousal support, the California court considers, among

other factors, each party's earning capacity, the needs of each

party based on the standard of living during the marriage, the

payor spouse's ability to pay, the obligations and assets of each

party, the duration of the marriage, and the age and health of

the parties.   See Cal. Fam. Code sec. 4320 (West 1994).

     Division 7 of the California Family Code governs the

division of debts and liabilities and that of property.    See Cal.

Fam. Code sec. 2500-2660 (West 1994).    Both assets and

liabilities are considered in dividing the community estate.     See

Cal. Fam. Code sec. 2552 (West 1994).
                               - 10 -


     The allocation of the liability for the 1993 income taxes

between petitioner and Ms. Cologne was based on their relative

incomes for the year.    Petitioner has not shown that the

allocation was based on their relative needs, standards of

living, or earning capacities when the taxes would be paid or on

any other factors normally taken into consideration in

determining support.    The agreement provided that petitioner

would be reimbursed for Ms. Cologne's smaller share out of the

net proceeds, if any, of the sale of the residence remaining

after other debts were paid.    The division of the couple's tax

liabilities is in the nature of a property settlement, rather

than a provision for the future support of Ms. Cologne.

Accordingly, section 4337 of the California Family Code (West

1994) does not operate to terminate these payments at

Ms. Cologne's death, and the requirement of section 71(b)(1)(D)

is not met.   Petitioner is not entitled to an alimony deduction

for the payments of his former spouse's 1993 Federal and State

income tax liabilities.

     Payment of Utilities for Wisconsin Property

     Pursuant to the agreement, petitioner and Ms. Cologne owned

the Wisconsin property as joint tenants with right of

survivorship.   Both had the right of use and possession of the

property, and his liability for utility bills would be continued

after her death.   While she occupied the property, however, the
                             - 11 -


utility charges related to her use of it.   We have allowed

alimony deductions for utilities.   See Graham v. Commissioner, 79

T.C. 415 (1982); Zampini v. Commissioner, T.C. Memo. 1991-395.

We hold that petitioner is entitled to deduct half of the amount

paid, or $610.77.

     To reflect the above holdings and the parties' stipulations,

                                         Decision will be entered

                                    under Rule 155.
