                         T.C. Memo. 2000-185



                       UNITED STATES TAX COURT



                VIRGINIA M. MARTEN, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*

           DAVID E. AND DONNA P. LANE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent


     Docket Nos. 3401-97, 16223-97.              Filed June 26, 2000.


     Woodford G. Rowland, for petitioner in docket No. 3401-97.

     John E. Cassinat, for petitioners in docket No. 16223-97.

     Christian A. Speck, for respondent.


                 SUPPLEMENTAL MEMORANDUM OPINION

     VASQUEZ, Judge:    This case is before the Court on Virginia

M. Marten’s (Ms. Marten) motion for further reconsideration




     *This Supplemental Memorandum Opinion supplements Marten v.
Commissioner, T.C. Memo. 1999-340.
                                 - 2 -

pursuant to Rule 161.1

       We incorporate herein by this reference the facts found in

our prior opinion, Marten v. Commissioner, T.C. Memo. 1999-340

(Marten I), and we reiterate the pertinent facts and find

additional facts as necessary.

       In 1953, David E. Lane (Mr. Lane) and Ms. Marten married.

During their marriage, they had four children.       Their youngest

child, Niklas, nearly drowned in an accident and became a

quadriplegic at age 4.    On or about January 16, 1979, Mr. Lane

and Ms. Marten legally separated.

       On September 1, 1982, Mr. Lane purchased a $750,000 life

insurance policy on his own life (the policy).       The policy was a

whole life policy that began accumulating a cash surrender value

in the 16th year.    Ms. Marten was the owner and irrevocable

beneficiary of the policy, and it was immediately assignable by

her.

       On March 20, 1984, the Sacramento County Superior Court (the

superior court) dissolved the marriage of Mr. Lane and Ms.

Marten.    In an order issued by the superior court (the support

decree), among other things, Mr. Lane was ordered to continue

paying the premiums on the policy.       On January 27, 1987, the



       1
        Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
                               - 3 -

superior court issued a modified decree.    The modified decree

required Mr. Lane to continue paying the premiums on the policy

as directed in the support decree.

     On April 26, 1995, Mr. Lane filed a motion to modify the

modified decree.   In a declaration attached to the motion to

modify, Mr. Lane asked that he be relieved of the obligation to

pay the premiums on the policy.   Mr. Lane claimed that the policy

was originally intended to pay for Niklas’ health care if Mr.

Lane were to predecease Niklas.   Mr. Lane claimed that Niklas’

care had been covered by Medicare and MedCal since 1992;

therefore, the policy was no longer needed.

     On June 19, 1995, Niklas died.    On December 28, 1995, the

superior court held a hearing on the motion to modify.    On

January 4, 1996, the superior court issued a Statement of

Intended Decision (the Intended Decision).    In the Intended

Decision, the superior court stated:    “the purpose of the

insurance was to provide for Niklas.”    The superior court,

acknowledging Niklas’ death, relieved Mr. Lane of his obligation

to pay the premiums on the policy.     On December 26, 1996, the

superior court issued a Judgment after Trial confirming the

Intended Decision.

     On October 12, 1999, this Court issued its Memorandum

Findings of Fact and Opinion in Marten I, which concluded that

premiums paid by Mr. Lane in 1993 and 1994 on the policy
                               - 4 -

constituted alimony includable in Ms. Marten’s income pursuant to

section 71(a)(1), prior to amendment by the Deficit Reduction Act

of 1984 (DEFRA), Pub. L. 98-369, sec. 422(a), 98 Stat. 494, 795

(pre-DEFRA section 71).

     On November 5, 1999, Ms. Marten filed a motion for

reconsideration of our opinion.   On April 20, 2000, we granted

the motion for reconsideration to consider whether we had erred

in applying pre-DEFRA section 71 as opposed to section 71, after

amendment by DEFRA (post-DEFRA section 71).   We held that we were

correct in applying pre-DEFRA section 71 and upheld our decision

in Marten I.

     On May 19, 2000, Ms. Marten filed a motion for further

reconsideration.   In the motion for further reconsideration, Ms.

Marten now argues that if pre-DEFRA section 71 applies, she

should still prevail based on our holding in Wright v.

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

1976).   Ms. Marten also reiterates her prior argument that Mr.

Lane should be judicially estopped from arguing that the premium

payments were not for Niklas’ support.    On June 7, 2000, Mr. Lane

and respondent filed responses thereto.

     Reconsideration under Rule 161 permits us to correct

manifest errors of law or fact, or to allow newly discovered

evidence to be introduced that could not have been introduced

before the filing of an opinion, even if the moving party had
                                - 5 -

exercised due diligence.   See Rothwell Cotton Co. v. Rosenthal &

Co., 827 F.2d 246, 251 (7th Cir. 1987); see also Traum v.

Commissioner, 237 F.2d 277, 281 (7th Cir. 1956), affg. T.C. Memo.

1955-127.    The Court will not grant a motion to reconsider unless

the party seeking reconsideration shows unusual circumstances or

substantial error.   See Alexander v. Commissioner, 95 T.C. 467,

469 (1990); Estate of Halas v. Commissioner, 94 T.C. 570, 574

(1990); Vaughn v. Commissioner, 87 T.C. 164, 166-167 (1986);

Estate of Bailly v. Commissioner, 81 T.C. 949, 951 (1983); Haft

Trust v. Commissioner, 62 T.C. 145, 147 (1974), affd. on this

issue 510 F.2d 43, 45 n.1 (1st Cir. 1975).

     From a review of the record and legal authority, we are

still convinced that our opinion in Marten I was decided

correctly.   For sake of completeness, however, we address our

decision in Wright v. Commissioner, supra, and distinguish it.

Further, we address Ms. Marten’s judicial estoppel argument and

conclude that this is not a proper case for the application of

the doctrine.

     Pre-DEFRA section 71 includes in the gross income of a

divorced wife (1) periodic payments (2) received by her (3) in

discharge of the husband’s legal obligation based on the martial

or family relationship (4) incurred under a divorce decree or

settlement agreement incident to such decree.   See Brodersen v.

Commissioner, 57 T.C. 412, 415-416 (1971).   In Marten I, we held
                               - 6 -

that the premium payments were periodic payments in discharge of

Mr. Lane’s legal obligation incurred under the support and

modified decrees.   We did not specifically address whether Ms.

Marten had “received” the payments within the meaning of pre-

DEFRA section 71.   Ms. Marten now argues that under Wright v.

Commissioner, supra, she never actually or constructively

received the payments, and the payments are not includable in her

gross income as alimony.

     Generally, it is not a requirement that the wife actually

receive the payments for the amount to be taxable income to her.

See Christiansen v. Commissioner, 60 T.C. 456 (1973).   It is

however necessary that the payments confer on the wife a

presently ascertainable economic benefit so as to deem the wife

in constructive receipt of the premium payments.   See Cosman v.

United States, 194 Ct. Cl. 656, 440 F.2d 1017 (1971); Mandel v.

Commissioner, 229 F.2d 382 (7th Cir. 1956), affg. 23 T.C. 81

(1954); Emmons v. Commissioner, 36 T.C. 728 (1961), affd. 311

F.2d 223 (6th Cir. 1962).

     In pre-DEFRA section 71 cases, generally, we have held that

the payee spouse must include in gross income premium payments

paid by his/her ex-spouse on a life insurance policy where the

payee spouse is named owner and irrevocable beneficiary of the

policy.   See Hyde v. Commissioner, 36 T.C. 507 (1961), affd. 301

F.2d 279 (2d Cir. 1962); Stewart v. Commissioner, 9 T.C. 195
                               - 7 -

(1947); Ellis v. Commissioner, T.C. Memo. 1973-152.     However, in

cases where the policy is pure term life insurance, we have held

that the benefits conferred on the payee spouse through the

premium payments were too unascertainable to be taxable to the

payee spouse.2   See Wright v. Commissioner, supra; Brodersen v.

Commissioner, supra.

     In Wright v. Commissioner, supra at 385, the husband was

required pursuant to the divorce decree to maintain a 10-year

renewable term life insurance policy on his own life naming his

wife the owner and beneficiary of the policy.    Under the decree,

the husband was to maintain the policy until his wife remarried,

reached age 65, or died.   See id. at 383-384.

     In that case, we held that in determining whether the wife

constructively received the premiums paid by her ex-husband “it

is necessary to examine what obligations are due her under the

policy, as well as whether she is the owner or assignee and

irrevocable beneficiary of the policy.”   Id. at 397.    We held

that the wife under the term life insurance policy had such

limited rights that she could not be said to have constructively

received an economic benefit from the premium payments.    See id.

at 398.   This Court focused on the contingent nature of the



     2
        We note that under post-DEFRA section 71 premium payments
on both whole and term life insurance policies are includable in
the payee spouse’s gross income. See sec. 1.71-1T(b), A-6,
Temporary Income Tax Regs., 49 Fed. Reg. 34455 (Aug. 31, 1984).
                                - 8 -

wife’s rights in the policy.   She lost her rights to the policy

proceeds if she predeceased her husband, attained the age of 65,

or remarried.   See id.   We stated that the mere peace of mind

afforded the wife by the pure term life insurance did not

constitute a taxable economic gain.     See id.

     The instant case is distinguishable from Wright.      Wright

concerned a pure term life insurance policy with additional

restrictions placed on the wife’s rights to the policy proceeds.

See Wright v. Commissioner, supra at 398.    In the present case,

the policy is a whole life insurance policy.      The policy is

captioned “Increasing Premium Whole Life Non-Participating–-No

Annual Dividends Policy”.   The policy began to build up a

substantial cash surrender value in the 16th year, and the values

accruing each year from the issuance of the policy were

guaranteed as long as the premiums were paid.      The policy was

immediately assignable by the wife, and she was entitled to the

policy proceeds even if she remarried or attained the age of 65.

She was also the owner and irrevocable beneficiary of the policy.

This is not like the situation in Wright where it was more

doubtful whether the wife would ever receive an economic benefit

from being the owner of the policy.3    See id.   Here, looking at

the policy in toto, we conclude the wife received presently


     3
        In fact, at the time of trial, the policy in question
here was in its 17th year and had a cash surrender value of
$10,500.
                               - 9 -

ascertainable economic benefits under the policy in the years at

issue; therefore, she constructively received the premium

payments.

     Ms. Marten also argues in her motion for further

reconsideration that Mr. Lane should be judicially estopped from

denying that the premium payments were intended for Niklas’

health care.   Ms. Marten claims that Mr. Lane’s present position

that the policy was for her support is inconsistent with his

prior position before the superior court (which that court

accepted) that the policy was to provide for Niklas’ care.

     The Tax Court, as well as most Federal Courts of Appeals,

have accepted the doctrine of judicial estoppel.4   See Helfand v.

Gerson, 105 F.3d 530 (9th Cir. 1997); United States ex rel. Am.

Bank v. C.I.T. Constr., Inc., 944 F.2d 253, 257-259 (5th Cir.

1991); McKinnon v. Blue Cross & Blue Shield, 935 F.2d 1187, 1192-

1193 (11th Cir. 1991); Allen v. Zurich Ins. Co., 667 F.2d 1162,

1166-1168 (4th Cir. 1982); Huddleston v. Commissioner, 100 T.C.

17, 27-29 (1993).   But see Chrysler Credit Corp. v. Country

Chrysler, Inc., 928 F.2d 1509, 1520 n.10 (10th Cir. 1991).

Judicial estoppel is an equitable doctrine which operates to

“prevent parties from taking positions that are inconsistent with


     4
        We note that the Court of Appeals for the Ninth Circuit,
the court to which this case is appealable, has adopted the
doctrine of judicial estoppel. See Helfand v. Gerson, 105 F.3d
530 (9th Cir. 1997); Golsen v. Commissioner, 54 T.C. 742 (1970),
affd. 445 F.2d 985 (10th Cir. 1971).
                               - 10 -

those previously asserted by the parties and accepted by courts

and that would result in inappropriate and prejudicial

consequences to the courts.”    Huddleston v. Commissioner, supra

at 26.   The doctrine focuses on the relationship between a party

and the courts, and it is intended to protect the latter.    See In

re Cassidy, 892 F.2d 637, 641 (7th Cir. 1990).    Whether or not to

apply the doctrine is within the court’s sound discretion.      It

should 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.”    Daugherty v. Commissioner, T.C. Memo. 1997-

349 (citing Teledyne Indus., Inc. v. NLRB, 911 F.2d 1214, 1218

(6th Cir. 1990)).

     We refuse to apply the doctrine of judicial estoppel in the

present case.   Assuming arguendo that Mr. Lane’s position in this

proceeding (that the policy was for Ms. Marten’s support) is

inconsistent with the position he took before the superior court

(that the policy was for Niklas’ care), there is no resulting

inappropriate or prejudicial consequence to this Court by hearing

his argument.   We stated in Marten I that “it appears that at

least part of the premium payments was to ensure Niklas’

continued care.”    We nonetheless concluded that the premium

payments were alimony pursuant to pre-DEFRA section 71 and Lester

v. Commissioner, 366 U.S. 299 (1961).    In Lester v. Commissioner,
                              - 11 -

supra at 303, the U.S. Supreme Court held that in order for a

divorce decree to “fix” an amount as child support under pre-

DEFRA section 71, the decree must expressly specify or fix the

amount of each payment which is for child support.    The Court

held that absent an express allocation, the entire payment is

alimony and taxable to the wife.   See Lester v. Commissioner,

supra.   Since there was no express allocation in the support

decree or modified decree in the present case, the payments would

be alimony even if intended to provide solely for Niklas’ care.

Therefore, there are no inappropriate or prejudicial consequences

to this Court by allowing Mr. Lane to advance his argument.

     We deny Ms. Marten’s motion for further reconsideration.

                                         An appropriate order

                                    will be issued.
