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T.C. Memo. 1999-49

UNITED STATES TAX COURT

FOREST R. PRESTON, Petitioner v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No.

19597-97.

Filed February 23, 1999.

Robert R. Lomax, for petitioner.

Eric B. Jorgensen, for respondent.

MEMORANDUM OPINION

LARO, Judge:

without trial.

The parties submitted this case to the Court

See Rule 122.

Petitioner petitioned the Court to

redetermine deficiencies in his 1992, 1993, and 1994 Federal

income tax and an accuracy-related penalty for 1994 under section

6662(a).

Following concessions, the only issue left to decide is

- 2 whether petitioner may deduct $47,482, $40,089, and $24,340 of

alimony1 for the respective years.

We hold that his alimony

deductions for the respective years are $1,878, $5,014, and zero.

Unless otherwise stated, section references are to the Internal

Revenue Code in effect for the subject years.

Rule references

are to the Tax Court Rules of Practice and Procedure.

Dollar

amounts are rounded to the nearest dollar.

Background

All facts were either stipulated or found by the Court from

exhibits accompanying the stipulation of facts.

The stipulations

of fact and accompanying exhibits are incorporated herein by this

reference.

Petitioner is a cash method taxpayer who resided in

Hamilton, Georgia, when he petitioned the Court.

Petitioner claimed alimony deductions of $60,102, $34,946,

and $24,202 on his 1992, 1993, and 1994 Federal income tax

returns, respectively.

Respondent disallowed these deductions,

determining that the payments were not alimony.

Petitioner

concedes that some of the reported amounts did not constitute

alimony.

Petitioner argues that his alimony deductions for the

respective years are $47,482, $40,089, and $24,340.

Petitioner married Dianne Sowell (Ms. Sowell) in 1974, and

they had two children (collectively, the children) during their

marriage.

The older child, Ashley Denise Preston (Ashley), was

born October 19, 1976.

The younger child, Martin Barron Sowell

Preston (Barron), was born October 3, 1984.

For most of 1991,

We use the term "alimony" to include "separate maintenance

payments".

- 3 petitioner lived with his family in Columbus, Georgia, in a house

(the Columbus house) that he owned jointly with Ms. Sowell.

Petitioner moved out of the Columbus house in December 1991, and

he moved into a cabin that he owned in Harris County, Georgia.

In March 1992, Ms. Sowell petitioned the Superior Court of

Muscogee County, Georgia, for a divorce from petitioner.

One

month later, on April 3, 1992, the superior court issued a

temporary order nunc pro tunc to March 19, 1992.

The temporary

order stated:

Plaintiff [Ms. Sowell] shall have the temporary

custody of the two (2) minor children of the parties,

and the Defendant [petitioner] shall have the right to

visit said children and have said children visit with

him at all reasonable times and places.

Plaintiff shall have the temporary exclusive use

of the [Columbus] house and premises and all household

furniture and furnishings located therein * * * and the

Cadillac automobile in her possession. The Defendant

shall have the temporary exclusive use of all marital

property now in his possession and the property located

in Harris County, Georgia known as the house or cabin

in the backwater.

Defendant shall pay for the support of Plaintiff

and the two (2) minor children of the parties and the

following household and family expenses until further

Order of the Court:

(a) The mortgage payments, ad valorem taxes and

insurance on the * * * [Columbus house] * * *;

(b) All utility expenses at the * * * [Columbus

house], including electricity, water, garbage and

- 4 sewer, telephone, gas, pest control, cable television

and lawn care;

and oil, repairs, automobile tags, licenses and

insurance;

(d) The medical and dental expenses of Wife and

the children and prescription drug expenses;

(e) The children's school tuition, supplies and

activities;

(f) The cost of clothing for Wife and the children

* * *.

In addition to making the payments above

enumerated, Defendant shall pay to Plaintiff the sum of

ONE THOUSAND DOLLARS ($1,000) per month, commencing

April 1, 1992, with a payment of FIVE HUNDRED DOLLARS

($500.00), and the payment of an additional FIVE

HUNDRED DOLLARS ($500.00) on the 15th of April, 1992,

and continuing with like payments during each calendar

month thereafter until further Order of the Court; with

the provision, however, that Defendant may at his

option pay the monthly sum on the 1st day of each

calendar month rather than in two (2) installments; and

Defendant shall pay to Plaintiff immediately an amount

so that the total sum given to her for support of

herself and the children during the month of March,

1992 will equal the sum of ONE THOUSAND DOLLARS

($1,000).

On June 3, 1993, the superior court held petitioner in

contempt of the temporary order because he had failed to pay

certain bills covered by the order.

The court ordered him to pay

these bills and to pay $350 of attorney's fees at the rate of $50

per month commencing with June 1993.

On September 4, 1993, the superior court entered a final

judgment and decree (the final decree) granting Ms. Sowell a

divorce from petitioner.

part:

The final decree provided in relevant

- 5 FINAL JUDGMENT AND DECREE

* * * it is the judgement of the Court that a

total divorce be granted. * * * Each party is awarded

their personal property and other property which is in

their possession.

The Plaintiff is awarded permanent custody of the

two minor children of the parties * * *

Defendant shall pay to the Plaintiff the sum of

$800.00 per month per child as child support and

Defendant shall commence said payments of child support

on August 1, 1993, with a payment of $800.00 and an

equal payment of $800.00 on August 15, 1993 and said

payments shall continue on the 1st and 15th of each

calendar month until each child attains the age of 18,

marries, dies, becomes fully self-supportive or

otherwise emancipated, whichever event shall first

occur the child support shall terminate. * * *

The Plaintiff is awarded the * * * [Columbus

house], and the Plaintiff is to make payments on the

indebtedness secured by said real property and shall

hold the Defendant harmless therefrom for payments due

on said property.

The Defendant shall pay to the Plaintiff a lump

sum award of alimony total of $180,000.00 with

$120,000.00 payable at $1,000.00 per month for ten (10)

years, beginning on August 1, 1993, and then in five

(5) years, due on the 14th day of July, 1998, the

Defendant shall pay to the Plaintiff a lump sum of

$10,000.00 and then in ten (10) years, due on the 14th

day of July, 2003, the Defendant shall pay to the

Plaintiff $50,000.00. * * *

- 6 10.

The Defendant is ordered to pay and be responsible

for tuition at Brookstone School for the minor child,

Barron, for 1993-1994 school year.

11.

The Defendant shall pay the insurance for the

minor child, Ashley's, car until she reaches 18 years

of age.

13.

The Defendant is ordered to buy the Plaintiff a

car not to exceed $17,000.00 within the next ninety

(90) days. Defendant may finance said purchase and he

shall be responsible and make the payments as due.

14.

The Defendant shall pay the sum of $5,000.00 as

attorney fees to be divided among the law firms HARP &

JOHNSON, P.C. and GROGAN, JONES, RUMER & GUNBY, P.C.

for their legal representation of Plaintiff. Said sum

shall be payable at $200.00 per month for 25 months

beginning on August 1, 1993 until said sum is paid in

full.

16.

The Defendant shall maintain and pay the premiums

for major health, hospitalization and dental insurance

for the minor children for as long as he is obligated

to pay child support. The Defendant shall be

responsible for all medical expenses which are not

covered by insurance for the benefit of the minor

children. * * *

Pursuant to the temporary order, petitioner paid Ms. Sowell

monthly payments totaling $10,000 in 1992 and $7,000 in 1993.

Pursuant to the final decree, petitioner paid Ms. Sowell monthly

payments totaling $5,000 in 1993 and $12,000 in 1994.

Petitioner

- 7 claims an alimony deduction for the amount of these monthly

payments, and for other amounts that he paid or incurred during

the subject years for the benefit of Ms. Sowell and/or the

children.

Each amount that petitioner paid or incurred during

the subject years, and for which he claims an alimony deduction,

is listed below by year, payee, amount, and purpose.2

These

amounts are as follows:

1992

Payee

Amount

Ms. Sowell

$10,000

Ms. Sowell

2,232

Pacelli High

1,109

Southern Bell

783

Sears

375

Ms. Sowell

212

Ms. Sowell

350

CB&T

1,525

N. C. Pharmacy

447

Galaxie

210

Dr. Hudson

406

Telecable

514

Un. Cities Gas

470

Dr. Allison

443

Brookstone School 2,373

Dr. Helms

665

Associates

533

Georgia Power

2,125

Columbus Water

524

C. Wilson

Columbus Ledger

116

Ms. Sowell

166

R. Waters

385

Grasshopper

685

Ms. Sowell

666

Bob's Pool

1,408

Purpose

Monthly payments

Clothes for children

Ashley's tuition

Telephone--Columbus house

Pest control--Columbus house

Clothes for Ms. Sowell

Barron's school picture

Barron's tuition

Drug bill

Satellite T.V.--Columbus house

Children's physician

Cable T.V.--Columbus House

Gas Heat--Columbus House

Ms. Sowell's dentist

Barron's tuition/related exp.

Ms. Sowell's dentist

Satellite T.V.--Columbus house

Electric bill--Columbus house

Water bill--Columbus house

Children's piano activities

Newspaper--Columbus house

Activities for Barron

Tree removal--Columbus house

Lawn care--Columbus house

Miscellaneous expenses

Pool liner--Columbus house

Petitioner paid all these amounts, but for the $2,204 and

$566 amounts shown with Preston Oil for 1992 and 1993,

respectively. Ms. Sowell charged the $2,204 and $566 amounts to

petitioner's account at Preston Oil. Preston Oil is a

corporation owned and operated by petitioner.

- 8 J.P Lanier Co.

Ms. Sowell

CB&T

D.J. Ins.

Ms. Sowell

World Book

S. Chemical

Preston Oil

GAO Ins.

Ms. Sowell

548

136

130

200

10,000

428

340

468

200

100

2,204

187

3,133

600

47,482

Homeowner ins.--Columbus house

Children's dental bill

Ms. Sowell's medical bill

Barron's birthday party

Buy automobile for Ashley

Insurance--Ms. Sowell's car

Insurance--Ashley's car

Misc. activities of children

Encyclopedia for children

Pool chemicals--Columbus house

Ms. Sowell's car expenses

Ashley's car expenses

Ms. Sowell/children health ins

Children's Christmas

1993

Payee

Ms. Sowell

Harp & Johnson

Ms. Sowell

Barnett Bank

Lee Grogan

Hirsch, et al.

Brookstone

Ms. Sowell

Southern Bell

Sears

Ms. Sowell

Un. Cities Gas

Associates

Georgia Power

Columbus Water

N. C. Pharmacy

Dr. Allison

Telecable

S. Chemical

Dr. Aranas

Dr. Helms

Brookstone

Dr. Thomason

Gayfers

Dr. Phelts

Columbus Ledger

Dr. Hutchins

World Book

Amount

$7,000

1,150

5,000

669

400

900

4,838

1,191

510

148

788

599

2,492

478

209

142

746

403

319

1,312

423

139

378

857

Purpose

Monthly payments

Legal fees

Monthly payments

Buy automobile for Diane

Diane's attorney fees

Children's clothing allowance

Barron's tuition

Reimbursement

Telephone--Columbus house

Pest control--Columbus house

Ms. Sowell's bills

Children's activities

Gas Heat--Columbus House

Satellite T.V.--Columbus house

Electric bill--Columbus house

Water bill--Columbus house

Drug bill--Ms. Sowell

Drug bill

Ms. Sowell's dentist

Cable T.V.--Columbus House

Pool Chemicals--Columbus house

Children's doctor bill

Ms. Sowell's dentist

Barron's school related exp.

Children's dentist

Clothes for Barron

Ashley's doctor bill

Newspaper--Columbus house

Children's eye doctor bill

Encyclopedia for children

- 9 Telecom

Josten's

Ms. Sowell

Grasshopper

Pastoral Inst.

Prem Collections

Olan Mills

Ms. Sowell

D.J. Ins.

Dr. Chhokar

Dr. Hudson

Auto Owners Ins.

Fuller Auto

St. Fran. Hosp.

Radiology

Prof. College

Path Em Re

Columbus College

Muscogee County

Jeane Teaster

Ms. Sowell

GAO Ins.

Preston Oil

193

347

116

630

290

296

454

164

585

437

110

464

701

468

2,222

566

152

40,089

Telephone--Columbus house

Ring for Ashley

Tire for Ashley's car

Lawn care--Columbus house

Counseling for Ashley

Ashley's medical bill

Children's pictures

School supplies

Children's activities

Ms. Sowell's automobile bill

Insurance--Columbus house

Ms. Sowell's medical bill

Children's doctor bill

Insurance on Ms. Sowell's car

Ms. Sowell's car repair

Ashley's medical bill

Ms. Sowell's medical bill

Ashley's doctor bill

Ms. Sowell's medical bill

Ms. Sowell's bill

Children's camp and karate

Tax on Ashley's car

Ashley's tutor bill

Misc. expenses of children

Ms. Sowell/children health ins.

Ms. Sowell's car expenses

Ashley's car expenses

1994

Payee

Amount

Dr. Helms

$1,647

Ms. Sowell

12,000

Barnett Bank

2,692

Harp & Johnson

1,100

Lee Grogan

1,100

Lane's

128

South Trust Bank

755

Brookstone

2,588

Gen. Amer. Ins.

2,048

Auto Owner Ins.

282

24,340

Purpose

Ms. Sowell's dentist

Monthly payments

Purchase of car for Ms. Sowell

Ms. Sowell's legal fees

Portrait of Barron

Purchase of car for Ms. Sowell

Barron's tuition

Pay loan on Ms. Sowell's

insurance policy

Ashley's automobile insurance

- 10 Discussion

We must determine whether petitioner may deduct any of the

disputed payments as alimony.

could not.

Respondent determined that he

Petitioner bears the burden of proving respondent's

determination wrong.

See Rule 142(a); Welch v. Helvering, 290

U.S. 111, 115 (1933).

An individual may generally deduct a payment made during the

taxable year to a spouse3 to the extent it is alimony that is

includable in the spouse's gross income.

(b).

See sec. 215(a) and

A payment is alimony that is includable in a spouse's gross

income when:

(1) The payment is made in cash, (2) the payment is

received by (or on behalf of) the spouse under a divorce or

separation instrument, (3) the divorce or separation instrument

does not provide that the payment is not reportable as alimony,

(4) the spouses reside in separate households at the time the

payment is made, (5) the spouses do not file a joint return, and

(6) the liability for payment does not continue for any period

after the 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.

We concern ourselves only with the three

requirements in dispute.

First, the need for a cash payment requires that alimony be

paid in cash or a cash equivalent.

A check or money order that

is payable on demand is a cash equivalent.

A debt instrument

We use the term "spouse" to refer to a present or former

spouse.

- 11 that is issued or transferred is not.

See sec. 71(b)(1); sec.

1.71-1T(b), Q&A-5, Temporary Income Tax Regs., 49 Fed. Reg. 34455

(Aug. 31, 1984).

Second, only those payments that are received by or on

behalf of a spouse pursuant to a divorce or separation instrument

may qualify as alimony.

Amounts that are paid as child support

do not qualify as alimony.

See sec. 71(c)(1).

Payments made

under a divorce or separation instrument are considered child

support to the extent that they will be reduced upon the

happening of a contingency related to a child, e.g., the child's

reaching a specified age.

See sec. 71(c)(2).

Third, alimony does not include amounts that must continue

to be paid after the payee's death.

See sec. 71(b)(1)(D).

Whether an obligation to make a payment ceases upon the payee's

death may be determined by the terms of the applicable documents.

If the documents are silent on this matter, the answer lies in

State law.

See Sampson v. Commissioner, 81 T.C. 614, 618 (1983),

affd. without published opinion 829 F.2d 39 (6th Cir. 1987); see

also Cunningham v. Commissioner, T.C. Memo. 1994-474.

Turning to the instant facts, we find that few of the

disputed payments qualify as alimony.

Most of these payments are

either payments of child support or payments for which petitioner

would remain liable if Ms. Sowell were to die.4

As to the latter

category of payments, nothing in the applicable documents

Some of these amounts also were not paid pursuant to the

temporary order or final decree.

- 12 conditions these payments on the fact that Ms. Sowell is living.

Nor can we find such a condition in applicable State (Georgia)

law.

Under Georgia law, alimony is either periodic or lump sum,

see Winokur v. Winokur, 365 S.E.2d 94, 95 (Ga. 1988), and the

mere fact that alimony is payable in installments does not mean

it is periodic, see Stone v. Stone, 330 S.E.2d 887, 889 (Ga.

1985).

Lump-sum alimony is payable in installments if the

applicable documents "state the exact amount of each payment and

the exact number of payments to be made without other

limitations, conditions or statements of intent".

See Winokur v.

Winokur, supra at 96; see also Stone v. Stone, supra at 889.

obligation to pay lump-sum alimony in installments does not

terminate upon the payee's death.

See Winokur v. Winokur, supra

at 95; see also Human v. Commissioner, T.C. Memo. 1998-106.

As to the non-child-support amounts which would cease upon

Ms. Sowell's death--namely, $212 spent in 1992 for Ms. Sowell's

clothes, $443 spent in 1992 for Ms. Sowell's dentist, $665 spent

in 1992 for Ms. Sowell's dentist, $130 spent in 1992 for Ms.

Sowell's medical bill, $428 spent in 1992 for Ms. Sowell's car

insurance, $2,204 spent in 1992 for Ms. Sowell's car expenses,

$95 spent in 1993 for Ms. Sowell's bills, $209 spent in 1993 for

Ms. Sowell's drug bill, $746 spent in 1993 for Ms. Sowell's

dentist, $1,312 spent in 1993 for Ms. Sowell's dentist, $30 spent

in 1993 for Ms. Sowell's automobile, $454 spent in 1993 for Ms.

Sowell's medical bill, $585 spent in 1993 for Ms. Sowell's car

insurance, $437 spent in 1993 for Ms. Sowell's car repair, $30

- 13 spent in 1993 for Ms. Sowell's medical bill, $464 spent in 1993

for Ms. Sowell's medical bill, $86 spent in 1993 for Ms. Sowell's

bill, $566 spent in 1993 for Ms. Sowell's car expense, and $1,647

spent in 1994 for Ms. Sowell's dentist--we hold that these

amounts, but for the $2,204, $566 and $1,647 amounts, are

deductible as alimony.5

The deductible amounts, which aggregate

$1,878 and $5,014 for 1992 and 1993, respectively, were paid to

(or for the benefit of) Ms. Sowell's maintenance, and, naturally,

petitioner's obligation to make these payments would have ceased

upon Ms. Sowell's death.6

The $2,204 and $566 amounts are not

deductible because petitioner did not pay these amounts in cash,

as is required by section 71(b)(1).

Petitioner "paid" these

amounts to Ms. Sowell by agreeing to pay these charges in the

future.

The $1,647 amount is not deductible because we are

unable to find that it was paid pursuant to a divorce or

There are other amounts--$447 spent in 1992 for a drug

bill, $666 spent in 1992 for miscellaneous expenses, $3,133 spent

in 1992 for health insurance for Ms. Sowell and the children, $22

spent in 1993 for reimbursement, $142 spent in 1993 for a drug

bill, $2,222 spent in 1993 for health insurance for Ms. Sowell

and the children, and $2,048 spent in 1994 to pay a loan on Ms.

Sowell's insurance policy--for which we are unable to determine

what, if any, amount was paid with respect to Ms. Sowell. (We

also note that the $2,048 amount was not required by either the

temporary order or the divorce decree.) As petitioner bears the

burden of proof, we must sustain respondent's disallowance of

these amounts.

Whereas petitioner's payments for Ms. Sowell's car

expenses are deductible as alimony, petitioner's payments in

satisfaction of his obligation to buy her a car are not. As we

read the final decree, petitioner's obligation to buy the car

would not have terminated upon Ms. Sowell's death. If Ms. Sowell

had died before petitioner had bought her the car, petitioner

would have had to buy the car for the benefit of her estate.

- 14 separation instrument.

Although the temporary order stated that

petitioner must pay Ms. Sowell's medical and dental expenses, the

final decree, which did not contain a similar provision, replaced

the temporary order as of September 4, 1993.

We hold that petitioner's alimony deductions in the

respective years are $1,878, $5,014, and zero.

In so holding, we

have carefully considered all remaining arguments made by the

parties for a result contrary to that expressed herein, and, to

the extent not discussed above, find them to be irrelevant or

without merit.

To reflect the foregoing,

Decision will be entered

under Rule 155.

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