                  T.C. Summary Opinion 2005-38



                     UNITED STATES TAX COURT



                KENNETH E. GILMORE, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 17649-03S.            Filed March 31, 2005.


     Kenneth E. Gilmore, pro se.

     Daniel N. Price, for respondent.



     GOLDBERG, 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.    The decision to be

entered is not reviewable by any other court, and this opinion

should not be cited as authority.   Unless otherwise indicated,

subsequent 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.
                              - 2 -

     Respondent determined a deficiency in petitioner’s Federal

income tax and additions to tax as follows:

                                  Additions to Tax
     Year   Deficiency   Sec. 6651(a)(1)   Sec. 6651(a)(2)

     1999    $12,185        $2,741.63         $1,584.05

     After concessions by the parties, the issue remaining for

decision is whether petitioner may deduct, as alimony under

section 215, military retirement pension payments made to his

former wife in the amount of $21,024.1

                           Background

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

The stipulation of facts, the stipulation of settled issues, and

the attached exhibits are incorporated herein by this reference.

At the time of filing his petition, petitioner resided in

Pipecreek, Texas.




     1
      In accordance with this Court’s opinion in Gilmore v.
Commissioner, T.C. Summary Opinion 2004-50, respondent concedes
that petitioner is entitled to deduct $5,424 under sec. 215 as
spousal maintenance in tax year 1999. However, the remaining
$15,600 is still at issue. Pursuant to sec. 7463(b), a summary
opinion cannot be relied upon as precedent for other cases.
However, this statutory prohibition does not necessarily preclude
application of the doctrines of res judicata and collateral
estoppel. Because the taxpayer and issue presented in the
instant proceeding are identical to the taxpayer and issue
decided in the prior proceeding, the present reliance and
reference to the previous summary opinion are permitted.
                               - 3 -

     This issue, pertaining to petitioner’s taxable year 1996,

has already been before this Court.2   Petitioner is a retired

United States Air Force military officer.    Petitioner and Mary

Alice Warriner (Ms. Warriner) married on September 10, 1981, and

separated in September 1993.   The District Court, El Paso County,

State of Colorado (Colorado court) entered a Temporary Order on

October 26, 1995.   The same court entered Final Orders and a

Decree of Dissolution on February 1, 1996.    The Final Orders were

a part of, and incorporated into, the Decree of Dissolution.

     The Final Orders state, in pertinent part:

     4. The parties had accumulated several pieces of real
     property in Colorado during this marriage. Over the course
     of the last years of the marriage, * * * [petitioner] wasted
     the marital estate by failing to pay mortgages and bills
     when due from the proceeds of rent checks, allowing several
     foreclosures, not responding to creditor summons, converting
     assets into investments outside the marital estate, and then
     not informing * * * [Ms. Warriner] of these actions until
     default or judgment entered. The Court finds that the total
     loss amounted to $454,150.00 in assets, costs, and judgments
     accumulated over the last years of the marriage.

     5. The real property presently titled in the name of * * *
     [Ms. Warriner], acquired during the marriage has a net asset
     value of $111,000.

     6. The total net loss of marital assets is therefore * * *
     $343,150.00 * * * [Ms. Warriner] is entitled to recover one
     half of this amount, or $171,575.00 as a property settlement
     from * * * [petitioner].

     7. There * * * [exists] a military retirement which is a
     part of the marital estate and is marital property subject
     to equitable division.



     2
      See id.
                         - 4 -

8. [Petitioner’s] ability to pay on debt, satisfy financial
obligations, or otherwise act in a * * * [financially]
responsible manner is problematic and highly unlikely in
view of past history.

          *    *    *    *       *   *   *

17. [Petitioner] is a retired military officer with 23
years total commissioned active duty. His military
retirement is an asset of the marital estate. * * * [Ms.
Warriner] has no retirement fund. As a consequence of the
waste of marital assets, specifically the loss of
accumulated investment property and the marital home, and
considering the unlikely cooperation of * * * [petitioner]
to repay * * * [Ms. Warriner] her losses, and the overall
division of property in this case, this Court therefore
makes an equitable division of the military retirement as
follows:

     a. Based upon the current amounts of annual and
monthly military retirement pay, and for the next 15 years,
* * * [Ms. Warriner] shall receive a total 63.31% of the
current military retirement as her equitable division of the
marital property. At present known monthly rates, this
amount equals $2,065.17 per month. This amount includes the
13.04% division of the pension ordered in Temporary Orders;
this amount * * * [continuos] indefinitely. The * * *
[additional] 50.27% represents the dollar amount of property
settlement owed [to] * * * [Ms. Warriner] by * * *
[petitioner], amortized over 15 years at the statutory rate
of 8% interest, an amount she is entitled by law.

     b. Payments should be made monthly directly to * * *
[Ms. Warriner]. The Court orders a Wage Assignment or
Garnishment or any other instrument required by the
Cleveland Military Pay Center to execute this Order.

     c. At the termination of 15 years of payment at the
above noted rate, or 180 monthly payments, the percent of
military retirement awarded to * * * [Ms. Warriner] changes
to 13.04%.

          *    *    *    *       *   *   *

     f. If possible and pursuant to the rules and laws
governing the Cleveland Military Pay Center, this division
of military retirement is Ordered to be apportioned into a
separate account on behalf of * * * [Ms. Warriner], with
                               - 5 -

     separate tax withholding, statements, and correspondence
     sent to her independent of any third party or the Court.

                *    *    *    *       *   *   *

     20.   Neither party is awarded maintenance.

     Subsequent to the Colorado court’s entering the Final

Orders, Ms. Warriner’s counsel discovered that direct payments to

Ms. Warriner from petitioner’s military retirement pension, as

directed by paragraph 17b of the Final Orders, were not permitted

pursuant to the Uniformed Services Former Spouses’ Protection Act

(USFSPA), 10 U.S.C. sec. 1408 (2000).3

     Ms. Warriner submitted a motion to amend Final Orders to the

Colorado court, and an Amended Order (Amended Order), issued on

May 9, 1996, was incorporated into and amended the Decree of

Dissolution and Final Orders entered on February 1, 1996.    The

Amended Order provided in pertinent part:

     2. [Ms. Warriner] is entitled to a [sic] equitable division
     of the marital estate yet there are no known additional
     assets in possession of * * * [petitioner] that are readily
     discoverable and the Court finds * * * [petitioner] has
     failed to comply with any disclosure requirements.

     THEREFORE THIS COURT ORDERS:

     3. That * * * [Ms. Warriner] is entitled to an award of
     spousal maintenance as follows:

          a. Permanent spousal maintenance is Ordered paid by *
     * * [petitioner] to * * * [Ms. Warriner] in the amount of


     3
      USFSPA does not allow for direct payments to Ms. Warriner
because she and petitioner were not married for 10 years or more
during which petitioner performed at least 10 years of military
service. Tit. 10 U.S.C. sec. 1408(d)(2) (2000).
                              - 6 -

     $452.00 per month. This amount continues regardless of the
     future marital status of * * * [Ms. Warriner]. * * * [Ms.
     Warriner] is further entitled to collect as part of this
     spousal maintenance award that statutory interest of 8% per
     annum on unpaid installments of this amount previously
     Ordered and not paid by [petitioner].

          b. Additional spousal maintenance is ordered in the
     amount of $1,300 per month until a total amount of
     $171,575.00, plus statutory interest (per annum) on any
     unpaid balance accruing from 1 February 1996 is paid in
     full. The amount Ordered in this subparagraph shall not be
     effected [sic] by marriage or death of either party. * * *
     [Petitioner] may pay this amount in other monthly payments
     or in full with a lump sum payment to include all interest
     accrued from 1 February, 1996 to date of final payment. At
     such time the principal of $171,575.00 is paid in full, with
     accrued interest, the Order for spousal maintenance payments
     for this subparagraph will be satisfied and payments will
     cease.

          c. Total spousal maintenance to be paid monthly by
     this order is $1,752 per month pursuant to the terms noted
     above.

     Pursuant to the Amended Order and Social Security Act of

1974, Pub. L. 93-647, sec. 459, 88 Stat. 2357, amended by the

Personal Responsibility and Work Opportunity Reconciliation Act

of 1996, Pub. L. 104-193, sec. 362, 110 Stat. 2242, codified at

42 U.S.C. sec. 659 (2000),4 the Defense Finance and Accounting


     4
      The United States is required to withhold moneys due from
the United States to any individual, including members of the
Armed Forces, to enforce the legal obligations of any individual
to provide alimony or child support. Social Security Act of
1974, Pub. L. 93-647, sec. 459, 88 Stat. 2357, amended by the
Personal Responsibility and Work Opportunity Reconciliation Act
of 1996, Pub. L. 104-193, sec. 362, 110 Stat. 2242, codified at
42 U.S.C. sec. 659 (2000). Pursuant to 42 U.S.C. sec.
659(i)(3)(B)(ii), alimony does not include “any payment or
transfer of property or its value by an individual to the spouse
or former spouse of the individual in compliance with any
                                                   (continued...)
                                 - 7 -

Service, Cleveland Center, Garnishment Operations, paid Ms.

Warriner $1,752 per month for the entire taxable year 1999 of

petitioner’s military retirement pension, the total being $21,024

as required by paragraph 3c. of the Amended Order.

     Petitioner entered into Chapter 13 Bankruptcy proceedings

during 2001.   Petitioner eventually converted such proceedings

into Chapter 7 Bankruptcy proceedings.   The United States

Bankruptcy Court for the District of Colorado (Bankruptcy court)

granted petitioner a discharge under section 727 of title 11,

United States Code (the Bankruptcy Code).   Petitioner’s payments

to Ms. Warriner under paragraph 3c. (above) were not discharged

in the bankruptcy proceedings.

     Petitioner filed his 1999 Federal income tax return on June

28, 2002.   In that return, petitioner reported $42,720 of income

and claimed a deduction in the amount of $21,024 as alimony

payments to Ms. Warriner.   Respondent disallowed the deduction

for alimony payments.   However, in accordance with this Court’s

opinion in Gilmore v. Commissioner, T.C. Summary Opinion 2004-50,

respondent later conceded that petitioner is entitled to deduct

$5,424 under section 215 as spousal maintenance in tax year 1999.

The remaining $15,600 is still at issue.



     4
      (...continued)
community property settlement, equitable distribution of
property, or other division of property between spouses or former
spouses.”
                               - 8 -

                            Discussion5

     The issue before the Court is the proper characterization of

the $15,600 of petitioner’s military retirement pension paid to

Ms. Warriner during tax year 1999.6    Petitioner argues these

payments constitute deductible alimony, and respondent claims

these payments constitute a division of marital property.

     Petitioner maintains the payments represent alimony because

the Bankruptcy court and the Defense Finance and Accounting

Service classified the payments as such.    Respondent maintains

that the payments represent a property settlement, and, as such,

the payments do not give rise to an alimony deduction.

Respondent argues that a property settlement was intended by the

divorce court.   However, the intended purpose behind the payments

is not controlling.   Nelson v. Commissioner, T.C. Memo. 1998-268.

Further, “labels attached to payments mandated by a decree of

divorce or marriage settlement agreement are not controlling.”

Benedict v. Commissioner, 82 T.C. 573, 577 (1984).    Finally, it

is well settled that State courts by their decisions cannot


     5
      We decide the issue in this case without regard to the
burden of proof. Accordingly, we need not decide whether the
general rule of sec. 7491(a)(1) is applicable in this case. See
Higbee v. Commissioner, 116 T.C. 438 (2001).
     6
      As stated previously, this issue, pertaining to
petitioner’s taxable year 1996, has already been before this
Court. Therefore, it appears that the doctrine of collateral
estoppel might apply to this case; however, respondent has not
raised the affirmative defense and as such is not at issue in the
present case. See Rule 39.
                                - 9 -

determine issues of Federal tax law.    See Commissioner v. Tower,

327 U.S. 280 (1946); Kenfield v. United States, 783 F.2d 966

(10th Cir. 1986); Neal v. Commissioner, T.C. Memo. 1999-97; Nieto

v. Commissioner, T.C. Memo. 1992-296.

     A payment must satisfy all the requirements of section 71(b)

to qualify as alimony.    See Jaffe v. Commissioner, T.C. Memo.

1999-196.    Accordingly, we look to the plain language of the

statute to decide the characterization of the $15,600 of

petitioner’s military retirement pension paid to Ms. Warriner.

     Alimony or separate maintenance payments generally are

deductible by the payor spouse.    Sec. 215.   Alimony or separate

maintenance payments are defined by section 71(b), which provides

in part:

            SEC. 71(b). Alimony or Separate Maintenance
            Payments Defined.--For purposes of this section–-

                 (1) In general.--The term “alimony or
            separate maintenance payment” means 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 spouse are not members
                               - 10 -

                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.

     It is clear the requirements of subparagraphs (A) and (C) of

section 71(b) are satisfied.   Ms. Warriner received the cash

payments pursuant to the Amended Order and Decree of Dissolution

issued by the Colorado court, and she and petitioner were not

members of the same household.

     We now consider section 71(b)(1)(B), which provides that a

payment will not be alimony if the divorce or separation

instrument designates the payment as not includable in gross

income and not allowable as an alimony deduction.   The

designation in the divorce or separation instrument “need not

specifically refer to sections 71 and 215".    Estate of Goldman v.

Commissioner, 112 T.C. 317, 323 (1999), affd. without published

opinion 242 F.3d 390 (10th Cir. 2000).   However, the “instrument

must contain a clear, explicit and express direction” that the

payments are not to be treated as alimony.    Richardson v.

Commissioner, 125 F.3d 551, 556 (7th Cir. 1997), affg. T.C. Memo.

1995-554.   The Amended Order does not contain such language, and

section 71(b)(1)(B) is satisfied.
                              - 11 -

     We now consider section 71(b)(1)(D).   To qualify as alimony,

petitioner’s obligation must terminate at the death of Ms.

Warriner.   In order to determine whether an obligation exists,

the terms of the applicable instrument must be considered, or if

the instrument is silent on the matter, we look to State law.

Kean v. Commissioner, T.C. Memo. 2003-163, supplemented by T.C.

Memo. 2003-275.

     Paragraphs 3a. and 3b. of the Amended Order provide for two

categories of payments to Ms. Warriner.   Respondent concedes that

payments made under paragraph 3a. are deductible.   Therefore, we

discuss only the payments made under paragraph 3b. of the Amended

Order.

     Paragraph 3b. of the Amended Order states that the

“Additional spousal maintenance [which] is ordered in the amount

of $1,300 per month until a total amount of $171,575.00 * * * is

paid in full.   The amount Ordered in this subparagraph shall not

be effected [sic] by marriage or death of either party.”     Under

the analysis of Kean, the Amended Order specifically provides

that the payments would continue after the death of Ms. Warriner,

thus disqualifying the payment under section 71(b)(1)(D).7

Petitioner is not entitled to a deduction under section 215 for


     7
      In general, payments to a former spouse terminate upon the
death of the former spouse. See Colo. Rev. Stat. sec. 14-10-
122(2) (2003). However, if agreed in writing or expressly
provided in the decree, payments to a former spouse may continue
after his or her death under Colorado law. See id.
                             - 12 -

the payments made under paragraph 3b. of the Amended Order.

     Reviewed and adopted as the report of the Small Tax Case

Division.


                                   Decision will be entered

                              under Rule 155.
