                       T.C. Memo. 1997-349



                     UNITED STATES TAX COURT



    JOHN F. DAUGHARTY AND SARAH R. DAUGHARTY, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

          FAYE E. DAUGHARTY, Petitioner v. COMMISSIONER
                 OF INTERNAL REVENUE, Respondent



     Docket Nos. 6023-95, 6280-95.             Filed July 29, 1997.



     James D. O'Donnell and John W. West, III, for petitioners

John F. and Sarah R. Daugharty.

     Kenneth G. Anderson, James P. Stevens, and John Callender

(specially recognized), for petitioner Faye E. Daugharty.

     Willie Fortenberry, Jr., for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION
                                 - 2 -


     RUWE, Judge:    Respondent determined the following

deficiencies and additions to tax in petitioners' Federal income

taxes:


                    John F. and Sarah R. Daugharty
                          docket No. 6023-95

                       Year              Deficiency

                       1991               $4,583
                       1992                8,680
                       1993                8,406


                          Faye E. Daugherty
                          docket No. 6280-95

         Year   Deficiency    Sec. 6651(a)(1)         Sec. 6654

         1988    $4,701          $1,175                 $302
         1989     4,568           1,142                  309
         1990     4,395           1,099                  288
         1991     4,208           1,052                  241
         1992     3,967             992                  171
         1993     3,840             960                  160


In order to protect the Government from a potential whipsaw,

respondent has taken inconsistent positions in these dockets.

     The issues for decision are:    (1) Whether payments made by

petitioner John F. Daugharty to his former spouse, petitioner

Faye E. Daugharty, in the amount of $30,000 per year constitute

alimony or, alternatively, a property settlement; and (2) if we

find that these payments constitute alimony, whether petitioner

Faye E. Daugharty is liable for additions to tax for failure to

file a timely return pursuant to section 6651(a)(1) and failure
                              - 3 -


to pay estimated tax pursuant to section 6654 for each of the

years in issue in docket No. 6280-95.
                               - 4 -


                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts is incorporated herein by this

reference.   Petitioners John F. and Sarah R. Daugharty and

petitioner Faye E. Daugharty all resided in Jacksonville Beach,

Florida, when they filed their petitions in these cases.1


Background


     John and Faye were married on March 20, 1958, in Atlanta,

Georgia.   During their marriage, which lasted over 22 years, John

and Faye had three children, one of whom was a minor when the

marriage dissolved in 1981.

     Following his graduation from the University of Georgia in

1958 with a degree in business administration, John was employed

in credit and financial related capacities and eventually became

manager of General Electric Credit Co.'s finance department,

where he served until his retirement.

     In or around 1965, John and Faye relocated to Jacksonville,

Florida.   On August 13, 1970, John entered into a contract to

purchase the Landon Imperial Apartments for $155,000.   Landon

Imperial Apartments is an 80-unit apartment complex located in

Duval County, Florida.   The contract provided that the seller

     1
      Petitioner Sarah R. Daugharty is a party to these
proceedings solely as a consequence of having filed joint returns
with petitioner John F. Daugharty.
                               - 5 -


would convey the property subject to an existing mortgage in the

original principal amount of $700,000.   The $155,000 that John

paid to the seller came from his individual funds.    On September

1, 1970, the seller executed a Warranty Deed conveying the

apartments to John and Faye.   The deed stated that the purchasers

were acquiring the property subject to a mortgage from Bisbee-

Baldwin Corp.


John's and Faye's Divorce


     On January 5, 1981, Faye filed a Petition for Dissolution of

Marriage in the Circuit Court, Fourth Judicial Circuit, in and

for Duval County, Florida2 (case number 81-112-CA).   On February

3, 1981, Faye's and John's marriage was dissolved pursuant to a

Stipulation and Final Judgment of Dissolution of Marriage

(Stipulation and Final Judgment).   The Stipulation provided, in

relevant part, as follows:


     in order to settle the issues relating to the financial
     affairs of the parties as to property rights, alimony,
     custody and support of the minor child of the parties,
     and in consideration of these promises and of the
     mutual promises hereinafter set forth, each party
     hereto accepts and will be bound by the following
     provisions * * *




     2
      Hereinafter, unless otherwise indicated, we shall refer to
the Circuit Court, Fourth Judicial Circuit, in and for Duval
County, Florida, as the "Fourth Judicial Circuit".
                                - 6 -


     The terms of the Stipulation and Final Judgment essentially

provided for the following:

     (1) Faye would receive custody of the parties' minor child,

while John had visitation privileges and was responsible for all

the child's expenses.

     (2) Faye would receive exclusive possession of the parties'

home in Jacksonville, Florida, which was to be placed on the

market for sale.    John was responsible for mortgage payments, ad

valorem real estate taxes, and insurance for up to 1 year while

the home was on the market.    If the home were sold within this

period, John and Faye would each receive one-half of the net

equity therein.    Following the sale, Faye was to receive all

furnishings and furniture.

     (3) John would receive from Faye a 2-carat diamond ring.

     (4) John was required to make the payments on Faye's

automobile for a 1-year period from the date of the agreement.

     (5) The parties' Baymeadows Club membership was to be

transferred to Faye's name.

     (6) John would provide Faye with a gasoline credit card, and

he was responsible for the payments thereon for a 6-month period

beginning on the date of the agreement.
                                - 7 -


     (7) Faye would convey her interest in the Landon Imperial

Apartments, by quitclaim deed, to John.3

     (8) Following the execution of the Final Judgment, John

would pay Faye $1,000 per month for 12 months or until such time

as the jointly owned home was sold, whichever was sooner.    During

this period, John would make all mortgage payments due on the

home.    After this period, John would pay Faye $2,200 per month

for a period of 12 months.    For each succeeding 12-month period,

John's monthly obligation to Faye would increase by $100 until it

reached $2,500 per month.    John would then pay Faye $2,500 per

month for the remainder of her life or until such time as she

remarried.    These payments would stop only upon Faye's remarriage

or death.    In consideration of the mutual promises made between

the parties, John bound his estate to make all payments required

to be made under the terms of the agreement.

     Pursuant to the Stipulation and Final Judgment, Faye

executed a Quit-Claim Deed, dated February 3, 1981, conveying her

interest in the Landon Imperial Apartments to John.    Beginning in

1981, John paid to Faye the amounts required under the

Stipulation and Final Judgment.


     3
      In a Notice of Proposed Property Taxes from the Duval
County Taxing Authorities, prepared in or around September 1980,
the Landon Imperial Apartments were assessed at a value of
$963,700. In a financial affidavit titled "John F. Daugharty II
Jacksonville, Florida February 1, 1981", John stated that he had
$700,000 of equity in the apartments.
                              - 8 -



Subsequent Litigation


     Subsequent to entry of the Stipulation and Final Judgment,

substantial litigation between John and Faye occurred in the

Florida State courts, extending until June 1991.
                               - 9 -


Case No. 81-112-CA


     On October 6, 1981, Faye filed a Motion to Set Aside

Property Settlement Agreement and to Cancel Deed in the Fourth

Judicial Circuit, in which she argued:


     The Wife affirmed her agreement with the terms the
     Husband had laid down because she was afraid of two
     possible developments, to-wit: (a) That if she did not
     take what the Husband was offering she would get
     nothing or (b) that if the Husband told Mr. Greene
     [John's attorney] about the bedroom episode, Mr. Greene
     might tell her Husband about the law on adultery which
     Mr. Sulik had told her about and if the Husband found
     out about that, he would give her nothing. * * *


Faye requested the court to set aside the Stipulation and Final

Judgment pursuant to rule 1.540(b) of the Florida Rules of Civil

Procedure.

     On or about October 22, 1981, John filed a Motion to

Dismiss.   On December 4, 1981, John filed a Supplemental

Memorandum in Support of Motion to Dismiss, which stated:


     The wife has assumed the mantel of "shotgunning",
     having no facts, no basis, and after having enjoyed the
     benefits of a property settlement agreement which
     leaves her as a very wealthy woman, after one year when
     she must part with that which she agreed to do, she now
     has the "sour grapes".


John's motion to dismiss raised several defenses, including a

failure to allege sufficient grounds for relief pursuant to rule
                              - 10 -


1.540(b) of the Florida Rules of Civil Procedure and a failure to

file within a reasonable period.

     On December 8, 1981, the Fourth Judicial Circuit granted

John's motion to dismiss.   In its order, the court did not

elaborate on the reasons for its decision.   This order was

affirmed by the District Court of Appeal, First District, State

of Florida (District Court of Appeal), in an unpublished per

curiam opinion filed August 12, 1982.

     On or about January 11, 1982, Faye filed a Motion for

Modification and Enforcement of Final Judgment, which contended,

among other things, that:


          2. The provisions for the Wife in the Final
     Judgment have proven to be grossly inadequate since the
     entry of said Final Judgment.

          3. The Husband's verbal promises made to the Wife
     assuring her of adequate monies for her support at all
     times, as relied on by the Wife, have not been
     fulfilled.

          4. The Husband's income, assets and net worth are
     now substantially more than the amount shown by his
     Financial Affidavit filed in evidence February 3, 1981.


Included in the relief requested by Faye was an increase in the

monthly payments to her, which her motion referred to as alimony.

     On or about January 12, 1982, John filed a Motion to Dismiss

in which he argued:
                        - 11 -


     1. That this Court does not have jurisdiction of
this matter with reference to seeking of a Motion for
Modification for the following reasons:

          a. That the Court has lost its jurisdiction
with regard to a Motion for Modification at the time of
the filing of the Notice of Appeal by the Wife.

          b. That the Wife is attempting to modify a
property settlement agreement, which is a non-
modifiable document under the laws of the State of
Florida.

     2. That this same matter was argued in a
previously filed Motion for Modification with reference
to undue influence, the fact the Wife was unable to
make ends meet on the documents submitted by her at the
trial, and the Husband submits that the Wife is now
attempting to do again what this Court has ruled it had
no jurisdiction to do and that is to appeal a case a
year after a decision has been rendered.

     3. That the parties agreed and each was
adequately represented by counsel with regard to the
matters disposed of in the property settlement
agreement, and the Wife cannot now be heard to complain
about a lack of consideration as reflected in paragraph
1 of her frivolous motion.

     4. That counsel for the Wife is engaged in total
harassment of the Husband, requiring that the Husband
secure counsel to defend petitions that are
substantially similar to ones that had previously been
dismissed and are presently on appeal.

     5. Allegations such as those contained in
paragraph 3 of "Husband's verbal promises" which is
totally contrary to the written document signed by the
parties, is totally fallacious and is improper
pleading.

     6. That paragraph 4 is a bold-faced allegation,
unsupported by any documentation, is an improper
statement, and is about one year late in coming.
                             - 12 -


     On or about February 4, 1982, John filed a "Husband's

Memorandum in Support of Motion to Dismiss", which stated


     that the [divorce] agreement was intended not merely
     for the support of the former Wife and the minor child
     of the marriage, but also as a full and complete
     settlement of the property rights. Where one party
     surrenders valuable property interests and at the same
     time is to receive periodic payments specified as
     alimony, such agreements are not subject to
     modification. Mills v. Mills, 339 So. 2d 681, 684
     (Fla. 1st Dist. 1976).


John maintained that Faye "fail[ed] to allege the elements which

would constitute a cause of action for modification of the

property settlement agreement between Mr. and Mrs. Daugharty."

John also alleged that the court lacked jurisdiction to decide

the case because the subject matter of Faye's Motion for

Modification and Enforcement of Final Judgment was substantially

the same as the subject matter of Faye's appeal, which was

pending at the time, from the denial of her Motion to Set Aside

Property Settlement Agreement and to Cancel Deed.

     On October 15, 1982, Faye filed an Amended Contempt Notice

against John, in which she stated that she would apply for an

order adjudging John "in contempt of Court for violation of the

terms of the Final Judgment of Dissolution of Marriage * * * by

failing to pay the alimony awarded thereby to FAYE E. DAUGHARTY".

On January 11, 1983, Faye filed a Second Amended Contempt Notice
                              - 13 -


against John.   On that same date, Faye filed an Amended Motion

for Modification and Enforcement of Final Judgment.

     In its Order Ruling on Motions, filed April 1, 1983, the

Fourth Judicial Circuit dismissed Faye's Second Amended Contempt

Notice and her Amended Motion for Modification and Enforcement of

Final Judgment.   The Order stated that


     the Wife's Amended Motion for Modification and
     Enforcement of Final Judgment and the Wife's Second
     Amended Contempt Notice are unsubstantiated by the
     evidence, and the Husband has paid all that was
     required to be paid by him under the terms of the Final
     Judgment of Dissolution of Marriage.


The District Court of Appeal affirmed this order in an

unpublished per curiam opinion filed February 10, 1984.


Case No. 82-12416-CA


     On October 15, 1982, Faye filed a Complaint in the Fourth

Judicial Circuit, to set aside the Stipulation and Final Judgment

pursuant to rule 1.540(b) of the Florida Rules of Civil

Procedure.   In her complaint, Faye alleged that "Defendant had

perpetrated a fraud upon the Court by the preparation, execution

and filing of a false and fraudulent affidavit which did not

constitute a truthful representation of Defendant's income,

assets and liabilities".   On or about March 21, 1983, John filed

an Answer asserting, among other things, the defense of res

judicata, since the issues, in his view, were the same as those
                              - 14 -


previously ruled upon in case number 81-112-CA.   Accordingly,

John moved for an entry of summary judgment in his favor.

     In an Order on Motions and Partial Summary Judgment, filed

October 3, 1983, the Fourth Judicial Circuit vacated, in part,

the February 3, 1981, Stipulation and Final Judgment, including

Faye's conveyance of her interest in the Landon Imperial

Apartments.

     On January 3, 1984, Faye filed a Motion for Temporary

Alimony and Suit Money.   In an Order for Temporary Alimony, filed

March 8, 1984, the Fourth Judicial Circuit ordered John to "pay

to the Plaintiff the sum of $1,800.00 on or before March 10,

1984, and a like sum of $1,800.00 on the 10th day of each and

every month thereafter, until further Order of this Court, as and

for temporary alimony."

     On September 26, 1984, the District Court of Appeal reversed

the Fourth Judicial Circuit's October 3, 1983, order and remanded

with instructions to dismiss Faye's complaint with leave to

amend, thereby reinstating the Stipulation and Final Judgment.

See Daugharty v. Daugharty, 456 So. 2d 1271, 1274 (Fla. Dist. Ct.

App. 1984).4   The District Court of Appeal stated:

     4
      In an Order on Motion for Entry of Money Judgment, filed
June 12, 1985, the Fourth Judicial Circuit determined all amounts
due Faye pursuant to the Stipulation and Final Judgment.
Accordingly, the court ordered John to pay Faye $43,600.
However, the court deducted from this total the amounts already
paid by John pursuant to the Fourth Judicial Circuit's Mar. 8,
                                                   (continued...)
                             - 15 -



     Because the principles of law enunciated in Yohanan [v.
     DeClaire, 421 So.2d 551 (Fla. App. 4th Dist. 1982)] and
     Brown [v. Brown, 432 So.2d 704 (Fla. App. 3d Dist.
     1983)], have been disapproved by our Supreme Court, we
     would be without authority to affirm the judgment in
     this case even if we believed that appellee's complaint
     properly alleged the perpetration by the husband of an
     extrinsic fraud. Here, as in DeClaire v. Yohanan, the
     allegedly false financial affidavit submitted by the
     husband was before the court which dissolved the
     marriage of the parties, and the husband's financial
     condition was or could have been made an issue in that
     case. Accordingly, the accuracy of the financial
     affidavit could have been questioned in those
     proceedings. The appellee had an opportunity to
     question the accuracy of the affidavit * * *

             *     *     *     *      *   *    *

     Here, as in DeClaire, the fraud perpetrated by
     appellant in connection with the filing of his
     financial affidavit, if indeed the affidavit was false,
     was intrinsic fraud and did not constitute fraud upon
     the court.

     we conclude that this case must be remanded to the
     trial court with instructions to dismiss the wife's
     complaint with leave to file an amended complaint
     should the wife feel that she can properly and in good
     faith allege misconduct by attorney Harden or collusion
     between Harden and her husband or her husband's
     attorney which prevented her from presenting her case
     in the divorce action. Conduct by an attorney which
     amounts to connivance at the defeat of his own client,
     or conduct by a party which prevents an opposing party
     from fairly presenting his or her claim or defenses
     does constitute fraud on the court. * * * [Id. at
     1273-1274].


     On remand, after Faye had filed an amended complaint, the

Fourth Judicial Circuit held a 3-day trial.   In its judgment

     4
      (...continued)
1984, Order for Temporary Alimony.
                             - 16 -


filed November 4, 1986, the Fourth Judicial Circuit found, among

other things, that:


          The plaintiff, Faye Eubanks Daugharty, has failed
     to sustain the burden of proving by the greater weight
     of the evidence that:

          1. there was any misconduct by attorney Paul
     Harden or collusion between Harden and her former
     attorney or her husband's attorney, Thomas Greene,
     which prevented her from presenting her case in the
     divorce action;

          2. there was any conduct on the part of her
     former husband which prevented her from fairly
     presenting her claim or defenses in the divorce action;

          3. she was so afraid of her former husband that
     she was susceptible to the exercise of an undue
     influence over her and that she was unable to resist
     the husband's control of her mind and her will;

          4. her former husband exercised any undue
     influence over her in any of the proceedings in the
     dissolution of marriage proceeding;

          5. she was prevented by any conduct of her former
     husband or by the conduct of any attorney amounting to
     connivance that would defeat her claim or defenses;

          6. she was uninformed as to the value of any of
     the property in the dissolution of marriage proceeding
     but, quite to the contrary, the evidence conclusively
     proved that she provided an itemized list of all of the
     property owned by her former husband to her former
     lawyer, John Sulik, prior to any dissolution of
     marriage proceeding being instituted;

          7. there was any misconduct on the part of her
     dissolution attorney, Paul Harden * * *


The court denied Faye's request to set aside the Final Judgment

of Dissolution of Marriage, which incorporated the Stipulation
                             - 17 -


between John and Faye, and rejected Faye's request to vacate the

conveyance of her interest in the Landon Imperial Apartments.

The District Court of Appeal affirmed the Final Judgment in an

unpublished per curiam opinion.   See Daugharty v. Daugharty, 547

So. 2d 636 (Fla. Dist. Ct. App. 1989).


Case No. 90-16340-CA


     After Faye initiated subsequent litigation involving

essentially the same subject, the Fourth Judicial Circuit

enjoined Faye from instituting further litigation stating:


          As set forth above, Ms. Daugharty has repeatedly
     instituted litigation against Defendants Greene, Harden
     and Daugharty raising the same allegations of alleged
     fraud in each instance. In view of the prior
     adjudications of this Court and of the First District
     Court of Appeal, this Court specifically finds and
     holds that Ms. Daugharty's actions in repeatedly making
     those same allegations in numerous separate complaints
     against those Defendants, individually and/or
     collectively, constitute frivolous litigation and an
     abuse of the processes of this Court. Accordingly, Ms.
     Daugharty will be, and she hereby is, enjoined from
     instituting any further litigation in the Circuit
     Court, Fourth Judicial Circuit, in and for Duval
     County, Florida, against Defendants John F. Daugharty,
     II, Thomas H. Greene, and Paul M. Harden, individually
     or collectively, without first obtaining prior written
     permission from this Court.


As of the date of trial in this case, no further proceedings have

been instituted in the Fourth Judicial Circuit.

     Pursuant to the Stipulation and Final Judgment, John paid to

Faye $30,000 during each of the years 1988 through 1993, and he
                              - 18 -


and his current wife, Sarah R. Daugharty, deducted these payments

as alimony on their Federal income tax returns for those years.5

Faye did not file Federal income tax returns for the taxable

years 1988 through 1993.


                              OPINION


     The principal issue for decision requires us to determine

whether John's payments of $30,000 per year to Faye during the

years 1988 through 1993 were made in discharge of his legal

obligation to Faye arising out of the marital or family

relationship (hereinafter sometimes referred to as alimony).     A

former spouse must include in gross income periodic payments

received as alimony or separate maintenance.   Sec. 71(a); Brown

v. Commissioner, 50 T.C. 865, 867-868 (1968), affd. 415 F.2d 310

(4th Cir. 1969).   On the other hand, payments which represent a

property settlement are not taxable to the recipient under

section 71.   Yoakum v. Commissioner, 82 T.C. 128, 134 (1984);

Thompson v. Commissioner, 50 T.C. 522, 525 (1968).   Pursuant to

section 215(a), a taxpayer may deduct amounts paid to a former

spouse if those payments are includable in the former spouse's




     5
      The record contains copies of canceled checks for 1987,
1988, and 1991 through 1993. On most of these checks, John
inserted the notation "alimony".
                                - 19 -


gross income under section 71.     Yoakum v. Commissioner, supra at

134.6

        Thus, if the payments in the instant case constitute

alimony, then Faye must include these amounts in income,7 and

John and Sarah may deduct them pursuant to section 215(a).

Alternatively, if the payments represent a property settlement,

then Faye need not include these amounts in income, and John and

Sarah are not entitled to deduct them.     Respondent has protected




        6
      The provisions of sec. 71(a) applicable to this case
provided:


             (1) Decree of divorce or separate maintenance.--
        If a wife is divorced or legally separated from her
        husband under a decree of divorce or of separate
        maintenance, the wife's gross income includes periodic
        payments (whether or not made at regular intervals)
        received after such decree in discharge of (or
        attributable to property transferred, in trust or
        otherwise, in discharge of) a legal obligation which,
        because of the marital or family relationship, is
        imposed on or incurred by the husband under the decree
        or under a written instrument incident to such divorce
        or separation.


     Secs. 71 and 215 were amended by sec. 422(a) and (b) of the
Deficit Reduction Act of 1984, Pub. L. 98-369, 98 Stat. 795, 797.
The 1984 amendments apply to divorce or separation instruments
modified on or after Jan. 1, 1985, if the modification provides
that the 1984 amendments govern. The amendments do not apply to
this litigation.
        7
      In addition to sec. 71(a), sec. 61(a)(8) requires a
taxpayer to include "Alimony and separate maintenance payments"
in gross income.
                              - 20 -


the Government from a potential whipsaw in these cases by taking

inconsistent positions in the respective notices of deficiency.


1. Judicial Estoppel


     At the outset, Faye contends that we should not make an

independent determination in this case as to whether the payments

in question constitute alimony or a property settlement.

Instead, Faye maintains that John is estopped by the doctrines of

judicial estoppel, res judicata, the law of the case, stare

decisis, and waiver from arguing that the payments represent

alimony.   Faye asserts that in the Florida State court

litigation, John argued, and the Florida State courts accepted,

the position that the Stipulation and Final Judgment was a

property settlement agreement.   Consequently, Faye contends that

we should find that the payments in issue constitute nontaxable

payments received pursuant to a property settlement.

     Judicial estoppel focuses on the relationship between a

litigant and the courts and seeks to protect the integrity of the

judicial process by preventing a party from successfully

asserting one position before a court and thereafter asserting a
                             - 21 -


contradictory position before the same or another court when it

is in that party's interest to do so.   Edwards v. Aetna Life Ins.

Co., 690 F.2d 595, 599 (6th Cir. 1982); Huddleston v.

Commissioner, 100 T.C. 17, 26 (1993).   Such manipulation of the

judicial process has been characterized as "cynical gamesmanship

* * * to suit an exigency of the moment", Teledyne Indus., Inc.

v. NLRB, 911 F.2d 1214, 1218 (6th Cir. 1990); "blowing hot and

cold", Allen v. Zurich Ins. Co., 667 F.2d 1162, 1167 n.3 (4th

Cir. 1982); and "playing fast and loose with the courts", Scarano

v. Central R.R., 203 F.2d 510, 513 (3d Cir. 1953).

     In Huddleston v. Commissioner, supra at 28-29, this Court

held:


     the doctrine of judicial estoppel is available in the
     Tax Court to be used in appropriate cases * * * to
     prevent parties from taking positions that are
     inconsistent with those previously asserted by the
     parties and accepted by courts and that would result in
     inappropriate and prejudicial consequences to the
     courts.[8]


We also explained:


     Acceptance by a court does not mean that the party
     being estopped prevailed in the prior proceeding with

     8
      Federal standards govern the application of judicial
estoppel in Federal court. In Warda v. Commissioner, 15 F.3d
533, 538 n.4 (6th Cir. 1994), affg. T.C. Memo. 1992-43, the Court
of Appeals for the Sixth Circuit explained: "This is because the
doctrine is designed to protect the integrity of judicial
institutions, and because the question (when presented in federal
court) primarily concerns federal interests."
                             - 22 -


     regard to the ultimate matter in dispute, but rather
     only that a particular position or argument asserted by
     the party in the prior proceeding was accepted by the
     court. [Id. at 26; citations omitted.]


See also Edwards v. Aetna Life Ins. Co., supra at 599.    In

Huddleston v. Commissioner, supra at 29, we applied judicial

estoppel to prevent the taxpayer from denying that he had

fiduciary authority to act on behalf of a decedent's estate.

This position was completely contradictory to the position that

the taxpayer had taken, and this Court had accepted, in a prior

case.

     Judicial estoppel must be applied with caution in order "to

avoid impinging on the truth-seeking function of the court

because the doctrine precludes a contradictory position without

examining the truth of either statement."    Teledyne Indus., Inc.

v. NLRB, supra at 1218; see also Allen v. Zurich Ins. Co., supra

at 1166; Fazi v. Commissioner, 105 T.C. 436, 445-446 (1995).    As

a result, before applying judicial estoppel, courts not only

require that a party have asserted an inconsistent position in an

earlier proceeding, but also that the court in the earlier

proceeding accepted that position.    United States v. C.I.T.

Constr., Inc., 944 F.2d 253, 258-259 (5th Cir. 1991); Edwards v.

Aetna Life Ins. Co., supra at 599; Huddleston v. Commissioner,
                              - 23 -


supra at 27.9   Judicial estoppel is a doctrine adopted to protect

the courts, and we possess discretion in invoking it.   Fazi v.

Commissioner, supra at 446; see also In re Cassidy, 892 F.2d 637,

642 (7th Cir. 1990).

     Thus, in the instant case, we must determine: (1) Whether

John maintained before the Florida State courts that the

provision of the Stipulation and Final Judgment requiring him to

pay $2,500 per month was a property settlement under Florida law;

and, if so, (2) whether this position was accepted by the State

courts in their rulings.   Unless both requirements are satisfied,

Faye's argument must fail.

     In his motion to dismiss, filed in the Fourth Judicial

Circuit on or about January 12, 1982, John stated that "the Wife

is attempting to modify a property settlement agreement, which is

a non-modifiable document under the laws of the State of




     9
      In Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 599 (6th
Cir. 1982), the Court of Appeals for the Sixth Circuit stated:

     Absent judicial acceptance of the inconsistent
     position, application of the rule is unwarranted
     because no risk of inconsistent results exists. Thus,
     the integrity of the judicial process is unaffected;
     the perception that either the first or the second
     court was misled is not present. [Citations omitted.]


See also Teledyne Indus., Inc. v. NLRB, 911 F.2d 1214, 1218 (6th
Cir. 1990).
                               - 24 -


Florida."10   In his memorandum, filed February 4, 1982, John

argued


     that the [divorce] agreement was intended not merely
     for the support of the former Wife and the minor child
     of the marriage, but also as a full and complete
     settlement of the property rights. Where one party
     surrenders valuable property interests and at the same
     time is to receive periodic payments specified as
     alimony, such agreements are not subject to
     modification. Mills v. Mills, 339 So. 2d 681, 684
     (Fla. 1st Dist. 1976).


John contends that his position in the Florida courts is not

inconsistent with his current position that the part of the

divorce agreement calling for periodic payments is alimony.     We

     10
      The relevant Florida divorce statute, as it existed at the
time of the parties' divorce on Feb. 3, 1981, provided:

          61.14. Modification of support, maintenance, or
     alimony agreements or judgments

          (1) When the parties have entered into * * * an
     agreement for payments for, or instead of, support,
     maintenance, or alimony, whether in connection with a
     proceeding for dissolution or separate maintenance or
     with any voluntary property settlement, * * * and the
     circumstances or the financial ability of either party
     has changed * * *, either party may apply to the
     circuit court of the circuit in which the parties, or
     either of them, resided at the date of the execution of
     the agreement or reside at the date of the application,
     or in which the agreement was executed or in which the
     order was rendered, for a judgment decreasing or
     increasing the amount of support, maintenance, or
     alimony, and the court has jurisdiction to make orders
     as equity requires * * * [Fla. Stat. Ann. sec. 61.14
     (West 1985)].

This statute has since been amended.    See Fla. Stat. Ann. sec.
61.14 (West Supp. 1997).
                               - 25 -


agree.    John's position in the Florida courts was not that there

were no support provisions in the agreement; rather, John made a

legal argument that the agreement was nonmodifiable because it

contained support provisions and a complete disposition of

property rights.

     Regardless of how we construe John's argument in support of

his motion to dismiss, the application of judicial estoppel for

which Faye argues also depends upon whether the Florida courts

ruled that the Stipulation and Final Judgment, including the

portion referring to the monthly payments to Faye, constituted a

settlement of property rights.   John contends, among other

things, that the Florida courts never made a ruling favorable to

John on that position.11   Resolution of this issue requires a

thorough review of the Florida State court litigation.

     We begin with Faye's October 6, 1981, Motion to Set Aside

Property Settlement Agreement and to Cancel Deed, which requested

relief pursuant to rule 1.540(b) of the Florida Rules of Civil

Procedure.   This rule allows a party to obtain relief from a

final judgment for fraud, misrepresentation, or other misconduct

     11
      John also argues that it is "entirely possible that, while
the periodic payments may not be alimony for purposes of 5 F.S.A.
§ 61.14, they still are for purposes of IRC §§ 71 and 215. * * *
It may well be that state and Federal law definitions of alimony
are simply different." John therefore maintains that the
doctrine of judicial estoppel would not apply, since his position
in the Florida State courts would not necessarily be inconsistent
with the one he has asserted here. Given our resolution of the
case, we need not address this contention.
                               - 26 -


of an adverse party.    Faye's motion presents her allegations of

misconduct on the part of John.    John's motion to dismiss and

memorandum in support thereof discuss the requirements imposed by

rule 1.540 of the Florida Rules of Civil Procedure and set forth

John's various arguments as to why Faye failed to satisfy these

requirements.   The Fourth Judicial Circuit filed an order on

December 8, 1981, which stated only that John's motion to dismiss

was granted, while Faye's motion to set aside property settlement

agreement was denied.    The District Court of Appeal affirmed in

an unpublished per curiam opinion.

     In his January 12, 1982, Motion to Dismiss, filed in

response to Faye's January 11, 1982, Motion for Modification and

Enforcement of Final Judgment, John asserted that the parties'

agreement constituted a nonmodifiable property settlement

agreement under Florida law.    Nevertheless, the relevant portion

of the Fourth Judicial Circuit's April 1, 1983, Order Ruling on

Motions simply stated:


     the Wife's Amended Motion for Modification and
     Enforcement of Final Judgment and the Wife's Second
     Amended Contempt Notice are unsubstantiated by the
     evidence, and the Husband has paid all that was
     required to be paid by him under the terms of the Final
     Judgment of Dissolution of Marriage. [Emphasis added.]


The District Court of Appeal affirmed in an unpublished per

curiam opinion.
                              - 27 -


     We do not find in the above statement of the Fourth Judicial

Circuit an acceptance of John's argument that the Stipulation and

Final Judgment constituted a nonmodifiable property settlement

agreement.   Indeed, the reference to Faye's failure of proof

suggests otherwise.   Moreover, we note that the court did not

have to make such a finding in order to decide against Faye.

John had presented various other arguments that appear to have

been the basis for the court's action.

     In her complaint in case number 82-12416-CA, filed October

15, 1982, Faye again attempted to set aside the Stipulation and

Final Judgment pursuant to rule 1.540(b) of the Florida Rules of

Civil Procedure for fraud upon the court.   In her complaint, Faye

maintained that John's financial affidavit, filed in connection

with the parties' divorce agreement, was fraudulent in that it

understated John's assets.   John's answer asserted, among other

things, that Faye's complaint had failed to state a cause of

action upon which relief could be granted, and the issues had

previously been ruled upon by the Fourth Judicial Circuit in case

number 81-112-CA.

     Although the Fourth Judicial Circuit granted summary

judgment for Faye and vacated most of the parties' Stipulation

and Final Judgment, including Faye's conveyance of her interest

in the Landon Imperial Apartments, the District Court of Appeal

reversed this decision.   See Daugharty v. Daugharty, 456 So. 2d
                                  - 28 -


at 1274.   The District Court of Appeal found that Faye had failed

to plead or prove the perpetration by John of the sort of

extrinsic fraud which could be denominated fraud upon the court

and warrant the vacation of the Stipulation and Final Judgment.

Id. at 1272.   In its opinion, the court did make one reference to

the Stipulation and Final Judgment as a "property settlement

agreement".    See id. at 1272.    However, we decline to hold, on

the basis of a single reference, that the court found that the

Stipulation and Final Judgment, including the monthly payments,

represented a property settlement agreement under Florida law.

Instead, the court's opinion focuses, and ultimately turns upon,

the insufficiency of Faye's pleadings with respect to an

allegation of fraud upon the court.        See id. at 1273-1274.

     On remand, the Fourth Judicial Circuit, after 3 days of

testimony and evidence, concluded that Faye had failed to carry

her burden of proof with respect to any type of extrinsic fraud,

which would be sufficient to warrant vacation of the Stipulation

and Final Judgment.   The District Court of Appeal affirmed in an

unpublished, per curiam opinion.

     Following our review of the rulings made by the Florida

State courts with respect to this litigation, we have not found

an acceptance by any of these courts that the Stipulation and

Final Judgment, including the portion requiring John to pay

$2,500 per month to Faye, constituted a property settlement
                               - 29 -


agreement under Florida law.   Courts must invoke judicial

estoppel with caution and only after it is clear that an earlier

court accepted the position in question.12     See Fazi v.

Commissioner, 105 T.C. at 445-446.      Consequently, we must make

our own independent determination as to whether the payments in

question constitute alimony or a property settlement.


2. Alimony/Property Settlement


     The question we must decide is whether the $2,500 per month

payments by John to Faye were made "because of the family or

marital relationship in recognition of the general obligation to

support".   Sec. 1.71-1(b)(4), Income Tax Regs.    The requirement

that the payments be made in discharge of a legal obligation

imposed because of the family or marital relationship means that

the payments must be in the nature of support rather than a

     12
      For similar reasons, we also reject Faye's remaining
arguments that John should be precluded from asserting that the
payments at issue represent alimony. Res judicata, for instance,
encompasses both claim and issue preclusion. See Hemmings v.
Commissioner, 104 T.C. 221, 231 (1995). The doctrine of claim
preclusion prevents a party from asserting a claim that has been,
or should have been, the subject of prior litigation. Id. Issue
preclusion prevents a party from relitigating an issue that the
party previously litigated unsuccessfully in a different action.
Blanton v. Commissioner, 94 T.C. 491, 494-495 (1990). Since we
have found that the Florida courts did not make a determination
as to whether the Stipulation and Final Judgment represented a
property settlement agreement, res judicata is inapplicable. The
doctrine of the law of the case is similarly inapplicable in this
context. See Quern v. Jordan, 440 U.S. 332, 347 n.18 (1979)
("The doctrine of law of the case comes into play only with
respect to issues previously determined.").
                                - 30 -


property settlement.    Beard v. Commissioner, 77 T.C. 1275, 1283

(1981); Bishop v. Commissioner, 55 T.C. 720, 724-725 (1971).

This issue is a factual one and requires an examination of all

the surrounding facts and circumstances.    Wright v. Commissioner,

62 T.C. 377, 389 (1974), affd. 543 F.2d 593 (7th Cir. 1976).

     Factors which indicate that the payments are in the nature

of a property settlement are:    (1) The parties in their agreement

(or the court in its decree) intended the payments to effect a

division of their assets; (2) the recipient surrendered valuable

property rights in exchange for the payments; (3) the payments

are fixed in amount and not subject to contingencies, such as the

remarriage or death of the recipient; (4) the payments are

secured; (5) the amount of the payments plus the other property

awarded to the recipient equals approximately one-half of the

property accumulated by the parties during marriage; (6) the

needs of the recipient were not taken into consideration in

determining the amount of the payments; and (7) a separate

provision for support was provided elsewhere in the decree or

agreement.    Benedict v. Commissioner, 82 T.C. 573, 577-578

(1984); Beard v. Commissioner, supra at 1284-1285.

     In the instant case, most of the above factors indicate that

the payments were in the nature of support rather than a property

settlement.    First, the payments are subject to two

contingencies.    The Stipulation and Final Judgment provided that
                                - 31 -


John's monthly payments to Faye would terminate upon her

remarriage or death.   Payments received pursuant to a property

settlement generally are not subject to contingencies and do not

terminate upon the death of the payee.    Instead, the obligation

to pay is generally "absolute."    See McCombs v. Commissioner, 397

F.2d 4, 8 (10th Cir. 1968), affg. T.C. Memo. 1967-124.

Similarly, Florida law provides that a property settlement

agreement represents a final division of property, which is not

subject to modification absent proof of fraud, duress, deceit,

coercion, or overreaching by the other party.    See, e.g., Baker

v. Baker, 394 So. 2d 465, 466 (Fla. Dist. Ct. App. 1981); Zedeck

v. Zedeck, 334 So. 2d 87, 88 (Fla. Dist. Ct. App. 1976).

     Second, nothing in the Stipulation and the Final Judgment

stated that John's obligation to make the requisite payments was

secured by any of his assets.    The absence of this factor is a

further indication that the payments were intended for Faye's

support.   Benedict v. Commissioner, supra at 578; Beard v.

Commissioner, supra at 1285.

     Third, there is no credible evidence that the amount of the

payments plus the other property awarded to Faye pursuant to the

Stipulation and Final Judgment equals approximately one-half of

the property accumulated by the parties during marriage.    In

addition, given the manner in which the payments in issue were
                               - 32 -


structured, we have no way of knowing their eventual total

amount.

     Fourth, there was no other provision in the settlement that

provided for Faye's support other than minor provisions for the

period during which the marital home was to be sold.

     In Beard v. Commissioner, supra at 1285, we stated that a

failure to satisfy one or more of the factors articulated therein

may tend to indicate that the payments in question are more in

the nature of a support allowance.      In the instant case, four of

these factors strongly indicate that the payments were in the

nature of support.   Most important is the fact that John's

obligation to make payments to Faye is not absolute but, rather,

will terminate upon Faye's remarriage or death.     As a result, we

find that the payments in issue were made for Faye’s support in

discharge of John’s legal obligation arising out of the family or

marital relationship.13   Therefore, Faye must include in her

gross income the amounts received, and John and Sarah are

     13
      Our analysis regarding the remaining factors listed in
Beard v. Commissioner, 77 T.C. 1275, 1284-1285 (1981), also
supports our conclusion. Item (1) (whether the parties intended
the payments to effect a division of assets) favors John’s
position. In addition to John’s testimony on this point, we note
that Faye’s State court pleadings indicate her belief that the
payments should be commensurate with her needs and John’s ability
to pay. As to item (2), we believe that the evidence regarding
whether Faye relinquished any property rights in exchange for the
$2,500 per month payments is inconclusive. As to item (6), the
evidence indicates that Faye’s needs were a consideration in
determining the amount of the payments. (Faye had been married
22 years and had no other means of support.)
                               - 33 -


entitled to a deduction for the amounts paid.   Secs. 71(a),

215(a).


3. Additions to Tax


     Respondent determined that Faye is liable for an addition to

tax under section 6651(a)(1) for 1988 through 1993.   Section

6651(a)(1) imposes an addition to tax upon a taxpayer who fails

to file a timely Federal income tax return, unless the taxpayer

demonstrates that the failure to file is due to "reasonable cause

and not due to willful neglect".   Sec. 6651(a)(1); United States

v. Boyle, 469 U.S. 241, 245 (1985); Jackson v. Commissioner, 864

F.2d 1521, 1527 (10th Cir. 1989), affg. 86 T.C. 492 (1986).     Faye

did not file returns during the years in issue, and the payments

from John represented the only income she received during those

years.    On brief, respondent argues that Faye consistently took

the position in the Florida State courts that the amounts in

question constituted modifiable alimony payments, and, therefore,

she was required to report these amounts on Federal income tax

returns for these years.

     At trial, Faye's attorney in the Florida State court

proceedings testified that he advised Faye after several of the

rulings by the Florida State courts had been delivered that the

monthly payments she was receiving from John constituted

nontaxable property settlement payments.   Faye's attorney has
                              - 34 -


practiced law in Florida for over 47 years.    It is well settled

that reasonable reliance on the advice of an attorney may

constitute reasonable cause for failure to file a timely return.

United States v. Boyle, supra at 250; Estate of La Meres v.

Commissioner, 98 T.C. 294, 314 (1992).    We find that Faye's

reliance on her attorney's advice provided her with reasonable

cause for her failure to file income tax returns for the years in

issue.   As a result, we hold that Faye is not liable for the

additions to tax under section 6651(a).

     Respondent also determined that Faye is liable for an

addition to tax for failure to pay estimated tax under section

6654(a) for each of the years in issue.   Unless one of the

statutory exemptions applies, imposition of this addition to tax

is mandatory where prepayments of tax, either through withholding

or by making estimated quarterly tax payments during the course

of the year, do not equal the percentage of total liability

required under the statute.   Sec. 6654(a); Niedringhaus v.

Commissioner, 99 T.C. 202, 222 (1992).    This section has no

exception for reasonable cause and lack of willful neglect.

Estate of Ruben v. Commissioner, 33 T.C. 1071, 1072 (1960);

Kramer v. Commissioner, T.C. Memo. 1996-513.    Faye has not

demonstrated that any of the statutory exemptions apply.    Thus,

we sustain respondent's determination.
    - 35 -


          Decision will be entered for

petitioners in docket No. 6023-95.

          Decision will be entered

for respondent in docket No. 6280-95,

except that petitioner is not liable for

the additions to tax under sec.

6651(a)(1).
