# UNITED STATES TAX COURT

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## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

T.C. Memo. 2003-221

UNITED STATES TAX COURT

MARLIN G. SPRINGER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent

Docket No. 13228-00.

Filed July 23, 2003.

Burnell E. Steinmeyer, Jr., and Larry R. Baumann, for
petitioner.
Albert B. Kerkhove and Henry N. Carriger, for respondent.

MEMORANDUM OPINION
GOEKE, Judge:

Respondent determined a deficiency in

petitioner’s 1996 Federal income tax of $20,394.

The sole issue

for decision is whether a payment of $50,000 petitioner made to

- 2 his ex-wife in 1996 is deductible as alimony under section
215(a).1
Background
The parties submitted this case fully stipulated pursuant to
Rule 122.

The stipulation of facts and the attached exhibits are

incorporated herein by this reference.

Petitioner resided in

Danbury, Nebraska, at the time he filed his petition.
Petitioner and Pamela Lynn Springer (Ms. Springer) were
married on November 27, 1970, in Lebanon, Nebraska.2

On January

10, 1995, pursuant to a “Decree of Dissolution” (the divorce
decree), the marriage between petitioner and Ms. Springer was
dissolved in the District Court of Red Willow County, Nebraska.
Petitioner and Ms. Springer also entered into a “Property
Settlement and Custody Agreement” (the marital settlement),
effective January 10, 1995, which was incorporated into the
divorce decree.3

1

Unless otherwise indicated, all 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

The record in this case does not provide any information
regarding the status of Ms. Springer’s 1996 taxable year and
whether she reported the payment in dispute as income.
3

The divorce decree stated that “the Property Settlement
Agreement entered into between the parties is hereby approved,
and the property and debts of the parties are divided and
allocated as set forth therein.” For convenience, subsequent
references to the marital settlement and the divorce decree
(continued...)

- 3 The marital settlement was divided into 28 articles.

In the

preamble, petitioner and Ms. Springer stated that they wished to
enter into a voluntary agreement to determine their respective
property rights and all other matters relating to the dissolution
of their marriage, including matters relating to child custody
and support, spousal support/alimony, division of property,
payment of debts, payments of attorney’s fees, and other matters
incident to the dissolution proceedings.

The marital settlement

reflected that petitioner and Ms. Springer were both represented
by legal counsel throughout the entire proceeding and entered
into the settlement “upon mature consideration and after ample
opportunity to seek the advice of separate counsel”.
Article 6, entitled “ALIMONY”, required petitioner to pay
“alimony for the support and maintenance” of Ms. Springer.
article stated:

The

The husband shall pay, through the Clerk of the
District Court of Red Willow County, Nebraska, nonmodifiable alimony for the support and maintenance of
the wife in the sum of One Thousand Five Hundred
Dollars ($1,500.00) per month, commencing upon the
first day of February, 1995, and continuing to be due
and payable on the first day of each month thereafter
for One Hundred Twenty (120) months, or until the death
of either party or the remarriage of recipient, if any
such event occurs prior to said date.
In addition to the foregoing alimony, the husband
shall pay, through the Clerk of the District Court of
Red Willow County, Nebraska, non-modifiable alimony for

3

(...continued)
collectively are to the divorce documents.

- 4 the support and maintenance of the wife in the sum of
Fifty Thousand Dollars ($50,000.00) per year for a
period of five (5) years, commencing on February 1,
1996, and continuing to be payable on February 1, 1997,
on February 1, 1998, on February 1, 1999 and on
February 1, 2000. This portion of the alimony to be
paid by the husband shall not terminate upon either the
death of the husband or the remarriage of the wife.
These alimony payments are due on the first day of
February each year as set forth above and if not paid
shall bear interest at the then current judgment rate
as prescribed by the Nebraska Supreme Court.
Other articles of the marital settlement discussed property
rights and other marriage dissolution matters.

Article 5

required petitioner to make monthly child support payments.
Article 7 provided for the division of certain real estate
between petitioner and Ms. Springer.

Articles 8 through 13

addressed the division of motor vehicles, bank accounts, business
interests, retirement benefits, household items and personal
effects, and life insurance, investments, and retirement plans.
Article 14 stated that petitioner would be entitled to claim
dependency exemptions for his and Ms. Springer’s children.

Under

article 15, petitioner assumed responsibility for various debts
and liabilities incurred by him and Ms. Springer during the
course of their marriage.

Finally, article 16, entitled

“ADDITIONAL PROPERTY DIVISION”, stated:
The wife shall be awarded an additional
$143,000.00, payable on or before February 1, 1995, and
$50,000.00 plus 6% interest from date of decree to be
paid on February 1, 2001, as additional property to
equalize property distribution. Husband shall have the
right to pay the interest annually or totally with the
2001 payment.

- 5 The marital settlement stated that it was binding on the
parties and their respective legal representatives, successors,
and assigns immediately following the dissolution of the
marriage.

Article 25 of the marital settlement provided that “No

modification of this Agreement shall be binding upon either of
the parties unless reduced to writing and subscribed to by both
parties unless ordered by the court.”

Article 26, entitled

“CAPTIONS”, stated that “Paragraph titles or captions contained
herein are inserted as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this
Agreement or any provision hereof.”
The divorce decree stated that the marital settlement
agreement was approved.

The divorce decree contained the

following provision ordering petitioner to make payments to Ms.
Springer:
IT IS FURTHER ORDERED that respondent shall pay,
through the Clerk of the District Court of Red Willow
County, Nebraska, non-modifiable alimony for the
support and maintenance of the petitioner in the sum of
One Thousand Five Hundred Dollars ($1,500.00) per
month, commencing upon the first day of February, 1995,
and continuing to be due and payable on the first day
of each month thereafter for One Hundred Twenty (120)
months, or until the death of either party or the
remarriage of recipient, if any such event occurs prior
to said date. In addition to the foregoing alimony,
the respondent shall pay, through the Clerk of the
District Court of Red Willow County, Nebraska, nonmodifiable alimony for the support and maintenance of
the petitioner in the sum of Fifty Thousand Dollars
($50,000.00) per year for a period of five (5) years,
commencing on February 1, 1996, and continuing to be
payable on February 1, 1997, on February 1, 1998, on

- 6 February 1, 1999 and on February 1, 2000. This portion
of the alimony to be paid by the respondent shall not
terminate upon either the death of the respondent or
the remarriage of the petitioner. These alimony
payments are due on the first day of February each year
as set forth above and if not paid shall bear interest
at the then current judgment rate as prescribed by the
Nebraska Supreme Court. All alimony ordered herein
shall be a judgment from the date of decree until paid
in full or released.
The divorce decree also generally incorporated the agreements
contained in the other articles of the marital settlement.
Petitioner made the $50,000 payment to Ms. Springer in 1996
in satisfaction of article 6 of the marital settlement and as
ordered in the divorce decree.
Petitioner timely filed Form 1040, U.S. Individual Income
Tax Return, for 1996.

On the Form 1040, petitioner claimed a

deduction for alimony paid of $68,000.4

On or about June 6,

2000, respondent commenced his examination of petitioner’s 1996
return.

On September 22, 2000, respondent issued a notice of

deficiency to petitioner for the taxable year 1996.

In the

notice, respondent disallowed $50,000 of the claimed deduction
for alimony paid on the ground that “Lump-sum cash or property

4

Of this amount, $50,000 was attributable to the annual
payment, and it appears that the remaining $18,000 was
attributable to the monthly payments of $1,500 (12 months x
$1,500 = $18,000).

- 7 settlements are not deductible as alimony.”5

Petitioner timely

filed a petition to this Court seeking a redetermination.
Discussion
The parties dispute the proper characterization of
petitioner’s $50,000 payment to Ms. Springer in 1996.

Respondent

determined that the $50,000 payment was not deductible by
petitioner because it was in the nature of a property settlement
payment.

Petitioner claims the payment is deductible as alimony

under section 215(a).

The parties’ respective positions are

based on contrary interpretations of the divorce documents and
applicable Nebraska law.
Generally, the Commissioner’s determination bears a
presumption of correctness, and the burden of proof rests with
the taxpayer.
(1933).

Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115

The fact that a case is submitted fully stipulated does

not alter the burden of proof, or the requirements otherwise
applicable with respect to adducing proof, or the effect of
failure of proof.

Rule 122(b); Kitch v. Commissioner, 104 T.C.

1, 5 (1995), affd. 103 F.3d 104 (10th Cir. 1996).

5

Respondent also decreased petitioner’s total itemized
deductions by $1,500. This was a computational adjustment based
on the increase in petitioner’s adjusted gross income that
resulted from respondent’s disallowance of $50,000 of the claimed
deduction for alimony paid. No other adjustments were made to
petitioner’s 1996 return.

- 8 In certain circumstances, if the taxpayer introduces
credible evidence with respect to any factual issue relevant to
ascertaining the proper tax liability, section 7491 places the
burden of proof on the Commissioner.

Sec. 7491(a).

Section

7491(a) applies only if an individual taxpayer complies with
substantiation requirements, maintains required records, and
cooperates fully with reasonable requests by the Commissioner for
witnesses, information, documents, meetings, and interviews.
Sec. 7491(a)(2).

Credible evidence has been described as “‘the

quality of evidence which, after critical analysis, the court
would find sufficient upon which to base a decision on the issue
if no contrary evidence were submitted’”.

Higbee v.

Commissioner, 116 T.C. 438, 442 (2001) (quoting H. Conf. Rept.
105-599, at 240 (1998), 1998-3 C.B. 755, 994).

Section 7491 is

effective with respect to court proceedings arising in connection
with examinations commencing after July 22, 1998.

Internal

Revenue Service Restructuring and Reform Act of 1998, Pub. L.
105-206, sec. 3001(c), 112 Stat. 727.
The parties stipulated that the examination of petitioner’s
1996 Federal income tax return commenced after the effective date
of section 7491, and petitioner has established that he made the
$50,000 payment to Ms. Springer in 1996 pursuant to the
provisions in the marital settlement and the divorce decree
requiring the payment of “alimony for the support and

- 9 maintenance” of Ms. Springer.

Although the parties have not

addressed petitioner’s compliance, there is no indication that
petitioner has failed to comply with substantiation requirements,
did not maintain required records, or failed to cooperate with
reasonable requests by respondent for witnesses, information,
documents, meetings, and interviews.

However, the parties’

respective positions are based on their contrary interpretations
of the divorce documents and Nebraska law.

Our resolution of the

issue presented is ultimately based on our interpretations of the
divorce documents and Nebraska law; therefore, which party bears
the burden of proof is not dispositive to our holding.6
Petitioner claims that the $50,000 payment constitutes
alimony; respondent contends that the payment was in the nature
of a property settlement payment.

Generally, property

settlements incident to a divorce are not taxable events and do
not give rise to deductions or recognizable income.

Sec. 1041;

Estate of Goldman v. Commissioner, 112 T.C. 317, 322 (1999),
affd. without published opinion sub nom. Schutter v.
Commissioner, 242 F.3d 390 (10th Cir. 2000).

Conversely, amounts

received as alimony or separate maintenance payments are taxable
to the recipient and deductible by the payor in the year paid.

6

This Court’s interpretation of State law is generally a
question of law and is reviewed de novo. Hoover v. Commissioner,
102 F.3d 842, 844 (6th Cir. 1996), affg. T.C. Memo. 1995-183.

- 10 Secs. 61(a)(8), 71(a), 215(a).7

The phrase “alimony or separate

maintenance payment” is defined in section 71(b)(1) as any cash
payment satisfying the following four requirements:
(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
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.
Respondent concedes that petitioner’s $50,000 payment to Ms.
Springer in 1996 satisfies subparagraphs (A), (B), and (C) of
section 71(b)(1).

The issue in dispute is whether the payment

satisfies subparagraph (D).
If the terms of the divorce documents or Nebraska law would
have required the annual payments of $50,000 to terminate on the

7

Sec. 215(a) provides a general rule that “In the case of an
individual, there shall be allowed as a deduction an amount equal
to the alimony or separate maintenance payments paid during such
individual’s taxable year.”

- 11 death of Ms. Springer, then these payments are alimony under
section 71 and deductible from petitioner’s gross income under
section 215(a).

See Lovejoy v. Commissioner, 293 F.3d 1208, 1210

(10th Cir. 2002), affg. Miller v. Commissioner, T.C. Memo. 1999273.

The parties dispute (1) whether the divorce documents would

have required termination of the annual payments on the death of
Ms. Springer, and (2) whether the liability to make the annual
payments would have terminated under Nebraska law.

Additionally,

respondent argues that the annual payments were intended to be
“alimony in gross” under Nebraska law and that this implies that
petitioner cannot deduct the $50,000 payment.
Current section 71 is the product of the Deficit Reduction
Act of 1984, Pub. L. 98-369, sec. 422, 98 Stat. 795, and the Tax
Reform Act of 1986, Pub. L. 99-514, sec. 1843(b), 100 Stat. 2853.
In Hoover v. Commissioner, 102 F.3d 842, 845 (6th Cir. 1996),
affg. T.C. Memo. 1995-183, the Court of Appeals for the Sixth
Circuit explained that by the 1984 revision, “Congress
specifically intended to eliminate the subjective inquiries into
intent and the nature of payments that had plagued the courts in
favor of a simpler, more objective test.”

The statute as enacted

in 1984 required that the divorce or separation instrument itself
state that the liability to make payments would terminate on the
payee’s death.

The 1986 amendment eliminated the requirement

that the termination provision be stated in the instrument itself

- 12 and permitted reference beyond divorce instruments to State law
to determine whether State law specifically provided that the
payments in question would terminate on the payee’s death.

In

analyzing this change, the Court of Appeals for the Sixth Circuit
explained:
Although the 1986 amendment injected state law
into the § 71(b)(1) inquiry, the purpose behind the
1984 revision still stands. A court determining
whether payments qualify as alimony as defined in § 71
will turn to state law only to determine whether state
law, by requiring that the payments terminate upon the
payee’s death, ensures that the payments satisfy §
71(b)(1)(D). Congress clearly did not intend courts to
engage in the very sort of subjective inquiry that had
prompted the 1984 revision. * * * [Id. at 846.]
In analyzing questions regarding termination of payments on
the death of the payee, the statutory mandate of section 71 would
have us first look at the language in the divorce instrument to
determine whether liability survives the death of the payee and,
if the instrument is not clear, then determine whether such
liability terminates at death by operation of State law.
845-846.

Id. at

In this case, we hold that although the marital

settlement attached to the divorce decree is not as clearly
worded as it might be, the liability in question would have
terminated at death pursuant to the divorce documents.
Furthermore, we hold that the liability would have terminated at
death pursuant to Nebraska law if the marital settlement is
deemed to have failed to address the issue of termination.

- 13 I.

Terms of the Divorce Documents
Petitioner argues that the divorce documents provided for

termination of the annual payments on the death of Ms. Springer.
Petitioner notes that the documents specifically state that the
monthly payments of $1,500 would terminate on the death of either
party or the remarriage of Ms. Springer, whereas the annual
payments would not terminate on the death of petitioner or the
remarriage of Ms. Springer.

Petitioner contends that the only

reasonable interpretation of the two provisions is that the
annual payments would also terminate on the death of Ms.
Springer.
Respondent contends that the annual payment of $50,000 is
not deductible as alimony by petitioner because the divorce
documents do not specifically state that the annual payments
would terminate on the death of Ms. Springer.

Respondent claims

that the annual payment provision should be analyzed separately
from other payments and property transfers included in the
marital settlement.

Respondent argues that the $50,000 payment

made in 1996 is not deductible if only the language relating to
the annual payments is considered.
Generally, different types of payments made pursuant to a
divorce decree are not treated as part of a single stream of
payments, but rather each type of payment is analyzed separately
to determine its proper characterization.

Oman v. Commissioner,

- 14 767 F.2d 290, 293 (6th Cir. 1985), affg. T.C. Memo. 1984-357;
Bernstein v. Commissioner, 622 F.2d 442, 445-446 (9th Cir. 1980),
affg. T.C. Memo. 1978-84; Bartsch v. Commissioner, 18 T.C. 65,
68-69 (1952), affd. per curiam 203 F.2d 715 (2d Cir. 1953).
Respondent, relying on the general rule above,8 argues that we
“should not lump the payments together to arrive at a
‘consolidated’ classification”, and that the two paragraphs
should be interpreted as if they have separate termination
provisions.
Respondent misapplies the general rule in the context of
this case.

The cases applying the general rule that different

types of payments are not to be treated as a single stream of
payments generally dealt with taxpayers attempting to treat
periodic payments and installment payments as a single stream of
periodic payments.

Under previous versions of sections 71 and

215, periodic payments made pursuant to a decree of divorce or

8

Other cases applying the general rule include White v.
Commissioner, 770 F.2d 685 (7th Cir. 1985), revg. 82 T.C. 222
(1984); Houston v. Commissioner, 442 F.2d 40 (7th Cir. 1971),
affg. Schwab v. Commissioner, 52 T.C. 815 (1969); Fidler v.
Commissioner, 231 F.2d 138 (9th Cir. 1956), affg. as modified 20
T.C. 1081 (1953); Estate of Smith v. Commissioner, 208 F.2d 349
(3d Cir. 1953), affg. in part and revg. in part a Memorandum
Opinion of this Court; Martin v. Commissioner, 73 T.C. 255
(1979); Hunt v. Commissioner, 22 T.C. 561 (1954); Glasgow v.
Commissioner, 21 T.C. 211 (1953); Norton v. Commissioner, 16 T.C.
1216 (1951), affd. 192 F.2d 960 (8th Cir. 1951); Burkle v.
Commissioner, T.C. Memo. 1986-394; Miller v. Commissioner, T.C.
Memo. 1981-15; Coker v. United States, 327 F. Supp. 169 (D. Neb.
1971), affd. 456 F.2d 676 (8th Cir. 1972); Tate v. United States,
207 F. Supp. 426 (E.D. Tenn. 1962).

- 15 separate maintenance were deductible by the payor.

Installment

payments discharging the obligation to pay a principal sum
generally were not periodic payments and thus were not deductible
by the payor.

An exception existed where installment payments

were deemed periodic payments if the payments either (1) lasted
or might have lasted more than 10 years from the date of the
divorce decree, or (2) were contingent upon the death of either
party, the payee’s remarriage, or a change in the economic status
of either party.9
In the cases respondent relies on, taxpayers attempted to
qualify for the exceptions under prior law by arguing that
installment payments and periodic payments were part of an
overall plan for support and were to be viewed as a single stream
of payments.

These cases involved attempts by taxpayers to

“camouflage” installment payments by means of combining them with
periodic payments.

Bernstein v. Commissioner, supra at 445.

The

payment provisions in the cases under prior law contained
contradictory terms or lacked any indication that they were
intended to be read in conjunction with each other.

These

factual scenarios are readily distinguishable from the instant
situation.

Current law does not involve the issue of whether

payments are periodic or installment payments, and petitioner is

9

See Yoakum v. Commissioner, 82 T.C. 128, 136 (1984); former
sec. 71(c)(1); former sec. 1.71-1(d)(3)(i) and (ii), Income Tax
Regs.

- 16 not attempting to combine the payment periods contained in the
two provisions to meet a periodicity requirement.10

This case

presents a question of interpreting the provisions of the
agreement regarding the effect of the payee’s death, not an issue
regarding consolidation of the stream of payments.
We find the cases respondent cites, and other cases applying
the general rule prohibiting the merger of different types of
payments, distinguishable from the instant case because those
cases did not deal with a situation where the language in one
payment provision of a divorce document made reference to another
provision or indicated that the payment provision should be read
in conjunction with another part of the document.

The present

issue is whether it is appropriate to review the preceding
paragraph to understand the language in question.

A well-

established principle of contract law is that a writing is
interpreted as a whole, and any writings which are part of the
same transaction should be viewed together.

10

2 Restatement,

We are unaware of any cases since the 1984 revision and
1986 amendment to sec. 71 applying the general rule prohibiting
merger of different types of payments. Although this does not
necessarily mean that the general rule prohibiting merger of
different types of payments does not apply because of the change
in law, the factual circumstances in which the general rule was
applied are not as prevalent under current law. In any event,
the facts and circumstances of this case are distinguishable from
prior cases applying the general rule.

- 17 Contracts 2d, sec. 202 (1997).11

Additionally, an interpretation

that gives a reasonable meaning to all parts of a writing is
preferred to one that leaves portions of the writing meaningless.
Rink v. Commissioner, 47 F.3d 168, 171 (6th Cir. 1995), affg. 100
T.C. 319 (1993); Poison Creek Ranches #1, Ltd. v. Commissioner,
T.C. Memo. 1996-504; Washoe Ranches #1, Ltd. v. Commissioner,
T.C. Memo. 1996-495.

With these principles in mind, we proceed

to examine the divorce documents to determine whether they
provide that there was no liability to make the annual payments
for any period after the death of Ms. Springer.
Article 6 of the marital settlement is entitled “ALIMONY”
and contains two paragraphs dealing with recurring payments to
Ms. Springer.

Although the caption of article 6 is not

dispositive, the use of parallel language and the positioning of
the paragraphs together in this article is significant.

It is

also noteworthy that article 6 is separate and distinct from the
articles providing for the division of property.

The first

paragraph specifically states that these payments will continue

11

Nebraska caselaw provides similar rules regarding the
interpretation of contractual agreements. “‘A contract must be
interpreted as a whole and, if possible, effect must be given to
every part thereof.’” Husen v. Husen, 487 N.W.2d 269, 272 (Neb.
1992) (quoting Crowley v. McCoy, 449 N.W.2d 221, 244 (Neb. 1989))
(analyzing relationship between two payment provisions contained
in property settlement and divorce decree to determine effect of
the payee’s remarriage on the payor’s liability to make alimony
payments); see also Ruble v. Reich, 611 N.W.2d 844, 850 (Neb.
2000) (“We view a contract as a whole in order to construe it.”).

- 18 to be due and payable for a period of 120 months, “or until the
death of either party or the remarriage of recipient”.

The

second paragraph specifically provides that “This portion of the
alimony” shall not terminate on the death of petitioner or the
remarriage of Ms. Springer.12

Under the first paragraph, the

alimony payments will terminate on the death of either party or
the remarriage of Ms. Springer.

Unlike the monthly payments

provided for in the first paragraph, the annual payments were not
to terminate on either the death of petitioner or the remarriage
of Ms. Springer.

“Reading the agreement from a reasonable,

commonsense perspective”, Estate of Goldman v. Commissioner, 112
T.C. at 323, and interpreting the writing as a whole, we believe
that the initial listing of three events causing termination
followed by the parallel paragraph specifically excluding only
two of those events from termination implies that the occurrence
of the third event would continue to cause termination of the
payments.
Other language used by petitioner and Ms. Springer indicates
that the annual payments would have terminated on the death of
Ms. Springer.

The marital settlement uses the same phrase in

describing the purpose of both the monthly and annual payments:
“alimony for the support and maintenance of the wife”.

12

This

We note that in the divorce decree of the Nebraska court,
the monthly and annual payment provisions are contained in the
same paragraph.

- 19 phrase indicates that the payments were intended to support Ms.
Springer, as contrasted with the payments provided by article 16
to support her estate or to equalize the property distribution
between her and petitioner.

Interpreting the divorce documents

to mean that the annual payments would not have terminated on the
death of Ms. Springer would lead to the result that if she had
died, then petitioner (or his estate) would have had to make
payments for Ms. Springer’s “support and maintenance” after her
death.

It is illogical and contrary to the accepted use of these

terms in such documents for “support” and “maintenance” to be
required by a decedent.13

Furthermore, acceptance of

respondent’s position would effectively rewrite the second
paragraph to state that the annual payments would not terminate
on the death of petitioner or Ms. Springer, or on the remarriage
of Ms. Springer.
Contrary to respondent’s contentions, our analysis of the
issue presented does not result in “lumping the payments”
together or making a “consolidated classification” in violation
of the general rule prohibiting the merger of different types of
payments into a single stream of payments.

Rather, our

interpretation is consistent with well-established principles of

13

This case is distinguishable from Cunningham v.
Commissioner, T.C. Memo. 1994-474, because the term of the annual
payments in this case is consistent with a period to support the
postdivorce transition of the payee spouse.

- 20 contract law that writings should be interpreted as a whole and
the interpretation should give a reasonable meaning to all parts
of the writing.

Accordingly, we find that the divorce documents

provide that the annual payments were to terminate on the death
of Ms. Springer; thus, the $50,000 payment made by petitioner to
Ms. Springer in 1996 is deductible as alimony under section
215(a).
II.

Nebraska Law
Even if the terms of the divorce documents did not provide

for termination on the death of Ms. Springer, petitioner would
still prevail as long as the annual payments would have
terminated under Nebraska law.14

On brief, the parties addressed

whether Nebraska statutory law provides for the termination of
the annual payments under the facts of this case.

The relevant

statute, Neb. Rev. Stat. section 42-365 (1998), provides:
When dissolution of a marriage is decreed, the
court may order payment of such alimony by one party to
the other and division of property as may be
reasonable, having regard for the circumstances of the
parties, duration of the marriage, a history of the
contributions to the marriage by each party, including
contributions to the care and education of the
children, and interruption of personal careers or
educational opportunities, and the ability of the
supported party to engage in gainful employment without
interfering with the interests of any minor children in
the custody of such party. Reasonable security for
payment may be required by the court. Unless amounts

14

For purposes of this discussion, we assume that the
divorce documents did not provide for termination of the annual
payments on the death of Ms. Springer.

- 21 have accrued prior to the date of service of process on
a petition to modify, orders for alimony may be
modified or revoked for good cause shown, but when
alimony is not allowed in the original decree
dissolving a marriage, such decree may not be modified
to award alimony. Except as otherwise agreed by the
parties in writing or by order of the court, alimony
orders shall terminate upon the death of either party
or the remarriage of the recipient. [Emphasis added.]
The pertinent issue in the instant case is whether petitioner and
Ms. Springer “otherwise agreed” in the marital settlement (or the
court ordered in the divorce decree) that the annual payments
would not terminate on the death of Ms. Springer.
Respondent, citing Watters v. Foreman, 284 N.W.2d 850 (Neb.
1979), argues that Neb. Rev. Stat. section 42-365 does not apply
because the annual payment provision in article 6 of the marital
settlement was not silent as to all termination procedures.

The

issue in Watters was whether the remarriage of the wife resulted
in the termination of alimony by operation of Neb. Rev. Stat.
section 42-365.

Under the decree, the husband was required to

pay the wife $1,000 per month for a period of 10 years and 1
month.

Id. at 852.

The decree stated that the payments were to

cease on the death of the wife but not on the death of the
husband.

Id.

The decree was silent regarding the husband’s

liability to make the payments if the wife remarried.

Id.

The Supreme Court of Nebraska had to decide whether the
parties had “otherwise agreed” within the meaning of the statute
and, therefore, the remarriage did not terminate the husband’s

- 22 liability to make the monthly alimony payments.

The court

initially noted that the value of the marital estate appeared to
be in excess of $200,000, but that the wife was receiving only
the monthly payments totaling $18,500, a 1973 Cadillac, some
household goods, and payment of $5,000 of her attorney’s fees.
Id.

The court then examined the language of the divorce decree

and held:
Where the parties by their agreement in writing, or the
court by its decree, provide that a specific amount of
alimony shall be paid for a specific period of time,
and shall terminate only upon the occurring of a
specific event set out in the agreement or decree and
otherwise shall not be subject to amendment or
revision, the payment of such alimony shall terminate
only upon the happening of the event set out in the
agreement or decree. * * * [Id. at 854.]
Thus, the fact that the husband and wife provided for a
termination event and the agreement was not modifiable resulted
in the nonapplicability of Neb. Rev. Stat. section 42-365.
Later, in Kingery v. Kingery, 320 N.W.2d 441 (Neb. 1982),
the issue was whether a nonmodifiable provision requiring that
payments be made until “paid in full” precluded application of
Neb. Rev. Stat. section 42-365 because the parties had “otherwise
agreed” within the meaning of the statute.

The decree of

dissolution was silent regarding the effect of death or
remarriage, and the husband argued that on his ex-wife’s
remarriage Neb. Rev. Stat. section 42-365 operated to relieve him

- 23 of liability for the remaining payments to her.

Id. at 441-442.

The court noted:
The words “terminate upon the death of either party or
the remarriage of the recipient,” clearly show that
this portion of the statute needs no order of court to
effect termination. The alimony terminates by
operation of law when the condition occurs. * * * [Id.
at 443.]
Thus, the court recognized that if Neb. Rev. Stat. section 42-365
applies, liability to make payments terminates without a court
order or modification of the divorce document.

The court

ultimately held that the order of the court that the alimony be
“paid in full” did not evidence an intention that the alimony
order should not terminate on remarriage.

Id. at 444.

In Pettid v. Commissioner, T.C. Memo. 1999-126, we applied
Neb. Rev. Stat. section 42-365 in a situation where the divorce
instruments were silent regarding whether payments would
terminate on the death of either party or the remarriage of the
payee spouse.

We distinguished the situation in Watters v.

Foreman, supra, on the ground that the divorce decree in that
case “expressly dealt with termination and provided that
termination would occur upon the death of the payee spouse.”
Because the divorce instrument in Pettid was silent about
termination and the effect that the death of either party or the
remarriage of the payee spouse would have on the payor’s
liability to make the payments, we held that the parties had not
“otherwise agreed” in writing regarding the effect of the death

- 24 or remarriage of the payee spouse on the payor spouse’s liability
to make the payments.
Additionally, we addressed the Commissioner’s argument that
a provision in the instrument stating that the agreement was
binding on the parties and their heirs, assigns, and personal
representatives indicated that the payor spouse or his estate
might be liable to make payments to the payee spouse after her
death.

We declined to read the binding agreement provision so

broadly “as to require the payments to continue after * * * [the
payee spouse’s] death or to constitute an agreement of the
parties that the alimony order will not terminate on * * * [the
payee spouse’s] death, as otherwise required by Neb. Rev. Stat.
section 42-365.”15
Finally, we examined the Supreme Court of Nebraska’s holding
in Kingery v. Kingery, supra.

We noted that under the holding of

that case, if Neb. Rev. Stat. section 42-365 applies, a payor’s
liability to pay alimony terminates automatically on the death of
the payee.

Like the court in that case, we disagreed with the

position that the statutory direction can be defeated by a
general contractual provision prohibiting modification of the
agreement.

15

The marital agreement in this case contains a similar
“binding agreement” provision. Respondent has not argued in this
case that this provision indicates or implies that the annual
payments were intended to survive the death of Ms. Springer.

- 25 In the instant case, the second paragraph of article 6 of
the marital settlement states that the liability to make the
annual payments to Ms. Springer will not terminate on either the
death of petitioner or the remarriage of Ms. Springer.

Unlike

the situation in Watters v. Foreman, 284 N.W.2d 850 (Neb. 1979),
the parties did not specifically state that the annual payments
would terminate on death or remarriage.

Instead, the parties

chose to specifically exclude the death of petitioner or the
remarriage of Ms. Springer as events causing termination.

In

Watters v. Foreman, supra, the parties stated one situation in
which the payments would terminate and one situation in which
they would not.

The court found that the parties’ statement that

the payments would terminate on the wife’s death effectively
limited the termination events to that specific occurrence and
precluded application of Neb. Rev. Stat. section 42-365 to
statutorily terminate the payments on the wife’s remarriage.
Respondent’s position regarding the application of Watters
in this case would lead to an incongruous result.
parties did not provide a termination event.

Here, the

Rather, they

specifically excluded from termination two of the three events
previously listed as causing termination in the prior related
paragraph.

The specific exclusion of two of the three events

from termination, in this context, without reference to the third
event, indicates that the third terminating event is still

- 26 viable.

Applying Watters would in effect add language to the

agreement providing that Ms. Springer’s death would not cause
termination even though the structure of the agreement indicates
the opposite.

If there is any doubt about the intent of the

divorce documents, there is clearly no basis to have Neb. Rev.
Stat. section 42-365 operate to provide a result that is directly
opposite to that implied in the agreement and contrary to the
result the Nebraska statute would provide in the absence of an
agreement of the parties on this point.
Finally, review of the entire marital settlement indicates
that petitioner and Ms. Springer attempted to provide a
reasonable division of the marital estate.

Other provisions of

the marital settlement and the divorce decree specifically
provided for child support payments and the division of assets
and liabilities (e.g., motor vehicles, real estate, bank
accounts, business and investment items, retirement benefits and
plans, personal property, and life insurance items) between
petitioner and Ms. Springer.

Additionally, article 16 of the

marital settlement specifically provided for lump-sum payments to
be made by petitioner to Ms. Springer “as additional property to
equalize property distribution.”

We are not concerned in this

case, as it appears the court was in Watters v. Foreman, supra,
that one spouse received considerably less than a fair and
equitable division of the marital estate, and that payments

- 27 labeled as alimony for support and maintenance were more in the
nature of property settlement payments.

For the reasons

discussed above, we hold that petitioner and Ms. Springer did not
“otherwise agree” within the meaning of Neb. Rev. Stat. section
42-365.
III.

Alimony in Gross
Respondent argues that the requirements that the annual

payments were not to terminate on the death of petitioner or the
remarriage of Ms. Springer were inserted into the marital
settlement to characterize the annual payments as “alimony in
gross” under Nebraska law.

Respondent implies that this is the

reason the annual payment provision lacks a specific reference
regarding the effect of Ms. Springer’s death, not that the two
payment provisions were intended to be read in conjunction and
terminate the liability to make the annual payments after the
death of Ms. Springer.

Respondent relies on Ball v. Ball, 159

N.W.2d 297 (Neb. 1968), to support his position.
In Ball v. Ball, supra at 300, the Supreme Court of Nebraska
discussed the difference between “alimony” and “alimony in
gross”.

The court stated:

The distinction between “alimony” and “alimony in
gross” may be gathered from the accepted definitions of
the two terms. “Alimony”, which signifies literally
nourishment or sustenance, is an allowance for support
and maintenance, or, as has been said, a substitute for
marital support. It is the allowance which a husband
may be compelled to pay to his wife or former wife for
her maintenance when she is living apart from him or

- 28 has been divorced. “Alimony in gross, or lump-sum
alimony,” is fundamentally the award of a definite sum
of money; and if the sum is payable in instalments the
payments run for a definite length of time. The sum is
payable in full, regardless of future events such as
the death of the husband or the remarriage of the wife.
Gross alimony becomes a vested right from the date of
the rendition of the judgment, and the manner of its
payment in no wise affects its nature or effect. The
fact that the award is payable in installments is not
determinative of the question whether it is gross
alimony or periodic alimony. On the other hand,
alimony in general, or installment alimony,
contemplates periodic payments of a definite sum for
the indefinite future, and terminates on the death of
either party or the remarriage of the wife. * * * The
phrase “alimony in gross” or “gross alimony” is always
for a definite amount of money, the payment is always
for a definite length of time, and it is always a
charge on the estate of the husband and is not
modifiable. It, therefore, appears that a decree
providing for “alimony in gross,” constituting a final
judgment not subject to modification, must incorporate
each and every one of the following propositions to
meet the recognized requirements for this type of
judgment, to wit: (1) The award must be for a definite
sum or for installments payable over a definite period
of time; (2) it must be payable in full regardless of
the death or remarriage of the judgment creditor; and
(3) it cannot terminate on the death of the judgment
debtor. [Citations omitted.]
Relying on this passage, respondent argues on brief that the
specific exclusion from termination of the death of petitioner
and the remarriage of Ms. Springer was intended to qualify the
annual payments as alimony in gross.
The Ball case predated the adoption of Neb. Rev. Stat.
section 42-365.
1989).

Murrell v. Murrell, 440 N.W.2d 237, 239 (Neb.

The Supreme Court of Nebraska has recognized that the

statute applies to all orders for alimony, and no distinction is

- 29 made between alimony and alimony in gross.

Kingery v. Kingery,

320 N.W.2d at 443; Euler v. Euler, 295 N.W.2d 397, 399 (Neb.
1980).

Thus, the liability to make payments which might

otherwise be characterized as alimony in gross under Nebraska law
will still terminate on the death of either party or the
remarriage of the payee spouse except as otherwise agreed by the
parties or ordered by the court.
Respondent agrees with the above principles; however, he
asks the Court to “recognize that the annual alimony termination
provisions at issue here are consistent with the trade or local
usage for payments of alimony in gross.”

Although respondent’s

position is not entirely clear, he appears to argue that
petitioner and Ms. Springer intended the annual payments to be
alimony in gross and that this intention implies that the annual
payments would not have terminated on the death of Ms. Springer.
Respondent claims that the annual payment in issue is properly
characterized as alimony in gross because it was part of a series
of payments for a definite period of time, the annual payments
were not modifiable, and the parties provided that the annual
payments would not terminate on the death of petitioner or the
remarriage of Ms. Springer.
The fact that petitioner was required to make annual
payments for a period of 5 years is not determinative of the
question of whether the payments constitute alimony or alimony in

- 30 gross.

See Ball v. Ball, supra at 300.

The language of the

divorce documents does not reflect that the payments were
intended to be part of a definite sum payable and, as discussed
previously, we believe that the liability to make the payments
was subject to the contingency of the death of Ms. Springer.

Nor

do we believe that the fact that the annual payments were not
modifiable means that the payments were alimony in gross.
Indeed, in Kingery v. Kingery, supra, the nonmodifiable
provisions did not prevent application of Neb. Rev. Stat. section
42-365.

Finally, in Ball v. Ball, supra at 300, the court stated

that alimony in gross must incorporate “each and every one” of
the requirements that the award be for a definite sum (or for
installments payable over a definite period of time), be payable
in full regardless of the death or remarriage of the payee
spouse, and not terminate on the death of the payor spouse.

The

divorce documents in this case lack the specific requirement that
the annual payments be payable in full regardless of the death of
the payee spouse, Ms. Springer.
We also note that the passage in Ball v. Ball, supra at 300,
relied on by respondent expressly describes alimony (as
distinguished from alimony in gross) as “an allowance for support
and maintenance”.

As discussed earlier, the divorce documents

stated that the annual payments were for the “support and
maintenance” of Ms. Springer.

The use of this phrase in the

- 31 annual payment provision is at odds with respondent’s contention
that the parties intended for the annual payments to qualify as
alimony in gross and not to terminate on the death of Ms.
Springer.
Respondent’s contention regarding trade or local usage is
inconsistent with the definition provided in Ball v. Ball, supra,
and with Kingery v. Kingery, supra, and Euler v. Euler supra.
Other than respondent’s unsupported allegations on brief, there
is nothing in the record to suggest that the marital settlement
was drafted with the intention of characterizing the annual
payments as alimony in gross and providing that the payments were
not to terminate on the death of Ms. Springer.

To the contrary,

the particular facts of this case indicate that the annual
payments were an allowance for support and maintenance, not part
of a property settlement binding on petitioner after the death of
Ms. Springer.
IV.

Conclusion
After careful consideration of the parties’ respective

arguments, and after reviewing the divorce documents and relevant
case law, we conclude that the terms of the divorce documents do
provide that there would have been no liability to make the
annual payments for any period after the death of Ms. Springer.
Assuming that the divorce documents did not provide for
termination of the annual payments on the death of Ms. Springer,

- 32 we find that the payments would have terminated under Nebraska
law.

Accordingly, we hold petitioner’s $50,000 payment to Ms.

Springer in 1996 is deductible as alimony under section 215(a).
Decision will be entered
for petitioner.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Atax-court%3Aed992b28d77a3a30. Public record. Not legal advice.