                        T.C. Memo. 2000-214



                      UNITED STATES TAX COURT



    THOMAS CLARENCE AND CLAUDIA ELLEN MALONEY, Petitioners v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 20568-97.                       Filed July 17, 2000.



     Thomas Maloney and Claudia Ellen Maloney, pro sese.

     Felicia L. Branch, for respondent.



                        MEMORANDUM OPINION


     LARO, Judge:   The parties submitted this case to the Court

without trial.   See Rule 122.   Petitioners petitioned the Court

to redetermine respondent’s determination of a $14,832 deficiency

in their 1993 Federal income tax.   We must decide whether they

may deduct as alimony a $47,900 payment that Thomas Maloney
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(petitioner) made to his former wife.     We hold they may not.

Section references are to the Internal Revenue Code as applicable

to the subject year.   Rule references are to the Tax Court Rules

of Practice and Procedure.

                             Background

     All facts were either stipulated or found by the Court from

exhibits accompanying the stipulations of fact.     The stipulations

of fact and the accompanying exhibits are incorporated herein by

this reference, and the parties’ stipulations of fact are found

accordingly.   Petitioners are cash method taxpayers who resided

in La Grange Park, Illinois, when we filed their petition

commencing this action.   They filed with respondent a joint 1993

Federal income tax return on which they claimed a $47,900

deduction for alimony paid to petitioner’s former spouse, Linda

R. Maloney (Ms. Maloney).

     Ms. Maloney sued petitioner for divorce in a Virginia

circuit court, and, on March 21, 1991, the court finalized the

divorce by way of a decree of final divorce (Virginia decree).

The Virginia decree provides in relevant part as follows:

          THIS CAUSE came on this day to be heard upon the
     bill of complaint; upon process served upon the
     defendant; upon the answer and cross-bill of the
     defendant; upon the report of James A. Evans,
     Commissioner in Chancery, and the matter was argued by
     counsel.

          UPON CONSIDERATION WHEREOF, the Court finds from
     the report, independently of the admissions of the
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     parties in the pleadings or otherwise, the following
     facts: that the parties are sui juris and neither is
     incarcerated, that the defendant is a member of the
     Armed Forces of the United States and is represented by
     counsel; that the parties were lawfully married in New
     Melle, Missouri, on July 11, 1970; that there were two
     children born of this marriage * * * ; that the
     complainant was both domiciled in Virginia and an
     actual good faith resident of Virginia on the date that
     this suit was instituted and for more than six months
     next preceding said date; * * * that this Court has
     jurisdiction over the subject matter; that the venue is
     proper; that the written stipulation between the
     parties should be affirmed by the Court and
     incorporated in this decree by reference; and that the
     report of said Commissioner should be confirmed in its
     entirety.

          WHEREFORE the Court doth ADJUDGE, ORDER and DECREE
     that * * * the defendant be, and he is herewith,
     divorced from the complainant from the bonds of
     matrimony * * *

               *    *       *   *       *   *   *

          The Court doth further ADJUDGE, ORDER and DECREE
     that the complainant and the defendant both be denied
     spousal support.

     The referenced stipulation (the stipulation) provides in

relevant part as follows:

          21. The husband covenants and agrees that upon his
     retirement from the United States Navy, he will
     immediately take whatever steps are necessary to
     provide for the wife thirty-seven and 50/100 (37.50)
     percent of his retirement funds, in allotment form, to
     be paid to her on a monthly basis at the same time he
     receives his sixty-two and 50/100 (62.50) percent
     portion thereof. He further covenants to participate
     in the Survivor Benefit Plan in order for the wife to
     be entitled to her thirty-seven and 50/100 (37.50)
     percent share of his retirement until such time as she
     dies. The retirement payments to wife shall continue
     until her death notwithstanding the death of the
     husband.
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     Petitioner separated, but did not retire, from the United

States Navy on or around March 31, 1993, and he was paid a lump-

sum separation payment of $116,897.87 in lieu of his retirement

benefits from the United States Navy.    At or about that time, Ms.

Maloney petitioned a court in Illinois, the State in which

petitioner then resided,1 requesting that the court either (1)

enforce the Virginia decree by requiring petitioner to pay to her

37.5 percent of the lump-sum amount or (2) modify the Virginia

decree to state explicitly that she was entitled to 37.5 percent

of any amount that petitioner received in lieu of his retirement

benefits.    Later in that year, the Illinois court entered an

agreed order (Illinois order) providing in relevant part as

follows:

          1. (a) That * *    * [Ms. Maloney] shall keep as her
     sole property the sum   of $47,900.00 representing her
     share and division of   the net funds received by * * *
     [petitioner] from the   United States Navy. Such
     division and transfer   shall not be considered a taxable
     event.

               (b) * * * [Ms. Maloney] shall hold * * *
     [petitioner] free, harmless and indemnified against any
     state or federal income taxes due and owing in
     connection with receipt by * * * [Ms. Maloney] of the
     aforesaid $47,900.00.

               (c) * * * [petitioner] shall keep as his sole
     property the sum of $47,861.03 plus interest
     representing his share and division of the net funds
     received from the United States Navy.



     1
         Ms. Maloney resided in Florida at that time.
                               - 5 -


               (d) * * * [petitioner] shall hold * * * [Ms.
     Maloney] free, harmless and indemnified against any
     state or federal taxes due and owing in connection with
     the gross amount paid by the United States Navy to * *
     * [petitioner] less the sum of $47,900.00 which is the
     responsibility of * * * [Ms. Maloney].

     Petitioner paid Ms. Maloney the $47,900 in 1993.

                            Discussion

     We must determine whether petitioners may deduct the $47,900

payment as alimony.2   Respondent determined they could not.

Petitioners must prove respondent’s determination wrong in order

to prevail.   See Rule 142(a); Welch v. Helvering, 290 U.S. 111,

115 (1933); see also Preston v. Commissioner, T.C. Memo. 1999-49,

affd. in part, revd. in part and remanded 209 F.3d 1281 (11th

Cir. 2000).

     An individual may generally deduct a payment made during the

taxable year to a former spouse to the extent it is alimony that

is includable in the former spouse’s gross income.     See sec.

215(a) and (b).   A payment is alimony that is includable in a

former spouse’s gross income when:     (1) The payment is made in

cash, (2) the payment is received by (or on behalf of) the former

spouse under a divorce or separation instrument, (3) the divorce

or separation instrument does not designate that the payment is

not to be treated as alimony, (4) the former spouses reside in


     2
       Petitioners do not dispute that this payment is includable
in their gross income, relying solely on their position that it
was paid to Ms. Maloney and is deductible as alimony.
                               - 6 -


separate households at the time the payment is made, (5) the

former spouses do not file a joint return, and (6) the liability

for payment does not continue for any period after the former

spouse’s death.   See sec. 71(b)(1), (e).    Each of these

requirements must be met before a payor may deduct a payment as

alimony.   The parties dispute only two of these requirements;

namely, the third and sixth requirements set forth above.

     We begin our analysis with the third requirement under which

a payment is not treated as alimony if the divorce or separation

instrument designates that the payment is not includable in the

recipient’s income under section 71 or deductible by the payor

under section 215.   See sec. 71(b)(1)(B).    The instrument must

contain a clear and explicit designation to that effect although

it need not refer expressly to section 71 or section 215.       See

Estate of Goldman v. Commissioner, 112 T.C. 317, 323-324 (1999);

see also Richardson v. Commissioner, 125 F.3d 551, 556 (7th Cir.

1997), affg. T.C. Memo. 1995-554.

     Here, we construe the Virginia decree and the Illinois order

as designating the payment in question as nonalimony.     The

Virginia decree provides explicitly that petitioner and Ms.

Maloney shall “both be denied spousal support.”     The Illinois

order provides explicitly that petitioner’s transfer of the

$47,900 to Ms. Maloney “shall not be considered a taxable event.”

The Virginia decree and the Illinois order, therefore, designate
                               - 7 -


that the $47,900 payment is not alimony and instead represents a

nontaxable division of marital assets.

     We hold that petitioners may not deduct the $47,900 payment

as alimony.   We have considered all arguments for a contrary

holding and find that it is unnecessary to reach them or that

they are without merit.

                                            Decision will be entered

                                       for respondent.
