# Petition — Wright v. Wright > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1645%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1980 - **Citation:** 445 U.S. 951 ## Text IN THE Supreme Court of the United States OCTOBER TERM, 1979 No. Q “I2OR } JEAN WRIGHT, Petitioner, vs. WILLIAM C. WRIGHT, Respondent. PETITION FOR A WRIT OF CERTIORARI TO THE SUPREME COURT OF WISCONSIN Bruce C. O’NEILL JOHN C. TRITSCHLER Attorneys for Petitioner Fox, CARPENTER, O’NEILL & SHANNON S.C. 622 N. Water Street Milwaukee, Wisconsin 53202 (414) 273-3939 Of Counsel ‘Dated: February 2, 1980 INDEX : PAGE Ne AR bbs a piyc se cae scee ii RIFE NE PG a | ‘Juestion Presented Seen ee eee eee eee teen eee ees 2 Constitutional Provision and Statutes involved ....... 2 ne Gs ede Guid Nespas ces crcie. 6 Raising the Federal ‘Question ...............-...00008- 15 Reasons for Granting the Writ ....................005. 21 EE GS RE SA SRR 31 Appendix \) ii CITATIONS Cases Baldwin v. Traveling Men’s Ass’n 283 U.S. 522 (1931) .. .29 Coleman v. Alabama 377 U.S. 129 (1964) ............0.. 20 Commissioner v. Estate of Bosch 387 U.S. 456 (1967) .28,29 Commissioner v. Lester 366 U.5. 299 (1961) Commissioner v. Sunnen 333 U.S. 591 (1948) ........ 28,29 Farwell v. Farwell 33 Wis. 2d 324, 147 N.W. ye a TER © Sir Shree nl a ear Er rere eee 27 Freuler v. Helvering 291 U.S. 35 (1934) ...........500e. 28 Helvering v. Fitch 296 U.S. 1 (1935) ........c cece cece 22 Hesse, Marion RK. 6D TG: GES (1973S) ..in ccc cece wens 25 Fiesee, Tacnie G. 7 7.6. 700 Ure 6 Os es ec ew ete retaes 23 Hogg, Thomas E. 13 T.C. 361 (1949) ............cse0ee 23 Jackson, Lewis B. Jr. 54 T.C. 125 (1970) ............0008. 9 Jenkins v. Georgia 418 U.S. 153 (1974) .................20 Johnson v. Johnson 37 Wis. 2d 302, 155 N.W. Se EE Ps oly CA ous aase Fata eds KE dead 17 Lemm v. Lemm 72 Wis. 2d 457, 259 N.W. 2d 440 PRUNE sista bade A + Mig PESTS Ol bode be BER OBER ROL ERE S 27 Luedke v. Luedke 215 Wis. 303, 254, N.W. 525 (1934) ...27 Miner v. Miner 10 Wis. 2d 438, 103 N.W. 2d 4 (1960) .. .24 New York ex rel Bryant v. Zimmerman 278 TC ne ee oe eis pe Ocala Star-Banner Co. v. Damron 401 U.S. 295 (1971) ...20 Ohio ex rel Popouri v. Agler, 280 U.S. 379 (1930) ...... 21 Pittsburgh, Cincinnati, Chicago & St. Louis Railway Company v. Long Island Loan & Trust Company 172 U.S. OES 6 iis biel h EAE As Se ER VORRAL os eae eR CEES 16 ae nO ll i dod : -of insurance and investments, custody of children, pay- “ment of attorney fees and. other matters. The combined ; ; ° BOF Sees 5 “. 4 and was’ awarded to her-pur- Se ee Ae Br l sza, re Tw ae, ees. +.5,'"\.The stipulation was made part of the record through -"._ “@ process of asking questions of the parties to determine . © whether they understood and agreed to its provisions.’ - -: ‘ Questions were first directed to Jean Wright by her - oo | Dh ke oly 103 ; counsel. Among the questions were those relating to. alimony and property division as follows: PES a a, eee 6] .. OFFICIAL WISCONSIN REPORTS, 249 Bs _ Supreme Court - 3 “Answer: (by Jean Wright) Yes. . . : “Question: T $228,000.00 within the next. ten and a half years or ten years six months on. the following terms: no less than $2,000.00 per month for the next six months after . the entry of judgment and the sum of $1,800.00 per month for the balance of the term of the payment of that $228,000.00, do you understand that? oe ate “Answer: (by Jean Wright) Yes, sir.” ~ The stipulation provided. that payment of the $228,000 would be secured by an escrow account funded with . “Question: That. alimony be denied, you understand” hat the defendant (sic) will pay you stock. If Mr. Wright died, the unpaid balance of the $228,000 would either be paid from his estate or from the escrow account. .The payment of $228,000 was in - addition to other property awarded to her. fans William Wright’s attorney then questioned him and Es ee eRe Se eh eee “Question: You feel you fully understand the provi- Sions thereof?: ~-°:. s* é 105 a “= - es 6] § \OFFICIAL WISCONSIN REPORTS, 251 - « Supreme Court -. “Counsel for William Wright Proposed that the para- graph relating to the $228,000 read that “alimony be and hereby is denied and in lieu of said alimony and in full Satisfaction of any claim therefor, and as a complete _ division of estate and to complete the division of the Property of ‘the parties, the plaintiff shall pay to the defendant the sum of $228,000.00 in 104% years of entry of judgment, said sum to be paid at the rate of $2,000.00 - . each month for a period of six months and $1,800.00 each month thereafter for a Period of 10 years.” .- | . The trial judge rejected the husband’s proposed find- . ings of fact and conclusions of law and instead adopted _ those submitted by counsel for the wife which provided et nck ee ; ae defendant the sum of $228,000.00 within ten and one-half -. (1014) years of the date of this. judgment; and payable on the following terms: No less than $2,000.00 per month | be paid by plaintiff to the defendant for the first six months; that thereafter the plaintiff shall pay to the defendant no less than. the sum of $1,800.00 per month . Clients. was ‘present, I-made it very specifically ‘clear that we ‘would not consider this as alimony or report it as alimony, that it . ' Was in truth and in-fact a division of estate, nestemar ag Mk IOS Cra 7 7 fn yee ts - «- a ‘, f re $48 Pe 4 ™ Pia oa _ rs > oo O.. “Mrs, Shellow: In lieu of alimony, © 9° 2 * 2s 5¥: a wt SR ss “Mr. Loeb: Even if it were in lieu or otherwise. el has, eee “". “Mrs. Shellow: Our only contention, Mr. Loeb, is that thisisa - division of estate in liew of alimony. dt sleet dees et eeg Bees Cia Rie Loeb: If you-do so, we warn you now, if you take it off as ny, you proceed at your own peril. °. |, ° ne ae Nea Ra “Mrs. Shellow: You fail to pay tax on it that’s between youand . your client, Mr. Loeb.” -. -* ey SS Gena ee ae a See ee eg 106 ee nel _ - 252 OFFICIAL WISCONSIN REPORTS. [Nov. . - Wright v. Wright, 92 Wis. 2d 246, . “ °F for the balance of the term of payment of $228,000.00 specified herein.” = -. Se at Bees ee Findings of’ fact and conclusions of law were signed . by the court on January 29, 1968. The judgment was . signed and filed on February 2,1968. _. eee Each party took the position that the other should _ bear the federal income tax consequences of-the monthly payments to Jean Wright.. William Wright deducted the payments on his income tax return and Jean Wright failed to include the payments made to her as income. She took the position that the payments were a division of property rather than support under federal income - 2 tax law. The Internal Revenue Service assessed de- ficiencies against both parties, asi ; _ The matter was litigated-in the Tax Court? which ruled that the payments made to her grew out of his marital obligation of support and treated the payments as income to her for federal .income tax. purposes. The matter was then appealed to the Seventh Circuit Court of. Appeals? which determined’ that the payments were Periodic payments under §71 of the Internal Revenue Code* and includable as income to Jean Wright in the year received and deductible by William Wright under _ §215 of the Internal Revenue Code.® The ten and one- - . half year payment period was a factor in‘the decision of . the federal courts.® : cf Na * germenton Sae'e wl eo: cee de tee comune | a , : CLI F! Tee ELH sy ae aye -* ot 3s wae: _ = Wright v. Commissioner, 62 T.C. 377 (1974). ae . 3 Wright v. Commissioner Of Internal Revenue, 543 F.2d 593 OU aia A a ee VS ea oe ees ..» £26 US.C.A. (LR.C. 1954) §71. 8 Ot es ay © 26 U.S.C.A. (IBC, 1954) §215,- 8 te © The Federal Court of Appeals noted, “Had the parties intend- . ' ed these to be installment payments under Section 71(c)(1) rath- ' er than periodic payments under Section 71(a), they could easily ‘have provided that the principal sum of $228,000.00 must be paid within ten years.” Wright v. Commissioner Of Internal Revenue. _-:848 F.2d 593, 598 (7th Cir.1976), : a . 107 6]. OFFICIAL WISCONSIN REPORTS. - 253 Supreme Court «.. The resulting increase in taxes to Jean. Wright was computed to be $102,840, 2p ‘,. , Jean Wright returned to the state court to try and recoup payment from her former husband for the tax assessment. The family court commissioner who re- viewed her petition to modify the divorce judgment held that he lacked power to do so. by virtue of sec. 247.32, Stats.,” and dismissed her petition. This occurred during 1977, approximately ten years after the divorce was — Jean Wright then sought a de novo review of the family court commissioner’s determination. She requested the judgment be modified to provide for alimony in an amount sufficient to pay the additional taxes or that her . .former husband. be ordered to pay on a ‘theory that the judgment meant to give her $228,000. free of any tax obligation and that the court was merely enforcing that _ judgment provision.® agai ity cot et, -. The circuit court relying primarily on its interpretation of Rotter v. Rotter, 80 Wis.2d 56, 257 N.W.2d. 86h (1977), amended the judgment by adding paragraph thirty-four toprovide: «sg. sf re :. 2>“That, in enforcement ofthis judgment and not as ‘. -alimony, support or fnaintenance, (William Wright) shall - pay to (Jean Wright) forthwith the sum of $102,840.00, 2 : 7 (Seefootnote10).°- = Saar e e bs ', +8“247.01. Jurisdiction. The circuit. courts have jurisdiction -_ .. ‘which sum, in the intént of this court, shall not be ; ar ss . “all actions affecting marriage and‘of all actions under s. 52.10. (or _. Concurrent. jurisdiction where other courts are vested with: like -- jurisdiction), and have authority to do all acts and things neces-. ‘sary and proper in guch actions and to éarry their orders and. .. Judgments into execution as prescribed in this chapter. All such = actions shall be ‘commenced and ‘conducted and the orders and ‘Judgments therein enforced according to these statutes in respect to actions in circuit court, as far as applicable, except .as provided in this chapter and in s. 52.10.” ae mtr oat ey! Ae datas ~ le Out sj ee. .io_ s - -——- «© 108 -* 254°. OFFICIAL WISCONSIN REPORTS. [Nov.. Wright v. birt 92 Wis. 2d 246. includable in the income of: (Jean Wright) for income. tax purposes nor deductible from ithe i income of sida wae Wright) for income tax purposes.” . The amended judgment was signed by the clerk on % ’ March 8, 1978. - _ The Wisconsin Court of ‘ieeitale held that the trial ' court was without authority to enter the order and judg- © ment appealed from, either under the provisions of sec. 247.01, Stats., or under sec. 247.32, and reversed. ! . The matter is now before us on review. : There are two principle questions on review: 1. Did the circuit court have authority under sec. | 247.01, Stats. 1977, to order payment of an additional $102,840 to Jean Wright under the theory it was merely enforcing the original divorce judgment? We conclude that it did not have such authority. 2. Did the circuit court have authority under sec. 247. 32, Stats. 1967, to modify the original divorce judg- ‘ment to provide for additional alimony? = ota uate the answer is no. hed i. DID THE CIRCUIT COURT. HAVE AUTHORITY , UNDER SEC. 247.01 STATS. 1977,TO ORDER .- ‘PAYMENT OF AN ADDIZIONAL, $102,840 TO -_ JEAN WRIGHT UNDER THE THEORY IT “ WAS MERELY ENFORCING THE ORIGINAL 3 - ee - DIVORCE JUDGMENT?.... PSacememiicigin as | . . e . ene me ee ee ees Ste it To eS a —_—_" - 1-3). open, og AE a ae Dee. 8h oes hi cscs Soe weg _-/ ++. In the case 2 of Rotter v. Rotter, supra, relied‘o on by the "a is trial: court, the husband had failed to comply with ex- _ . “plicit language’ of the ‘divorce judgment in which he was ordered to cooperate in the conversion ‘of health -insurance .coverage for his ex-wife... He assured her ‘that he would do so..As a result of her reliance on the court order ard his promise she incurred sub- stantial medical bills. The husband had allowed the . m 109 6] ‘OFFICIAL WISCONSIN REPORTS. 255 Onn Supreme Court = policy of insurance to lapse. The circuit court ordered the husband to pay the medical bills and this Court upheld its authority under sec. 247.01, Stats. This Court - pointed out that that statute vests in the trial courts the authority to do all things necessary and proper to carry their orders and judgments into execution. This Court held that the order was necessary to give effect to the divorce judgment and to protect the wife from the’ loss occasioned by the inaction of the husband.’ The Court pointed out that without such authority the pro- visions of the judgment would have been of no effect. ’ But it is apparent that the present case presents an en- tirely different set of circumstances than those con- fronting this Court in Rotter. William Wright has complied with the original judgment. He has made payments over ten and one-half years totalling $228, 000. - The judgment has been complied with. A judgment is to be construed as of the time of its entry. Callaghan’s, Wisconsin Pleading And Practice, sec. 37.49 (1978). ' Judgments are to be construed.in the same manner as other written instruments. Vaccaro v. Vaccaro, 67 _ Wis.2d 477, 482, 227°N.W.2d 62 (1975). A judgment that is clear on .its face is not open to construction but if it is ambiguous, construction is allowed and the court will consider the whole record, including pleadings, . findings of fact and conclusion of law, and the judgment: itself. See, Lally v. Lally, 152 Wis. 56, 138 N.W. 651 (1913) ; Estate of Boyd,.18 Wis.2d 379, 381, 118 N.W.2d . 9705 (1963). But the judgment entered in 1967 is not ‘ambiguous as to its terms. The judgment provided for the payment. of $228,000 over ten and one-half years. — The trial ‘court adopted the wife’s findings of facts and ‘. conclusions of law and the judgment was based thereon.” Counsel for the wife did contend at the December 8, 1967 hearing that the findings submitted in her behalf and which the trial court adopted would have the 110 256 OFFICIAL WISCONSIN REPORTS:. ‘ [Nov.) Wright v. Wright, 92 Wis. 2d 246. legal effect of excluding the payments from her income and barring a deduction for William Wright. The United. States Court of Appeals for the Seventh Circuit, as — cited above, disagreed.: The trial court at the time of the findings and conclusions made no reference to in- ~ come tax liability. Counsel for the wife argues that the trial court must be presumed to have meant that the .. wife should not have to pay because in Wetzel v. Wetzel, . ~ 35 Wis.2d 108, (110, 150 N. W.2d 482 Hei this eourk said: “We think in making a division of property or in granting alimony, or both, that consideration should be given to the tax consequences. Disregarding the effect — : of taxes may result in an unrealistic and unjust result. We do not. hold that the trial court oadk abi as a solution a method which produces the least amount of tax for the husband or for the wife, but.in arriving at a determination of the business. side of the divorce the tax impact is a nae which ——_ the whole process. fe eens: sie S4 RY _ However, the duty placed: ‘on ia judge in’ Wetzel _ involved a contested divorce in which the division. of property, both as to the amount and the form of division, _. was made by the trial court. In the case before us, the - 3 -_..‘ division, both as to amount and form, was made by the were ‘ ’ parties by stipulation in open court. The. findings of . . .. fact and conclusions of law were in the form submitted . “by Jean Wright’s counsel and the court at her Tequest -’.. adopted those findings and conclusions.” rgke 88, #52) M4, SY en ee sh it shee et ” Aer Counsel -when ‘entering into’ a divorea ‘stipulation = ae es the duty ‘to consider tax consequences to his client. ei PRT The trial court is obliged to consider income tax conse-. . - ‘’ quences in a property stipulation. Wetzel, supra. Failure. of a trial court to consider. tax consequences may con- — an abuse of ee But time = — from 111 e cs ~. S902 6]. OFFICIAL WISCONSIN REPORTS. 257 Supreme Court - - g judgment for abuse of discretion has long since expired | in this.case.. The record here shows the trial court was aware that taxes were a factor to be considered. Secs. 71(a) (1) and 215 of the Internal Revenue Code were adopted in 1942 in order to clarify the treatment of property divisions and support payments as a conse- quence of divorce. M. Chirelstein, Federal Income Taza- tion, $9.03 (1977 ). The judgment was silent as to any intended income tax consequences.® The definition of alimony and property division under state law is not the same or co-extensive with the provisions for periodic and installment payments under the Internal Revenue Code. In Seiler v. Seiler, 48 -Wis.2d 400, 180 N.W.2d 627 (1970), the, wife sought relief from a property division which would constitute periodic payments under sec. 71 Internal Revenue Code. Even though it was ‘a property division under Wisconsin law, and so referred to in this Court’s.opinion, it. was also a periodic payment under the Internal Revenue Code, inclydable i in the wife’s . , income for federal income ine: Eurpones. ¢ Sodan [6J 00° tue ° st “If there is no pee on the face. of the stipulation or *iudgment, the subjective intent of the parties is ir- ~ relevant. “Because a judgment is to be construed like ..; resort to the subjective in-. . any other instrument, . tent of the parties is irrelevant.” Vaccaro v. Vaccaro, supra, at 483; Miller. v. vases 67 Wis. 2d. oo a _ 227.N.W.2d 626 (1975). nee -.” «Because the husband in the case iy shige us “had rully : complied with the en. sec. Set 01, Sart did not apply. © 3. Ce te 9 “Generally” oe ——— Scalbnaind for more than rT - years from the date of the divorce decree or separation agreement are considered periodic payments, even though a lump sum total is - specified.” E. Griswold & M. _— roving Income pearing P. 833 (1976). ToS hae apna ot 112 ee a NS e . . >. 258 OFFICIAL WISCONSIN REPORTS. [Nov. Wright v. Wright, 92 Wis. 2d 246. "sf II. DID THE CIRCUIT COURT HAVE AUTHORITY _ | UNDER SEC. 247.82, STATS. 1967, TO MODI- “FY THE ORIGINAL JUDGMENT TO PRO- - “VIDE FOR ADDITIONAL ALIMONY? — ‘In : memorandum decision entered on December 20, 1977, the circuit court concluded that the original judg- + ment did provide for certain items of alimony and thus were modifiable. These items were: a provision requir- ing William to pay a portion of Jean Wright’s medical expenses; a provision requiring William Wright to main- tain a life insurance policy on his life with Jean Wright as the beneficiary, and a provision that William Wright pay certain investment expenses incurred by Jean Wright. All were to terminate on the death or remarriage of Jean Wright. She argues these were payments in the nature of alimony thereby leaving the divorce judgment open to revision under the provisions of sec, 247.32.'° - 1© Sec, 247.32, Stats., was amended in 1972 to provide that a- judgment which fails to allow for alimony or only grants alimony —~ for a limited time may not thereafter be modified as to the ali- mony award, but it also provided that it would only be effective for judgments rendered or granted after the effective date of the ’ Act, April 12, 1972. $12, Chapter 220, Laws of 1971, effectjve April 12, 1972. Since the original judgment of divorce in this case was granted in 1968 this limitation does not Arent Pree. v. -- Moore, 89 Wis.2d 665, 278 N.W.2d 881 (1979). Bat ies Sec, 247.32, Stats. 1967, provides: . . - | “947.32. Revision of judgment. After s judgment Ane ae “2 2 oe alimony or other allowance for the wife and children, or either > of them, or for the appointment of trustees as aforesaid the court’ —— may, from time to time, on the petition of either of the parties * and upon notice:to the family court commissioner, revise and alter. such judgment respecting the amount of-such alimony or allow- ance and the payment thereof, and also respecting the appropria- tion and payment of the principal and income of the property so held in trust, and may make any judgment respecting any of the | said matters which such court might have made in the original ~ action. But when a final division of the property shall have been . made under s. 247,26 no other an shall be thereafter made — _ for the wife.” ] ¥ rn ee . 113 6] OFFICIAL WISCONSIN REPORTS. 259 _ Supreme Court Thus,. she argues that the circuit court’s award of - $102,840 could be made as alimony. It was also argued on her behalf that the definition of alimony is or should, be. the same as.a periodic payment under 87. 1 of me Internal Revenue Code. However, the order amending the par SN and the amended judgment that counsel for Jean Wright asks this Court to uphold specifically says that the ordered “payment of $102,840 is not alimony. The Court of Appeals assumed without deciding, the maintenance of a life insurance policy and the payment of medical and investment expenses by William Wright, which were to terminate upon the death or remarriage of Jean Wright, were “in the nature of alimony.” The court further found that even though these items might have been alimony, thus modifiable, the payment of $228,000 was a fixed amount for the division of estate and by defi- nition non-modifiable. Implicit in this finding is that the modification of alimony, if allowed, would be limited’ to the scope of the original award, that i is, medical, life in- _ surance andinvestmentexpenses. . _, . Even if it is to be assumed that the payments ned to be made during Jean Wright’s lifetime or until remar- _ . Yiage are “in the nature of alimony” it is clear that gen- | _ eral alimony for the support of the wife was not given. ae . These payments were for specific purposes and under the terms of the judgment, the circuit court did not. re- i: ;tain jurisdiction to make an award ‘to compensate for ~ Toss ‘incurred by’ income’ ‘taxes. ‘Jurisdiction that may have been: retained was limited to those specific items of “Hifi insurance, medical expenses and investment expenses. . Jean Wright’s counsel calls.our attention to the case of - Burg v. Burg, 1 Wis.2d 419, 85 N.W.2d 356 (1957), where a nominal amount of alimony was held to be sufficient _ for a Jater award of general alimony. However, the nom-. inal award:of alimony in Burg was made for the express purpose of retaining jurisdiction over alimony so that if : e 114 . re et te eee ee . - Bewts.’« 260 OFFICIAL WISCONSIN REPORTS. [Nov. | Wright v. Wright, 92 Wis. 2d 246. the need arose an award could be made in the future. It was a device designed to prevent the wife from phen en- . tirely foreclosed from receiving alimony. In Kronforst v. Kronforst, 21 Wis.2d 54, 65-66, 123 N.W.2da 528 (1968), this Courtsaid: = -- - : “There is no question but that, if the juidemmeit ti is sie’ ified so as to retain jurisdiction over alimony, the county court will have jurisdiction to award alimony in the fu- ture to plaintiff upon an adequate showing of change of circumstances even though no alimony is presently award- ed. However, it should be pointed out that a trial court should not reserve such jurisdiction to award ali- mony without stating its reasons for so doing. . . Such reasons may be stated in the memorandum decision, in the findings of fact, or the judgment. . . The trial court can effectively retain jurisdictions to award alimony in the future without in the meantime awarding alimony in @ nominal amount, such as one dollar per month, as was done in Hansen v. Hansen, 259 Wis. 185, 49 N.W.2d 434 (357 Burg v. wath 1 Wis. 2d 419, 85 N. W.2d 356 ~The original: us in the case at ter ae in 1968 did not reserve jurisdiction to make a general ali- mony award as is required by Kronforst, supra. Para- . graph twenty-second of the judgment states that alimony _ is denied and certainly negatives an intent on the part of _ in the future.” ase kee et ST! tr eves = ss c wet Ratna “¢ as ~". ates 2 = t* . “(q~ ‘ os 8+ eer : aha ee ~ ow BE -. Thus, to the extent that the award of i insurance, "pind £ “the court to reserve the power to ‘Taake a ‘general award - cal and investment expenses constituted alimony, any pod modification of the original judgment should be con- strained to those’ specific items. - If it were held other- wise, a very limited provision for the payment of specific” expenses of one spouse could later become the basis of a much larger general alimony award. This would have the . effect of limiting the flexibility! of the parties and the court in devising the settlement and judgment provisions. | } > - . 6] OFFICIAL WISCONSIN REPORTS. 261..— ‘s. Supreme Court It would be impossible to obtain the agreementofaspouse - to pick up expenses such as these if it was known .that gross modification could occur at’a later date. Thus, the original judgment in this case demonstrates that the trial- . court considered the relative positions of the parties and decided against a reservation of jurisdiction for a general | alimony award. The error in that judgment, if there was. . one, is not reviewable here since the time for appeal of: . that judgment has long since expired. Anderson v. An- ie es derson, 8 Wis.2d 133, 98 N.W.2d°434 (1959) ;.see also, Steinkopf v. Steinkopf, 165 Wis, 224, 161 -N.W. 757 (1917). To the extent that the circuit court had jurisdic- tion to modify the alimony awarded for the insurance, medical and investment expenses, it was limited to those items and could not award He, 840 as Been cre sae on this ground. ~ matt Oot as Counsel for Jean ‘Wright argues that if the installment payments are taxable under. the federal Jaw then they are also alimony under Wisconsin law.. This argument ‘ . would equate periodic payments under the. Internal Reve-. ~ ~ nue Code §71 with alimony under. state law. Although Moe the ‘definitions and applications ‘may overlap in many . ite Cases, | ‘they clearly: are not co-extensive for all purposes. . and in.all events. The Internal Revenue Code addresses. - . _ itself to: periodic and installment: -payments.'". It is not:..:...--- te, OF “SEC. 711. ALIMONY AND SEPARATE MAINTENANCE .. .: :. PAYMENTS... [Sec. 71(a)] (a) GENERAL RULE—(1) DE-. * -- CREE ‘OF- DIVORCE OR SEPARATE ‘MAINTENANCE—It a. *. .. wife is divorced or legally separated from her husband under a de-. > * -" eree of divorce or of separate maintenance, the wife’s gross income - - Includes periodic payments (whether or not made at regular inter- - * wals) received after such decree in discharge of (or-attributable . - ‘to property transferred, in trust or otherwise, in. discharge of) a...’ legal obligation whick because of marital or family relationship, . is imposed on or incurred by the husband under the deéree or un-: der a written instrument — to —_ divorce ¢ or penton. . 116 Leh ** -* - 962° | OFFICIAL WISCONSIN REPORTS. [Nov. ~ Wright v. Wright, 92 Wis. 2d 246. the labels placed on the payments which are determina- tive under the federal tax law. It is the structure and _effect of the payments which control ag characterization. As lias been stated: «20 3 eng uektT eae ~ “fa] number of cases déal with the ‘tisiinetiog aeaiein | a alimony and‘ property settlements. In approaching the * - issue, the [federal] ‘courts have not always adopted the * ~. to the divorce.” L. Thomas Jr., Tax Consequences Of. characterization of the payments given by the parties or the state court, but have considered inter alia, the nature of the negotiations between the parties, whether: such payments are in lump sum, whether they are in addition to other support or maintenance payments specified in a. decree or agreement and whether the wife has released any interest in property or other rights held by her prior “SEC. 71(c) PRINCIPAL SUM PAID IN INSTALLMENTS —(1) GENERAL RULE—For purposes of subsection (a), in- stallment payments, discharging a part of an obligation’ the prin- cipal sumi of which is, either in terms of money or property, spec- ' ified in the decree, instrument, or agreement shall Tak be treated as periodic payments. . “(2) WHERE PERIOD FOR PAYMENT Is MORE THAN 10° YEARS—lIf£, by the terms of the decree, instrument, or agreement, * the principal sum referred to in paragraph (1) is to be paid or may © ; be paid over.a period ending more than 10 years from the date of © such decree, instrament, or agreement then (notwithstanding para- - graph: (1) the installment payments: shall be treated as periodic — nas payments for-purposes of. subsection (a), but (in the case of any- — 4 _ one taxable year of the wife). only-to the extent of 10 percent of - ‘the principal sum. For purposes of the preceding sentence, the. ~- . part .of any principal sum which: is. allocable to a period after the: ©. ~-taxable year of the wife in which it is received shall be treated as _ - an installment, payment for ‘the taxable year in which. it is re-_ '_—- ceived.”. ...-... +. “or o25tt Yes “adele Anes Wi enies “SEC. 71(d): RULE FOR HUSBAND IN ‘CASE OF TRANS ‘ ° -2. FERRED’ PROPERTY—The husband’s gross income does‘not in- - ".* ., Clude amounts received which, under subsection (a), are (1) in- @) attributable = ee ae a ea re eee £ Aes Ag ne cludible in the gross income of the eee “117 aT SSS DIE A i bE Se - . . . a nr re ne ee a 6] OFFICIAL WISCONSIN REPORTS. 263 Supreme Court 7 Marriage, Separation And Divorce. ALI-ABA. Commit- tee On Continuing Legal Education, pp. 118-119 (1976). Under the terms of the divorce judgment in this case, William Wright was required to pay his ex-wife $228,000 in installments. The payments were not to end on her death or remarriage and the full amount was to be paid even if he had died before all payments had been made. The judgment called it a division of estate and division of property. Under Wisconsin law this was a property di- vision and as such it is not subject to modification under our statutes. The Circuit Court lacked authority under sec. 247.32, Stats., to modify the original judgment. By the Court. —The decision by the Court of Appeals is affirmed. . COFFEY, J., took no part. WILLIAM G. CALLOW, J . (dissenting). The major- ity states “the judgment was silent as to any intended income tax consequences.” Simultaneously, the majority recognizes that trial courts are obliged to consider income tax consequences in a property stipulation, Wetzel v. Wet- zel, 35 Wis.2d 103, 110, 150 N.W.2d 482 (1967), and that the trial court in this case was aware that income tax con- 7 _siderations played a significant role; yet the majority concludes that the judgment unambiguously allocates to Jean Wright the income tax liability for the payments made by William to Jean. I cannot agree, and would find : the judgment ‘ambiguous as to the tax consequences of the payments to Jean Wright.” Accordingly, I would re- mand this case to the circuit court for a determination of the original intent of the judgment. ire Judgments are to.be construed in the same manner as other written instruments, Vaccaro v. Vaccaro, 67 Wis.2d 477, 482, 227 N.W.2d 62 (1975), and are to be construed as of the time of entry. Childs v. Dakike, 160 Wis. 184, _ 118 264 OFFICIAL WISCONSIN REPORTS. [Nov. Wright v. Wright, 92 Wis. 2d 246, Dissent. = 192, 151 N.W. 878 (1915). If reasonably or fairly suscep- tible to different constructions,a written instrument is ambiguous.. Lemke v. Larsen Co., 35 a 427, 432, 151 N.W.2d 17 (1967). - Section 71(a)(1) of the. Internal a ite Code of 1954 provides that periodic payments are income to the ex-wife if they are received after a decree of divorce and - ‘in discharge of. the husband’s “legal. obligation which, because of the marital or family relationship, is imposed __ on or incurred by the husband under the decree or under | - a written instrument incident to such divorce or separa- - tion.” This section “contemplates a payment made in pursuance of the husband’s obligation of support and not — in satisfaction of some property rights of the former © spouse,” Van Orman v. C.iR., 418 F.2d 170, q71 (re } Cir. 1969). - Under Section 7 1 (c) of the teeaal Si sciiasig Code of | 1954, installment payments discharging an obligation to pay a principal sum specified in the decree are not to be - treated as “periodic payments” within the meaning of Section 71(a) unless the decree provides that the prin- cipal sum “is to be paid or may: be paid over a period eriding more than 10 years from the date of such decree,” in which case the amount received constitutes a “periodic payment” with the ‘meaning of Section 7 (c) (2) “to the extent of 10 percent of the principal sum.” . . _ ‘Therefore, to be. includable- under Section . 7 1 in the - °° gross.income of the wife, the principal sum must be pay- : .~* able in installments over a period in excess of ten years _ and must be in discharge of an obligation of maintenance _: “+ {imposed under the decree of divorce because of the mari- -. tal relationship. If includable in the gross income of the ~ :- wife, the payments may be deducted by the arene. “wo : Section 215. ..-- Oe, ee Sa Maes TS “xf, de Ph ser mme 1555 Admittedly, the judgment. is silent with camad ‘is its tax consequences. But silence cannot be equated with — 119 — od 6] OFFICIAL WISCONSIN REPORTS. 265 Supreme Court unambiguity, especially where we have stated “it seems more proper to presume the trial court followed the hold- ing of Wetzel v. Wetzel than that it did not.” Seiler v. - Seiler, 48 Wis.2d 400, 406, 180 N.W.2d 627 (1970). Fears that this analysis allows ambiguity to be found whenever an. instrument is silent on a particular point are exaggerated, for we can find support in the record that the point at issue here, the income tax consequences, was considered in the statement of the stipulation in open court. ferent constructions. Although installment payments executing the “property settlement” were to be made over a period greater than ten years, the trial court took the specific step of denying alimony. The decree of divorce, - at least on its face, imposes no obligation of maintenance. Here Jean Wright had a sufficient personal estate to ac- commodate her support, and the court recognized this in approving that portion of the stipulation which provided there would be no alimony. Because the parties had been married nineteen years, Jean was entitled to the portion of their accumulated estate in the sum of $228,000. I do not think it unreasonable to view the judgment as intend-, ing that Jean Wright receive $228,000 as a division of property, free of income tax liability. Nor is it entirely unreasonable to view the judgment as contemplating a di- vision of property on the basis of the parties’ respective _ property ownership at the time of divorce, plus payments for Jean’s maintenance to be made over a period of ten” : | and one-half years. As noted by the United States Court -of Appeals, this is “a close and difficult case.” eh sig See ane Com’r of Int. Rev., 543 F.2d 593, 598 (1976). Because I would find ambiguity in the original judg-— ‘ment, I would reverse the decision of the court of appeals , ‘and remand the case to the circuit court. While normally - the circuit court’s later judgment favoring Jean Wright should not be disturbed if the “great weight and clear ~~ 12¢ In my view, the judgment is fairly susceptible to dif-- se ten pee ‘ eo Oa eee eee 266 OFFICIAL WISCONSIN REPORTS. [Nov. - In Matter of Estate of Jacobs, 92 Wis. 2d 266. preponderance of the evidence is not against the circuit : court conclusion,” Rotter v. Rotter, 80 Wis.2d 56, 61, 257 N.W.2d 861 (1977), the circuit court’s hearing did not — address ambiguity in the original judgment and instead considered Jean Wright’s current. financial position, tax * liability, and health. That is inconsistent with Childs v. Dahlke, supra. Accordingly, I would remand this case . 3 with directions that the circuit court hear evidence as - the — intent of the judgment. wagers aay IN MatTeR oF Estate oF JAcons, Deceased: T1.G, Per- ' sonal Representative of the Estate, cca Vv. aeacinnccuuael OF REVENUE, Respondent. ‘Supreme Court - + 4 age ‘ —"- No. 77-168. Argued October 8,1979-— ee . Decided November 6, 2998, ti L “Taxation 8548*—inheritance tax—basis, and seein. of tax. ie " tehaitteres ‘to ‘7 tax on n right to receive | sneaiidies and. suount -" of tax is determined according to relationship of ice ee ‘and value of each transfer OF gift from decedent. ~. :’ 2. “Taxation. '8558°—inheritance tax—property subject to ‘tax— | “need not be part of decedent’s estate. " Property need not become part of egal 's estate in order: for : - it to be subject to inheritance tax.. St a ee rb 2k ‘Wills 8169.5*—Joint will—disposal of aseets by survivor oe ‘ terms of contract control. .- 2 oboe teeta of contract control right of edie ra spore of assets ; _ acquired under joint contractual will... _ ate ‘¢. Wills §169.5*—joint will—disposal of assets i ies as tent of parties at time of entering into will. _. Intent of parties at time will is entered into governs ight af survivor to dispose of assets acquired under will... * See Caliaghan’s Wisconsin Digest, same topic and section Gehan ma ‘ 121 No. 77-686 STATE OF WISCONSIN IN COURT OF APPEALS DISTRICT I WILLIAM C. WRIGHT, Plaintiff-Appellant, Vv. JEAN WRIGHT, Defendant-Respondent. APPEAL from an order and judgment of the circuit court for Milwaukee county: ROBERT M. CURLEY, Circuit Judge. Reversed and remanded with directions. Before Decker, C.J., Cannon, P.J., and R.W. Hansen, Reserve Judge. DECKER, C.J. William and Jean Wright were divorced in October, 1967. The divorce judgment pro- vided in pertinent parts: Twenty-first. That alimony be and hereby is denied. KK ° 201 Twenty-fourth. That as and for a complete division of estate and to complete the division of property of the parties, the plaintiff be and he hereby shall pay to defendant the sum of $228,000.00 within ten and one-half (10-1/2) years of the date of this judgment; and payable on the following terms: No less than $2,000.00 per month be paid by plaintiff to the defendant for the first six months; that thereafter the plain- tiff shall pay to the defendant no less than the sum of ST” 800.00 per month for the bal- ance of the term of payment of $228,000.00 specified herein. The payment provisions had been orally stipulated by the parties. Difficulty arose, however, as to the language to be utilized in the judgment because of the income tax consequences of the judgment provisions. Both parties submitted proposed findings of fact and conclusions of law and the trial court (Judge L. J. Foley, Ir.) adopted those submitted by the wife as set out above. The husband's proposed findings stated that the property division payments were to be made "in lieu of alimony."" In proposing 202 ‘such language the husband meant to bring the payments within the provisions of Section 71, T.R.C.. C1994). Under the provisions of that code section, alimony payments or pay- ments "in lieu of alimony" are periodic payments which constitute taxable income for the person receiving them and a deduc- tion for the person making such payments. As noted above, the trial court, without explanation, rejected the "in lieu of ali- mony" language and specifically provided the payments were to complete the division of property. Jean Wright did not report the payments made as taxable income in 1968, 1969 and 1970. William Wright claimed the payments as deductions against his taxable income in those years. The Commissioner of Internal 1see Marion R. Hesse (1973), 60 T.C. 685. 203 Revenue made deficiency determinations as to both parties and sought a determination whether the payments were actually "periodic payments ... in discharge of ... a legal | obligation which, because of the marital or family relationship is imposed on or in- " curred by the husband under the decree ... Section 71, I.R.C. (1954). In William C. Wright (1974), 62 T.C. 377, aff'd, Wright v. Com‘'r. of Int. Rev., 543 F.2d 593 (7th Cir. 1976), the court held that it was not bound by the label placed on the payments byi the state decree and that the payments were periodic payments. As a result, Jean Wright was found to be delinquent in her income tax payments in.the amount of $102,840. Jean Wright subsequently filed a peti- tion to modify the divorce judgment by the allowance of additional alimony. The family : | 204 court commissioner determined that he was without jurisdiction to make such an order by virtue of sec. 247.32, Stats. (1975) and dismissed the petition. Petitioner then applied to the circuit court for a de noyo review of the court commissioner's determination, requesting that the circuit court modify the judgment to provide for additional alimony or, in the alternative, enforce the original judgment "to wit: the receipt of $288 ,000. without any dim- inution by income taxes." On review, Judge Curley determined that the circuit court had jurisdiction to en- tertain the motion for modification of judg- ment and ordered William Wright to pay Jean Wright $102,840 within sixty days of entry 2tnfra, n. 5. Note: All subsequent statu- atory references are to the provisions of Wis. Stats. (1975). . 205 of the order. Although it is clear that the court found that certain provisions of the original decree were for alimony and the judgment could therefore be modified under sec. 247.32, Stats., the court stated it re- lied upon the power "inherent in this court under the authority recently propounded in Rotter v. Rotter, 80 Wis.2d 56." We hold that the court was without | jurisdiction to enter the order appealed from either under the provisions of sec. 246.01; Stats., or sec. 247.32, Stats., and reverse. 3tn Rotter v. Rotter, 80 Wis. 2d 56, 62, 257 N.W.2d 861. (1977), the Wisconsin Supreme Court distinguished between an order modifying a judgment of divorce under sec. 247.32, Stats. (1975), and an "order ... properly entered for the enforcement of the divorce judgment" under sec. 247.01, Stats. (1975). Sec. 247.01, Stats., provides that the trial courts have authority to "do all ... things necessary and proper ... to carry their orders and judg- ments into execution ..." 206 . ee ee ee eT eT e . as. falls tac vn ng Pay ate eee — . Power to Enforce Judgment The trial court concluded that the order it entered was justified by virtue of the provisions of sec. 247.01, Stats. The statute, however, presupposses a con- dition precedent to the exercise of the inherent power set out therein: that the provision of the order or judgment of the court has not been executed. The trial court was not faced with that circumstance. The provision of the original divorce judgment for payment of $228,000 ap fulfilled by the appellant and there was no need for a subsequent order or amended judgment to execute the original judgment. _ The defendant maintains that the cir- cumstances surrounding the ikke as the original judgment demonstrate the clear in- tent of the trial court to provide her with the net amount of $228,000 from the husband's estate. The heart of the argument is that 207 2 the judgment would have provided an additional sien if the trial court had been aware at the time of judgment that the property division payments would be found to be taxable income. Since the amount received was taxed, Jean Wright claims the judgment was not executed. The default divorce hearing in this case was based upon an oral stipulation of the parties. After the divorce judgment was granted, the attorneys for the parties were unable to agree upon proposed findings of fact and conclusions of law because they disagreed upon the income tax consequences of the stipulation. That disagreement was made known to Judge Foley and differently worded proposed findings and conclusions were submitted to him. The trial court ex- ecuted the findings and conclusions pre- pared by the attorney for Jean Wright which were in conformity with the oral stipulation. 208 wn od hea was, "Judgments are to be construed like other written instruments." R.B. General Trucking v. Auto Parts & Services, 3 Wis.2d 91, 98, 87 N.W.2d 863 (1958). (T)he office of judicial construc- tion is not to make contracts or to reform them, but to determine what the parties contracted to do; not necessarily what they intended to agree to, as evidenced by the lan- guage they saw fit to use. Wiscon- sin Marine & Fire Ins. Co. Bank v. Wilkin, 95 Wis. LII, 115, 69 N-W. 354 (1897) quoted in Miller v. Miller, 67 Wis.2d 435, 442, 227 N.W.2d 626 (1975). The language of the original divorce judg- ment obligated the plaintiff to pay $228,000 to the defendant to complete the division of property between the parties. The Plaintiff complied with that provision of the judgment and there was no basis for a further order to carry into execution a fully executed provision of the judgment. 209 Power to Modify Judgment In its memorandum decision the trial court adopted the position of the defendant that because some of the provisions of the original judgment were in the nature of ali- mony ,* the judgment, in its entirety, was subject to modification under the provisions of sec. 247.32, Stats., ? although it did “Plaintiff was required to pay a portion of respondent's medical expenses and investment expenses until her remarriage or death and maintain a poiicy of insurance upon his life - where in defendant was named as beneficiary. Ssec. 247.32, Stats. (1975), provides: Revision of judgment. After a judgment providing for alimony or other allowance for the wife and children, or either of them, or for the appointment of trustees as aforesaid the court may, from time to time, on the petition of either of the parties and upon notice to the family court commissioner, revise and alter such judg- ment respecting the amount of such alimony or allowance and the payment thereof, and also respecting the appropriation and pay- ment of the principal and income of the property so held in trust, and may make any judgment respecting any of the said matters which such court might have made in the original action. But when a final division of the property shall have been made under Sec. DAT 26 no other provisions shall be thereafter made for the wife. 210 ™ — pe not rely upon that statute in making its decision. Section 247.32, Stats., kia time modification of provisions for alimony contained in a judgment of divorce. As che Wisconsin Supreme Court stated in Gray v. Gray, 240 Wis. 285, 287, 3 N.W.2d 376 (1942): "The provision for alimony may be revised from time to time but the division of the estate is fixed for all time. Sec. 247.32, Stats.""6 The judgment provision for payment of $228,000 in monthly installments specified that it was "as and for a complete division of estate and to complete the division of property between the parties." The order appealed from invalidly modified the pro- vision. Assuming the medical, investment and life insurance costs were in the nature 6 ° abe.07° SeacseP seaiacrs ts Serehis one MSE 211 4 they were subject to mod- of alimony, ification under sec. 247.32, Stats. Payments to complete the division of property ers not. By the Court:--Judgment and order modifying the original divorce judgment reversed. Cause remanded for proceedings consistent with this opinion. Recommendation: No publication. 7s question we need not reach. Gee} STATE OF WISCONSIN : CIRCUIT COURT : MILWAUKEE COUNTY WILLIAM C. WRIGHT, Plaintiff, vs. JEAN WRIGHT, Defendant. MEMORANDUM DECISION This matter is before the Circuit Court on the defendant wife's motion to modify the judg- ment to provide for additional alimony, or, in the alternative, to eni ~“e the judgment. The original judgment was entered by the Hon. Leander J. Foley, Jr., Judge of the Circuit Court of Milwaukee County, on October 4, 1967. On February 10, 1977, the defendant, Jean Wright, ob- tained an Order to Show Cause, signed by the Hon. Glen W. Ploetz, Assistant Family Court Commissioner of Milwaukee County, Wisconsin. This order directed the plaintiff and petitioner, William C. Wright, to show cause why the judgment should not be 301 modified to provide for "additional alimony” payable by the plaintiff to the defendant. This order was returnable April 27, 1977. On July 1, 1977, the matter was heard before the Hon. William F. Seales Assistant Family Court Camissioner. Assistant Fanily Court Commissioner Duski, after consideration of the briefs and arguments presented by counsel for the respective parties, denied the defendant's motion for additional alimony and held that a judgment of divorce cannot be revised if that judgment makes no provision for alimony. He concluded ti:at the judgment of divorce in the original action here provided for only property settlement and not alimony; consequently, that judgment could not be disturbed. This matter is _ now before this court because the defendant wife moved for a review of the Family Court Commissioner's decision. This court has had the benefit of perusing the original judgment, the transcript and findings of 302 a SEN fact and conclusions of law. Testimony and oral argument was had before this court on September 12, 1977, wherein the defendant, Jean W. Wright, testified. 20 exhibits were offered and received. Oral argument was presented by Mr. Bruce C. O'Neill on behalf of the defendant wife, and by Mr. Robert E. Cook on behalf of the plaintiff husband. Mr. Gerald J. Kahn also argued on behalf of the plain- tiff Imsband. The defendant wife testified at the hearing, held before this court on September 12, 1977, as to her claimed changed circumstances; namely, that the income tax liability changed her circun- stances because her assets were the same as they were at the time of the divorce, which consisted primarily of a farm she owned and certain modest- yield securities with the incame from such assets, in all respects, being modest. This court has also had the benefit of the inspection of Circuit Court Case No. 435-823, which was a later divorce action between this plaintiff and his second wife, Ellen Wright, in which the 303 | plaintiff's financial declaration showed that he had a net worth of approximately $3,000,000.00, and an annual incame of approximately $100,000.00. 3 Further, this court has had the benefit of perusing the decisions from the U.S. Tax Court controversy which ultimately led to the parties being back before this court. The contentions of the defendant wife are that a Wisconsin judgment of divorce can provide for both alimony and property division; that both Wisconsin and Federal Income Tax Laws define alimony payments as support payments; that this court would have made the payments "in lieu of alimony" if it had intended that the payments be taxable to the wife; that since the court, that is to say, Judge Leander J. Foley, Jr., in his decision, chose not to use the phrase "in lieu of alimony" as to the payments in paragraph 26 of the judgment and adopted the conclusion of law proposed by the attorney for the wife, therefore, there can be no doubt that it was the intent of the Circuit 304 Court back in 1967, at the time of the granting of the judgment of divorce, that the payments required under that judgment were not to be taxable to the wife and that the wife finds herself in the predicament of now owing approximately $102,840.00 in additional taxes because of the skill of the plaintiff in the Federal Courts where he was able to convince those courts, despite the Divorce Court having stated that "Alimony be and hereby is denied," despite the Divorce Court having stated that the payments were "for a complete division of estate and to complete the division of property of the parties," and despite the Divorce Court having refused to use the term "in lieu of alimony’' as to such payments, that such payments were really support payments. It is further contended by the defendant wife that since this is a court of equity it can remedy the injustice being imposed by the plaintiff on his ex-wife by this court finding that it intended the payments under paragraph 26 of the judement to be 305 tax free to the wife and requiring the husband to provide the wife with money so that she can offset her tax liability on such payments by either of the following means: (a) Finding that this 3 court has jurisdiction to modify the judgment on the basis that the payments under paragraph 26 of the judgment are for alimony and then modifying the judgment to provide the wife with additional alimony so that she can pay her taxes; or (b). Enforcing the judgment by ordering the husband to pay additional money so that she will have received $228,000.00 after taxes; in other words, a net to her of $228,000.00. It is further contended by the defendant wife that this court does in fact have jurisdiction to enforce this judgment regardless of whether or not it contains any provision for alimony. The plaintiff husband, on the other hand, con- tends, among other things, that this court lacks jurisdiction to now make such amendment as is proposed by the defendant wife's counsel, and that, 306 because of Section 247.23 of the Wisconsin Statutes, which directs that a judgment of divorce providing only for division of property and not for alimony may not thereafter be revised or modified, that : this court is tone less to make any such modificiations as requested by the defendant wife; and that the | court, therefore, lacks statutory jurisdiction to reopen such judgment. Great emphasis is placed upon the actions taken in the Federal Tax Court. This court can only say in this regard that it is not bound by any decisions made by the Federal Tax Court any more than that court would be bound by decisions made by this court, and that this court will cmsider those actions insofar as they have operated to reduce the defendant wife's settlement of $228,000.00 by a sizable sum; to-wit, $102,840.00. This court finds Assistant Family Court Commissioner Duski, in making his decision of July 1, 1977, did in fact abuse his discretion by making such decision. This court finds that Section 247.32, Wis. Stats., is not controlling inasmuch as the 307 judgment provides, among other things, at paragraph Twenty-first: "That the plaintiff shall be liable for all health, medical, and reasonably related expenses that the defendant may incur except for the first $250.00 per year and for said first $250.00 of said expense the defendant shall be liable; said liability shall terminate upon de- fendant's renarriage." While it is true this my have been a final division of estate, and it would appear that perhaps it was a prima facie property settlement, here the added factor that the payment of health, iedical, and reasonably related expenses ane be terminated upon the defendant wife's re- marriage is more a characteristic of alimony and not of a property settlement, according to the rationale in Fritschler v. Fritschler, 60 Wis. (2d) 283, 291. ! This court also concludes that the provisions in paragraph Twenty-third of the judgment, providing that the plaintiff, William C. Wight, shall maintain — the present $200,000.00 of life insurance, being with the Northwestern Mutual Life Insurance Company, 308 Policy No. 5 531 595, date of issuance, August 22, 1963, of witch the defendent ts omer tn full force and effect and shall maintain the defendant as beneficiary thereon for as long as said policy shall provide and at least to age 65 and shall keep the defendant as beneficiary of all the proceeds of said policy until she dies or remarries, also has the characteristics of alimony and not a property division. The court also finds that those provisions under paragraph Twenty-fifth of the judgment that Say with respect to financial counsel, which is named "Fiduciary Cosel, Inc." which manages the defendant wife's investment portfolio, and that the expenses thereof exceeding $100.00 per year shall hereby be paid by the plaintiff husband, and that this management shall terminate upon the defendant's death or remarriage, has the characteristics of alimony. | Therefore, it is the order of this court that the judgment shall be amended to provide 309 that the plaintiff husband pay to the defendant wife, within sixty days of this order, the sum of $102,840.00, which will have the net effect of restoring to her the exact amount lost by her because of the rulings of the United States Courts. The authority to make this order is, in the court's opinion, inherent in this court under the authority recently propounded in Rotter v. Rotter, 80 Wis. (2d) 56. it is intended that the $102,840.00 not be taxable For the sake of this Circuit Court case, to the defendant wife; otherwise, she would not be restored to the position that it is this court's opinion she was intended to be in by the original | judgment entered by the Hon. Leander J. Foley, Jr. on October 4, 1967. Dated, at Milwaukee, Wisconsin, this 20th_ day of December, 1977. BY THE COURT Robert M. Curley Circuit Judge 310 In the — For the Seventh Cirenit Nos. 75-1170 through 75-117 JEAN W. WRIGHT, . - % ‘ . ‘ f . WW. a COMMISSIONER OF INTERNAL REVENUE ? WILLIAM C. WRIGHT and ELLEN W. Wricur, : & . COMMISSIONER OF INTERNAL REVENUE - . » 4 , *%, t: Appeal from the Tax Court of the U 3 a ited St Nos. 830-72, 1356-72, 1991-72 wan te 401 Gniten States Court of Bo 1 A Respondent-Appellant _ (Cross-Appelles). neals : : sik ; Petitioner-Appellant, | ee a “ (Cross-Appellee), Re ondent-Appellee, Cross-Appellant). Petitioners-Appellees, i asi: SEPTEMBER 9, 1975—DeEcED OcToBER 08, 1976 : : 2 eae Nos. 75-1170 - 75-1176 Before STEVENS, Circuit Justice,* FAIRCHILD, Chief Judge and CAMPBELL, Senior District Judge.** CAMPBELL, Senior District Judge. These — are taken from a single decision of the United States Tax Court rendered in four consolidated cases' wherein petitioners challenged certain federal income tax deficiency determinations made by the Commissioner of Internal Revenue.? The issues on appeal are those which were before the Tax Court: : * Mr. Justice Stevens partici ated initially as Circuit Judge; on and after December 19, 1975, he participated as Circuit Justice. ** Senior District Judge William J. Campbell of the United States District Court for the Northern District of Illinois is sitting by designation. 1 William C. Wright and Ellen W. Wright v. Commissioner (No. 830-72); Wiliiam C. wrest and Ellen W. Wright v. Com- missioner (No. ng Jean W. Wright v. Commissioner (No. 1356-72) and Jean W. Wright v. Commissioner (No. 1991-72). 2 The Commissioner took inconsistent positions in his deficiency determinations against petitioners, thus insuring the recovery of back taxes from whichever taxpayer was determined by the Court to be liable. Thus, he determined deficiencies against William C. and Ellen W. Wright for the one 1968, 1969 and 1970 in the amounts of $8,603.13, $14,- _ 63.76 and $14,267.14, wg gg er. while also determining deficiencies against Jean W. Wright, : the amounts of $6,667.59, $7,330.41 and $7,093.34, respective- ly. The inconsistency arises from the fact that, in each in- _stance, the correctness of the Commissioner’s ruling rests on whether or not certain payments made by William were in- - come to Jean under peak 71 (a) and therefore deductible by . William under section 215. To the extent that they are, the deficiency against Jean is correct and that against William is incorrect. On the other hand, to the extent that such payments are not income to Jean, neither are they deductible by William, in which event the Commissioner’s deficiency deter- mination is correct as to William and incorrect with respect to Jean. _As the Commissioner’s brief indicates, his cross-appeals to this Court “are for protective purposes only. 402 for the same years, in - Nos. 75-1170 - 75-1176 3 “(1) Whether the cash payments made by William C. Wright during the calendar years 1968, 1969, and 1970 to his former wife, Jean W. Wright, are includable in her gross income for such years as alimony under the provisions of section 71, I.R.C. 1954,3 and consequently deductible for such ‘years by William C. and Ellen W. Wright under the provisions of section 215; and ; 2) Whether annual premiums paid by William C. right during the calendar years 1968, 1969, and 1970 on a term life insurance policy owned by his | former wife, Jean W. Wright, are includable in her —' gross income for such years as alimony under the provisions of section 71 and consequently deductible for such years by William C. and Ellen W. Wright under the provisions of section 215.” In the Tax Court, the parties stipulated to all facts relevant to a determination of the foregoing issues. Those facts have been set forth in the Tax Court’s opin- ion, and may be summarized as follows: William C. Wright (William) and Jean W. Wright Jean) were married in Milwaukee, Wisconsin on anuary 31, 1948. In 1967, William filed for divorce and for custody of their minor children. Jean filed a counter- claim seeking a divorce, alimony, a division of property, attorneys’ fees, costs, and custody of the children. On Oc- ' tober 4, 1967, the action for divorce came to trial, the - : parties having elected to proceed on Jean’s counterclaim. Ihe parties entered into a stipulation in open court with regard to the disposition of property owned by each of | them, custody of their children, alimony, attorneys’ fees ~ | ‘and court costs. In all pertinent respects, the stipulation of the parties was accepted and adopted by Judge L. J. Foley, Jr. of the Circuit Court for Milwaukee County, Wisconsin .in his findings of fact,.conclusions of law and judgment orally made at the hearing and included as_ ‘soph of the transcript thereof. The court found, on the ~ : asis of her counterclaim, that Jean was “entitled to an- absolute divorce.” . ! * All references are to the Internal Revenue Code of 1954. 4 Nos. 75-1170 - 75-1176 © The parties stipulated that their combined net worth was $1.065,122.00. Of this amount, assets worth $227,- 752.00, consisting of property which was either inheri- ted from her mother or purchased with the proceeds of that inheritance, were owned by Jean. The remainin assets, valued at $837,370.00, had been purchased an a were owned by William. Sse At the divorce hearing, Jean acknowledged under oath | that she understood alimony was to be denied; William acknowledged that he understood there was to be a full and complete division of estate in lieu of any claim upon him by Jean for alimony. Subsequent to the hearing, Jean’s attorney submitted proposed findings of fact and conclusions of law, in- cluding the following: | “Twenty-first. That alimony be and hereby is . denied. zx * Twenty-fifth. (a) That as and fora complete divi- sion of estate and to complete the division of proper- - of the parties, the plaintiff shall pay to the defen- 7 po the sum of $228,000.00 within ten and one-half _ (10-1/2) years of October 4, 1967, .. .”. - William subsequently objected to these proposed find- ings of fact and conclusions of law, contending that they did not conform with his understanding of the parties’ stipulation. His attorney submitted an alternate conclu- sion of law which stated: _ ? ! “25a That alimony be and hereby is denied and in - Jieu of said alimony and in full satisfaction of any — claim therefore, and as a compleve division of estate and to complete the division of property of the par-. - ties, the plaintiff shall pay to the defendant the sum of $228,000.00 in 10-1/2 years of entry of ju ent, said sum to be paid at the rate of $2,000.00 each month for a period of six months and $1,800.00 each month thereafter for a period of 10 years.” 404 ee AT CES On a Nos. 75-1170 - 75-1176" 5 Jean’s attorney argued that the lump sum payment of $228,000.00 constituted a division of the estate, not alimony, and that at the time the 10-1/2 year period was agreed upon, she did not consider the Ba nar as alimony and would not report it as such. William’s at- torney argued that the 10-1/2 year period provided for in the stipulation was designed to permit William an in- come tax deduction for the payments made over that | period of time. 7 On January 29, 1968, the court entered its findings of | fact and conclusions of law, including the following: “Twenty-second. That alimony be and hereby is denied. Twent-third. [sic] That the plaintiff, William C. Wright, shall maintain the present $200,000.00 of life insurance, being with the Northwestern Mutual Life Insurance Company. Policy No. 5 553 595, date of issuance, August 22, 1963 [sic], of which the defendant is owner in full force and effect and shall maintain the defendant as beneficiary thereon for - as long as said policy shall provide and at least to age 65 and shall keep the defendant as beneficiary of all the proceeds of said policy until she dies or - remarries; that if there are any proceeds of this in- surance that the defendant collects, whatever is not _ used by the defendant in her lifetime shall be left at the time of her death to the children of the parties, either by her will or by trust or by separate trusts -in her will. . a * + + a (a) That as and for a complete divi- sion of estate and to complete the division of proper- of the parties, the plaintiff ... shall pay the efendant the sum of $228,000.00 within ten and one-half (10-1/2) years of October 4, 1967; . . .”. The decree then set forth the terms under which the $228,000.00 was to be paid, requiring that William make payments of not less than $2,000.00 per month for the first six months, and no less than $1800.00 per month over a 10% year period, until the full $228,000 4cs —_—i- = = —- = 6 | ‘Nos. 75-1170 - 75-1176 has been paid. The divorce decree further provided that payment of this sum was to be secured by sufficient marketable securities in the investment portfolio awarded to William, and that said securities were to be placed in escrow under terms and conditions suitable to secure the payment of the money awarded to Jean. In the event of William’s death prior to full payment of the $228,000.00, Jean was to be paid on — ony wae right or from | due, either from the estate of William C. the escrow account, unless the estate “is not liquid or is insolvent, or impaired in any manner,” in which event the balance due was to be paid from the escrow ac- . count. The value of the assets awarded to Jean under the divorce decree, including the present value of the $228,000.00 lump sum payment, was determined to be $459,018.00. The value of the assets awarded to William was determined to be $606,104.00. In May of 1968, the hen executed a mutual release which, in part, stated: HEREAS, said judgment of divorce which was en- tered February 2, 1968 provided for, among other things, a property settlement between the parties in lieu of alimony; .. .”. | During the calendar years 1968, 1969 and 1970, Wil- liam paid Jean $22,200.00, $21,600.00, and $21,600.00, respectively, as installments on the principal sum of $228,000.00. He also paid in those years, respectively, $1,505.50, $1,459.50, and $1,415.50 to Northwestern Mu- tual Life Insurance Company as premiums on the $200,000.00 term life insurance policy referred to in the - twenty-third paragraph of the decree. | The Tax Court determined that the installment pay- ments made by William to Jean should have been in- cluded in Jean’s gross income for the years 1968, 1969 and 1970, pursuant to section 71, and that William was _ entitled to deduct the amounts of said — for those years pursuant to section 215(a). The court fur- ther held “that Jean did not constructively receive an economic benefit under the [insurance] policy and ino amount is includable in her income because of the pay- ments of the premium on this policy by William.” Ac- cordingly, the premiums paid were held not to be in- come to Jean, and not deductible by William. Nos. ‘75-1170 - 75-1176 7 On appeal, Jean contends that the Tax Court erred in construing the installment payments as “periodic pay- ments” within the meaning of section 71(a), and there- fore taxable income to her. William contends that the court erred in holding that no part of the insurance pre- miums constituted income to Jean, thus disallowing his claim to deductions under section 215. Nee Section 71 provides that where “periodic payments” — are received by a divorced wife from her former hus- band subsequent and pursuant to a decree of divorce “in © discharge. . . of a legal obligation which, because of the - marital or family relationship, is imposed on or incurred by the husband under the decree. . .”, such payments are included in the wife’s gross income. Under Section 71(c), installment payments discharg- ing an obligation to pay a principal sum specified in the decree are not to be treated as “periodic payments” within the meaning of Section 71(a) unless the decree provides that the Fhe sy sun “is to be paid or may be paid over a period ending more than ten years from the date of such decree. . .”, in which event the amount re- ceived constitutes a “periodic payment” within the meaning of Section 7(a) the principal sum.” Under Section 215, the husband may deduct “amounts includable under Section 71 in the gross income of his wife... .” : . Thus, to be includable under Section 71 in the gross income of the wife, the principal sum must be payable in installments over a period in excess of ten years (Sec- tion 71 (c)(2) ) and must be in discharge of an obligation | imposed under the decree because of the marital rela- | ‘tionship (Section 71(a) ). This latter requirement “con- . templates a payment made in pursuance of the hus- . band’s obligation of support and not in satisfaction of . some property rights of the former spouse.” Van Orman v. Commissioner, 418 F. 2d 170 (7th Cir. 1969). - The Tax Court held that the principal sum — ($228,000.00) could be paid in installments over a period of 10% years and that these installments therefore con- | stituted “periodic payments” for the purposes of Section 71(a). The Court further held that illam’s obligation to so compensate Jean was due to “their marital and ~ “to the extent of 10 percent of - | as P 8 Nos. 75-1170 - 75-1176 family relationship”, ie. pursuant to William’s obliga-— tion of support rather than in satisfaction of Jean’s prop- erty rights. | On appeal, Jean challenges both of these findings. She argues that the record is silent as to her need for sup- port, that she had substantial property of her own and that the divorce court’s decree reflects an intention that the payments be part of a property setilement, not contributions toward her support. She also notes that the payments were not subject to the contingencies of death or remarriage, and were secured. The Tax Court’s deci- sion, she contends, also ignores two decisions of this Court, Van Orman v. Commissioner, supra, and Houston v. Commissioner, 442 F.2d 40 (7th Cir. 1970). In holding that the: payments “were intended by the parties to be payments in discharge of a legal obligation which was imposed on her former husband, William, be- cause of the marital relationship”, the Tax Court cor- rectly observed that the question of whether payments ‘are made in recognition of the general obligation to su port or in settlement of a wife’s property rights depends. upon the facts and circumstances of each case’ The use of a particular label in the divorce decree or settlement . agreement is not conclusive;nor is any other factor irre- buttable proof of the parties’ intentions. While we con- sider this a close and difficult case, we have concluded that the Tax Court’s determination should be upheld. Among the factors which we believe supportive of this _ conclusion is the fact that the $228,000.00 awarded to Jean was obviously not paid in exchange for tangible property owned by her at the time of divorce. That prop- — erty, valued at $227,752.00, was separately awarded to her under the decree. In addition, she received property owned by William consisting of furnishings valued at $20,000.00, two automobiles and the discharge of her | liabilities in the amount of $41,266.00. | was paid in exchange for her inchoate rights to her hus- band’s property, the Tax Court held that such rights do not establish co-ownership of the property held in the - husband’s name, and from this premise seems to have - 408 In response to Jean’s contention that the $228,000.00 Nos. 75-1170 - 75-1176 | oe concluded that the loss of inchoate rights through di- | vorce cannot support a division of property. Thus, the Court concluded that “Jean did not surrender any prop- | erty interests or give up anything that is recognized as supporting a division of property in exchange for the disputed payments other than her right of alimony.” To the extent that the court held that surrender of © inchoate rights cannot support a division of property, we disagree. Where the record clearly shows that the par- | ties so intended the payments for this purpose, surren- | der of a wife’s inchoate rights in exchange for a lump | sum payment, to be made in installments over a number of years, might well preclude a finding that the pay- ments were made in pursuance of the husband's obliga- | tion of support. The intention of the parties is the princi- al determinant. But here, the record is not clear and, in fact, is silent respecting the surrender of inchoate rights and the payment of a lump sum in exchange therefor/It appears, rather, that the parties contem- plated a division of property on the basis of their respec- tive ownership at the time of divorce, plus payments for Jean’s support to be made over a period of 10% years, Further supportive of this finding is the use of a 10% year payment period. Had the parties intended these to be installment payments under Section 71 (c)(1), rather than periodic payments under Section 71(a), they could easily have provided that the principal sum of $228,000.00 must be paid within ten years. In addition, we. note that the release signed by the parties following issuance of the decree referred to “a property settlement between the parties in lieu of alimony”, which Jean had sought in her counterclaim for divorce. As Jean contends, the fact that the payments were for : a fixed sum, were secured and were not contingent upon | death or remarriage is indicative of a division of pro erty rather than payment of tsa So also is the divorce .court’s adoption, and inc usion in the divorce decree, of the findings and conclusions submitted by | Jean’s attorney. We find, however, that these conclusions | are more than counterbalanced by those factors indicat- | ing that the payments were intended for the purpose of 409 . | : 10 | . Nos. 75-1170 - 75-1176 support rather than as a division of property. As the Tax Court noted, a payment of a fixed and secured sum ~ over a definite period of time may nevertheless be in- tended to discharge the general obligation of support. It is not uncommon for the parties to provide for such pay- — ments, in lieu of alimony, where they wish to insure that the decree of divorce will not be subject to later modifi- : cation by the Court. Contrary to Jean’s contention, we do not consider the: : result in this case to be inconsistent with our previous | decision in Van Orman and Houston, supra. In Van Or- man, the “Property Settlement Agreement” obliged the taxpayer to purchase a home for his former wife. The . home was to be selected by her and was to cost not more » than $40,000.00. The a te was required to deliver | ome to his former wife within | free and clear title to the ten years. In early 1962, he paid $7700.00 down on the purchase | rice of a home and $37,500.00 urchase price, secured by a mortgage. For the years 1962 and 1963, he attempted to deduct the borrowed the remainder of the | _ mort a. and home insurance payments under Section _ 215(a). The Tax Court’s decision u holding the Commis- © sioner’s disallowance of these deductions was affirmed by this Co urt. As Jean argues, we held that Section.71 | (a)(1) “contemplates a payment made in pursuance of the | hhusband’s obligation of support and not satisfaction of | some property. rights of the former spouse.” While we , identified certain factors which are also present in thi this | case ag indicating the satisfaction of a property a we also rather than the payment of periodic support,* w pointed out that title to the home was to be delivered within the ten year limitation period of Section 71(c). More important, unlike the instant case, the Agreement - provided for gg payments, requiring “alimony of $1300.00 to $900.00 per month for a period of ten years and one month, the specific amount ae on tax- payer’s income during that period.” 418 F.2d at 171. No such separate provision for the payment of support was included in the Wright divorce decree. je. ‘ @ “(Tjhe payments made by reason of the absolute obligation bey as remarriage or change in economic status.” 418 F’. 2d at 410 ' i ‘ ' ' . to purchase the new home would not be affected by such fac: | ' - Nos. 75-1170 - 75-1176 3 Lott _Contrary to Jean’s contention, we find Houston s | tive of the Tax Court’s decision. In that case, Bomaten (husband) was obliged under the settlement agreement to transfer assets worth $505,699.44 to Schwab (wife). He was to convey non-cash assets worth $90,699.14 and $415,000.00 in cash, the latter to be paid through the im- mediate transfer of $115,000.00 and the annual payment | of $25,000.00 per year for the next twelve years. In 1959, Houston deducted $50,569.94 as “ten percen of the total of thirteen periodic payments favahle. pete : eriod of thirteen years to former spouse .. .”. The ommissioner disallowed the deduction and the Tax Court upheld the Commissioner’s ruling. We affirmed, holding that the $90,699.14 in non-cash assets and the as es in cash represented a division of property. : Ve reasoned that “[w]here there is a substantial pay- ment, such as this, which comes soon after the entry of the divorce decree, we think it is not unreasonable to oe a property settlement was intended.” 442 In the instant case however the question at i - cerns whether the annual ayments—not a lump sum transferred immediately after the divorce—were in- tended as support or as a division of assets. These pay-- ments are more closely akin to the $25,000.00 annual payment in Houston, which this Court impliedly consid- ered deductible by Houston and income to Schwab. Our opinion states: “[w]e think that the Tax Court correctly noted that the 1959 payment was distinguished from the later [$25,000.00 amounts both by its size and time of ayment.” 442 F.2d at 42. It is clear that both the Tax urt and this Court considered the fixed annual pay- ‘ments to have been intended as support. Jean also challenges the Tax Court’s finding that th | payments were “periodic payments” within the nie of Section 71(a) and Section 71(c). She contends that the decree of divorce, entered October 4, 1967, did not be- come final under Wisconsin law until October 4; 1968. Since the last ent will be due April 4, 1978, she. argues that full payment of the principal sum will be paid over a period ending less than ten years from the 411 12 , "Nos. 75-1170 - 75-1176 | date of the decree, and that, therefore, the payments re- ceived constitute “installment payments” under Section 7 hea rather than “periodic payments” under Section 71(a). eae Under Wisconsin law, the parties to a divorce may not remarry for a "ais of one year subsequent to issuance . of the decree. On this basis, Jean characterizes the de- cree as “interlocutory” until one year following its issu- ance, at which point it becomes either party may appeal, and the court may vacate or modify the judgment as it affects the marital status of © the parties. For the purposes of Section 71, we find that the decree is final at the time of its issuance. The fact that either party may appeal is indicative of its finality, as is the act that the court may vacate the judgment within that one year slg and “restore the parties to the marital relation that existed before the granting of such judg- ment.” Wis. Stats. of 1967, Sec. 247.87(2). Moreover, obligations imposed upon the parties under the decree become effective at the time it is granted. For the foregoing reasons, we hold that the Tax Court. ‘correctly construed the payments as “periodic payments received ... in discharge of ... a legal obligation which, because of the marital or family relationship, is imposed on or incurred by the husband under the decree .. .. Accordingly, they constitute gross income to Jean and are deductible under Section 215(a) by William. | We further agree with the Tax Court’s finding that the premiums paid by William on the term life insur- ance policy should not be included in Jean’s gross in- come and therefore are not deductible by William. That the premium payments oat, the requirements of Sec- tion 71(a) is undisputed in all these premium payments are not payments made in discharge of a legal obligation whjch because of the material | relationship is incurred by . The premium payments are under a decree. . . . The payments are periodic (Footnote continued on following page) | 412 inal”, During the per- - iod of one year following the issuance of the decree, but one respect’: whether | the payments were constructively received by Jean, i.e. | ® As the Tax Court noted, the “parties do not contend that : er ‘. | Nos. 75-1170 - 75-1176 ce whether she received in any of the years under consid- eration an ascertainable economic benefit through the . payment by William of premiums. , The divorce decree requires William to purchase term insurance which, unlike whole insurance, entitles the _owner-beneficiary, Jean, to no ascertainable benefits other than the proceeds of the policy upon William’s | death. Furthermore, her entitlement to the proceeds ‘is defeasible by her remarriage, death or attainment of age 65 prior to William’s death. We find that the benefits derived by Jean through the payment of premiums by William are no greater than the benefits received by the wife in Seligmann v. Com- missioner, 207 F.2d 489 (7th Cir. 1953). Under Selig- - | d for the reasons set forth in the opinion of the Tax ‘Guat hevaih 62 T. C. 377, 395-400, we find that the premiums paid by William on the term life insurance — policy are not includable in the gross income of Jean and , are not deductible by William. For the foregoing reasons, the decision of the Tax — Court is affirmed. A true Copy: Bee: Teste: Clerk of the United States Court of _. Appeals for the Seventh Circuit Jean did not actually receive the premiums paid and the dis- pute centers on whether the premium payments were con- structively received by Jean within the meaning of Section 71(a).” 62 T. C. at 396. etry et USCA 4216—Midwest Law Printing Co., Inc, Chicago—10-28-76—275 413 - AFFIRMED. . a ae t Continued | . | ; illiam is obliged to pay them over the lesser of his or | Seas lien Pa ht nariee or 1987. The parties recognize - | be | (367) WILLIAM C. WRIGHT a. Oe - SO ee Oe ee ee ee oe ee ae ET ‘aL. ae RESPONDENT “Wiuasx S Ww RIGHT AND Ens pv. COMMISSIONER. OF tpenticeat REVENCE, Docket Nos. $30-72, 1350-72, 1991-72, 4201-72, Filed June 23, 1974 In 2n oral agreement stipulated to at their eivorce trial petitioner = William C. Wright and his forumer wife, petitioner Jean W. Witghs, | +... agreed that cll property owned by Jean would Le granted io her and > in addition she would be granted certain property of Wiiliata’s, that s° “>; William would pay certain of ber expenses, and that William would ‘pay to Jean $228,003 over a period of 1034 years, the payment to . ~+ be secured by stocks placed in escrow, and that Willism would pay . . ~~. * the premiums on a $200,060 term life insurance policy owned by 5°. Jean on his life and keep Jean as the beneficiary until she died or --. gomarried or reached age 63. The judgment rendered on Oct. 4, 1967, Dy. ’ adopted the stipulation of the parties and granted a divorce to _ Jean which prohibited cither party from remarrying uatil 1 year _ thereafter. The stipulation was trauscribed by the court reporter as was tLe juésment of the court. A written decree was entcred by the ’ 2 Cases of the fuliewing petitioners are consolidated herewith : Jean W. Wright. docket ’ No. 1356-72 ; Jean W. Wright, éocket No. 1601-72; and Wilham C. Wright and oe. WwW. Wright, docket No. 4104-72, i“ . age > 1 e a ; : | ‘ . j i e . i be iti ii in leer rt 378 62 UNITED STATES TAX COURT REPORTS ~ 77) court on Feb. 2, 1968, incorporating the stipulation of the parties. dicta: 1. The $225,000 to be paid bs William to Jean was a payaoient because of the marital relationship and ia discharge of his cuty of support to her and not a divisiou of property of the parties. It was 2 periodic payment under see. T1(c)(2) since the judsgurent entercd on Oct. 4, 1967, approving Wiiliam’s agreement with Jean which was reduced to writing and reconfirmed in the written decree entered Feb. 2, 196S, required him to make these payments over a period of over 10 years froia Oct. 4, 1967. Therefore, the payments made in 196S, 1969, and 1970 as installments on the $225,CC) are includabie in Jean's income and deductitle by Wiiliam. - 2 Lhe premiums paid by William on the term insurance poiiey - did not bestow such a benefit on.Jean as to result in her construc- tive receipt of income tierefrom. Therefore. the amount of the premiums paid by William in 1965, 1969, and 1970 are not includcalie. in Jean's income or deductible by William. eee Gerald J. Kakn and John 3f. Byers, for the petitioners in docket Nos. 830-72 and 4104-72. Bruce C. O'Neill, for the petitioner in docket Nos. 1356-72 and 1991-72. Michacl W. Ford, ops the respondent. OPINION Scorr, Judge: Kespondent determined deficiencies in the Federal income tax of petitioners William C. and Ellen W. Wright in the amounts of $5,603.15, $14,965.76, and $14,567.14 for the calendar years 1968, 1969, and 1970, respectively. Respondent determined deficien- cies in the Federal income tax of petitioner Jean W. Wright in the amounts of $6,667.59, $7,530.41, and $7,093.34 for ees calendar years 1968, 1969, and 1970, respectively.? ‘a The parties have disposed of some of the i issues by agreement, Teav- ing for decision the following: (1) Whether the cash payments made by w illiem C. v right dutins the calendar years 1968, 1969, and 1970 to his former wife, Jean v. Wright, are includable in her gross income for such years as alimony under tho provisions of section 71, I.R.C. 19542 and consequently . deductible for such years by William C. and Ellen W. Wright under : the provisions of section 215; and . PS (2) Whether annual premiums paid by William C. Wright dasa tes the calendar years 1968, 1900, and 1970 on a term life insurance policy ® Respondent has taken an inconsistent position with respect to his deficiency eters minations against petitioners William C. and Ellen W. Wright and petitioner Jean W. _ Weight ® All references ere to the Internal Revenue Code of 1034. (377) WILLIASL C. WIGHT ; 379 owned by his former wife, Jean W. Wright, are inchidable in her gross income for such years as alimony under the provisions of section ZL and consequently deductible for such years hy Wiliam C. and Ellen W. Wright uniler the provisions of section 215. Allthe facts have been stipulated and are found accordingly. Petitioners William C. Wright (William) and Ellen W. Wright, ‘husband and wife, were residents of Milwaukce, Wis., at the time of the filing of their petitions in this case. They filed their joint Federal income tax returns for the calendar years 1968, 1969, and’ 1970 at — tho Internal Revenue Service Center, Kansas City, Mo. : Petitioner Jean W. Wright (Jean) was a resident of Cedarburg, Wis., at the time of the filing of her petitions in this case. She filed her Federal income tax returns for thé calendar years 1968, 1969, and 1970 at the Internal Revenue Service Center, Kansas City, Mo. | Jean and William filed a joint Federal income tax return for the calendar year 1907. oe yee ee Jean was born on January 22, 1922, and William was born on Feb- ruary 10, 1921. On January 41, 1948, Jean and William were married in Milwaukee, Wis. Two children were born of their marriage, one on July 22, 1950, and the other on March 25, 1952. ’ On April 28, 1967, William commenced an actidn in the Circuit | Court for Milwaukee County secking an absolute divorce from Jean and the custody of their minor children. On August 17, 1967, Jean filed an answer seeking dismissal of William’s complaint and asking for support and maintenance of herself and the minor children. On — October 4, 1967, Jean filed a counterclaim asking for an absolute divorce from William, alimony and support moncy, 2 division of ‘property, attorneys’ fees, costs, and custody of the minor children. - On October 4, 1967, the action for divorce came ‘to trial before Judeo L. J. Foley, Jr., of the Circuit Court for Milwaukee County, Wis. At that time, William’s attorney informed the court that no evidence would be introduced in support of the complaint and that. - the parties would proceed on Jean’s counterclaim. pte .° At the trial William and Jean, relying on a-statement of assets and liabilities prepared by William of the property they owned, © entered into a stipulation in open court with regard to disposition of property owned by cach of them, custody of the minor children, ali- _ mony, attorncys’ fees, and court costs. The stipulation was taken by ee a Py. court reporter and later transcribed, the nscript being certified as true and correct by the rter under dato of October 13, 1967. The stipulation of thes ato with cite amplificaiiun as to Jean’s rights of visitation to the children, was ac- cepted and adopted by the court in its findings of fact, conclusions 503 380 62 UNITED STATRS TAX COURT REPORTS (377) of law, and judgment orally made by the judge at the hearing and included in the transcript of the hearing. This oral statement in- cluded the conclusion of Izw by the court that based on her counter- claim Jean “is entitled to an absotute divorce.” It was stipulated that William and Jean had a net worth in the amount of $1,065,122 which consisted-of the following: . Estate or Wituiaxs C. anp Jean Wricut : . ee Asses Sue 3 ik > Farm and improvements.....------------------------ $121, 500 Farm furnishings-...-.----------; PE PE reper 20, 090 ie nonin aeneninns 141, 500 Encumbrances: : Mortgage—Ilillmann. ...------------------ $S, 500 Mortgate-—P. Jennings..------------------- 5, 500 Mortgage—J.ucders....-.------------------ 3, 265 17, 206 Net asset nN i aeeenmae anaes $124, 234 Residence and rear parcel (per appraisal 6/10/57)-.-.----- 135,090 — Contents, furnishings, and jewelry (per sppzeisal 1050).... §0, 0&0 Total... ccccncqaceccccccccccccccwen nono cones enncceccee= 215, 000 Investments (per report 5/1/67): William C. Wright portfolio...-...------------------ _ 616, 470 “+. Jean W. Wright.s.....------------- RICERCA 139, 518 : Total investments---- Bs eS apie Saceaanemamnnan 735, 988 Automobiles—antique end othcr..,-----------------++ee---e eee" 24, 960 Livestock and animals_..-.-..-.----------2--- ee ener n nee ncene= 4S, 600 Notes receivable... --------- --- - -- oe nnn ne ee ene nen ran eenneen= ' . 4,060 Total assets...--.---------- +--+ oo oo onan nnn nn enn eeee- 1, 169, 122 | ———== ; Licdilities % First Wisconsin National Bank (Jean Wright maker; cosigned by William Wright)_.-...-----------------22-e coreg ese terrn 24, C30 First Wisconsin National Bank (William Wright maker).--------- 20, 009 Fall River Foundry—duce from William Wright, officer.-..-.------ 60, 000 Total liabilitics......-..- aie celamnaeine isdlnsihianaavein ainsi 104, 000 . Such assets wero owned by William and Jean as follows: en ae = am nag tee ghee, | - Farm and improvements me $121,500 - - Contents, furnishings, and jewels. 8,090 - Investments—Jean Wright 139, 51S “ Skee : 1§ 269, 018 Less: Mortgages $17,266 * ae _ Note- 24,000 41,266. Net assets 27,732 504 : WILLIAM C. WRIGHT 3Sl (377) Willicm Farm furnishings de ws . §20, 0m Residence and rear parccl . ee Contents, jewelry, and furnishings ie 72, om Investments oo one .~ 616,470 « Automobiles - ~ 24, 900 Livestuck and animals... ' " Jean - Famn and improvements Farm furnishings........__ -- 20,000 Contents, jewelry, and furnishings . - $000 Investment portfolio : 139, 51S Pontize car Unkoown Antique electric car Unknown Horse, cats, and goats Unknown Miscellancous property Unknown Approximate valte at a ciscount rate of 6 percent of $228,000 lump-sum - payment receivable from William -- 170,000 459, 01S -508 G77) ~ WILLIAM ¢C.. WRicHT * . 3d . Wittiom Resi:lence and rear DOI simieasinnenetneccicncdecwnenanneas.., $125, Contents, furnishings, and jewelry ancnwaneeneene 72,000 . _ Investment portfolio €36, 370 Autcmobdiles ‘ - 208 Livestock and animals. we ---- $8,¢00 Notes receirable. ows 1,0 Miscellancous property ccunceusuences Tokxnown Bt svi tJ eae Roa 897, 370 Less: Previous existing personal liabilities $20, 06 eee ae Bag GO, 000 $0, 000 Liabilitics assumed £1,206 . 121, 206 Approximate value of $225,060 lump-sum payment pay- wens able to Jean 170,000 261, 206 ‘ G06, 104 Tho October term of the Cirenit Court of Milwaukee C ounty during which October 4, 1967, fell expired on December $1, 1907. No appeal was taken by cither party from the judgment of divorce of the Milwau- kee County Circuit Court nor were any proceedings to modiiy or vacate the judgment instituted by either party. In May 1968 Jean and William each executed a mutual Telease which stated in part: _Wuereas, said judgment of divorce which was entered Fetruars 2, 19¢S provided for, among other things, a property settlement betweea the parties in lieu of alimony; * * * ; During the calendar years 1968, 1969, and 1970, William paid Jean as installments on the principal sum of $223,000 the amounts - of $22,200, $21,600, and $21,600, respectively. ay On May 21, 1963, Jean applied to Northwestern Mutzal Life In- surance Co. for 2 10-year renewable term life insurance policy on - tho life of William in the face amount of $200.60: Policy No. 5 531 595 was issued by Northwestern Mutual Life Insurance Co. on August 10, 1963, in the faco amount of $200,000 on the life of William, which policy is and has since its issuance been owned by Jean. Jean, as sole owner of the policy, is obligated to pay the premiums due on the policy on an annual basis and under the policy provisions may change the beneficiaries. Jean is presently the sole beneficiary under _tho policy. The policy provided it could be converted at any time until August 10, 1973, to a new level annua! premium life or endow- ment plan in the same underwriting classification and for the same 3 amount of insurance as the existing policy. The original policy was 509 386 . G2 UNITED STATES TAX COURT REPORTS (377) lost or destroyed and a replacement policy was issued on June 8, 1973. | During the calendar years 1968, 1909, and 1970, William paid North- western Mutual Life Insurance Co. as net premiums on the efore-_ mentioned policy the sums of $1,505.50, $1,459.50, and $1,415.50, "respectively. The gross premium in each of the years 1968, 1969, and 1970 amounted to $2,229.50 and the dividends applied in reduction of the gross premium in 1908, 1969, and 1970 amounted ‘to $749, $S£0, and $SS4, respectively. * Peale The 1-year term premiums in the years 1968, 1969, and 1970 for $200,000 of term insurance on the life of a male born on February 10, 1921 (the date of birth of William), based on “P.S. No. 58” rates are S1AGL, $1,578 and $1,706, respective] y, : William, on his joint Federal income tax returns for the calendar years 1968, 1969, and 1970, claimed deductions under section 215 for alimony payments of $22,775, $24,359, and $23,113, respectively. Jean, on her Federal income tax returns for the calendar years 1968, 1969, and 1970, did not include in her gross inco:ne any pay- "ments made to her on her behalf by William, bat did include in 1970 the $4,500 representing the value of an automobile purchased for her by William. : ee a Xespondeat in his notice of deficiency to William dated Novem- her 26, 1971, increased his income as reported for the exlendar year LIGS by $22,200, representing the elained alimony deduction for installment payments on the suin of $228,000 during such year. In his petition, William alleges that respondent crroncously failed to allow a deduction as alimony for the payment of $1,505.50 made by William on a life insurance policy ewned by Jean. yond ee: Respondent in his notice of deficiency to William increased his in- come as reported by disallowing his claimed deduction for alimony of $24,339 for 1969 and $23,250 of his claimed deduction for alimony for 1970, of which $21,600 for each year represents installment pay- ments on the $228,000 principal sum-and $1,460 for 1969 and $1,415.50 owned by Jean. Respondent explained the disallowance of the disputed deductions for alimony paid to Jean in the years 196S, 1969, and 1970 with the ’ statement that: 5 en ig a ‘It has not been established that-such e:nouats are incladible as income to your former wife under section 71 of the Internal Reveaue Code. Accordingly, you are not entitied to the deductio#s under section 2135 of the Internal Revenue Code. : : . 510 - for 1970 represent premium payments on a term life insurance policy ~ (377) WELLIAM C. WRIGHT 3S7 Respondent in his notice of deficiency to Jean increased her income for 196S as reported by the amount of $22,500, representing install- ment payments received by her from Willian on the sum of $225,060, and $1,503.50, representing lite iasurance premiums paid on behalf of Jean by William. | Respondent in his notice to Jean increased her income as reported for 1969 and 1970 by $23,060 and $22,776, respectively, representing $21,600 of installment payments received by Jean from William for each year and $1,160 of life insurance premiums paid on behalf of Jean by William for 1969 and $1,176 * of life insurance premiwns paid on behalf of Jean by William for 1970. : Weise Respondent explained that the increases in her taxable ineome for the calendar years 1953, 1969, and 1970 do “not qualify as excludable installment payments since the payments are to be paid to you over a period ending more than 10 years from the date of the dceree,” and that the amounts of $1405.50, SiG0, andl SINT for such yenrs, respectively, “veprescat. alimony ineome,.” Section 71(a)* provides that if a wife is ivoreed or legally sepa- rated from er husband she must ‘include in her taxable incoine periodic payments reezived by her in discharge of a legal obligation arising out of the marital relationship and “imposed on er incurred by the husband under the decree or under a written instrument in- cident te such divorce or separatiton.” Pursuant to the provisions of section 215(a)*a husband is entitled to deduct from his taxable income such periodic payments made to his divorced wife in the year paid. Jean’s primary position is that the installment payments received by her under the divorce decree rendered on October 4, 1987, repre- ' sented payments of a property scitlement and were not payments in discharge of an obligation incurred by her former husband because ’ of the marital or family relationship and therefore these payments are not includable in her income under section 71(a)(1). In the altcrnative Jean contends that these payments are not includabdle in her income under section 71(a) (1) since they are excluded by the pro- *The actual net premium payment pafd dy William fn 1970 was in the amornt of $1,415.50, % . , *SEC. 71. ALIMONY AND SEPARATE MAINTENANCE PAYMENTS. . @) Gexerat Reuz2— : 5 : ) DECREE OF PVORCE OR SEPARATE MATNTENANCE.—If a wile fs divorced ot lecally separated from her husband uncer a decree of divorce or of SMrate malutenance, the wile’s gra Income includes periodic payments (whetiser or not made at raculur inzervais) received afver such decree ia discharge Of (or attribcrabie to property transferred, in Lost oc o:herwise, in herce off a lezal obiization which, beea:se of the marital or Gruily relationship, is imposed on or incurred by the husband under the or wader 3 written Instrument incideat to such divozee or separation. *SEC, 218. ALIMONY, ETC., PAYMENTS. ~ gh (a) Gesbrat KeLe.—In tha case of a husiaad described in Section Tl. there shall be atlowed a3 a Seduction amounts incitdilie ander sction Tl fa the gross lacoma ef his wife. puy-mect of which is made Within the hushcned’s taxable year. No deduction shafi be stiowed uncer the preceding seatence with Fespect to any Paynrent if, by reason of section 71(d) or G82, the amount th is not hiciudible in the $ cross income, 2 f jen | 511 } RA ee 3SS 62 UNITED STATES TAX COURT REPORTS (377) vision of section 71(c)* as the installment payments discharging an obligation the principal sum of which is specified in money are not payable over 9 period of more than 10 years from the date of the final divorce decree on October 4, 1958. Jean also contends the pay- ments of life insurance premiums by her former husband on a term life insuranco policy owned by her do not constitute a sufficient eco-. nomic benefit to her to qualify the paymenis 2s taxable income to her. | William’s primary position is that the installment payments he was required to make under the decree rendered on October 4, 1967, and the court-transczibed oral stipulation that he and Jean entered into during tho divorce proceedings, which was substantially adopted in such decree, are in discharge of a legal obligation imposed on him because of the marital relationship. Further he contends such pay- ments are periodic under section 71(2) (1) pursuant to section 71 (c) as they discharge an obligation the principal sum of which is specified in the deerce and stipulation as p:yalle in money over a period extend ing more than 10 yexrs from the date of the decree when rendered, or from the date 60 days after thie expiration of the term of the court | during which the deeres was pronounced, or from the date the stipu- Jation as transcribed in the divorce groceedings became effective. Therefore he concludes the payments aré inéludable as alimony in his former wife’s income’ and deductible by him. Further William con- tends that Jean received a valuable economic benefit by virtue of the premiums he paid on the term life insurance policy which Jean owned ‘on his life to the extent of cither his actual premium payments or tho “P.S. 5S” costs, the cost of a 1-year term insurance policy on the life of a male of his age. | As we have noted, respendent took inconsistent positions as to these-._ payments with respect to Jean and William ia his notices of deSicien- cies. Without waiving his inconsistent positions, respondent on brief argues in favor of Jean and against William except with regard to the payments being over a period of more than 10 years from the date of the divorce decree which respondent argues is October 4, 1967. ’.. We have recognized on a number of occasions that where there is a *SEC. 71 (ce), Prixcrpat Scx Paro ix INSTALLMENTS.— , ; (1) GexeraL nete.—For purposes of subsection (a), instalment payments dis- _ Charging a part of an chillzation the Priacipal suin of which 13, etther in terns of moncy or property, spectded In the dceree, instrument, or Asrecment shall not be * treated as periodic payments. . * (2) WHERE Prut0d For PAYMENT 18 MORR TITAN 10 TEats.—If, by the terms of the ' fleerce, instrument, or agreement, tke priacipal sun: referred to {n- Paragraph (1) i to be paid or may be paid over a perlod ending more than 10 years from the date ot such decree, instrument, or agreement, thea (notwithstanding Paragraph (1)) the installment payments shall be treated as weriodic payments for purposes of gubdsec- tion (a), but (in the case of any one taxable year of the wife) only to the extent of 10 percent of the principal suai. For Ptrposes Of the preceding seatence, the part of any priccipal sum which {s allocable to a pestod afier the taxable year of the wife in which it {3 received shal! be treated cs an instaliiwernt payment for the taxable year in which It ts receiveJ. : : 512 (377) WILLIAM C. WRIGHT 389 division of property of the parties to a divorce and the husband males payments in satisfaction of property rights of the wife the amcunts received by the wife are capital in nature and are neither includadle in her gross income under section 71 nor deductible by the husband under section 215. Lewis 2. Jackson, Jr., 54 T.C. 125, 129 (1970). See sec. 1.71-1(c) (4), Income ‘Tax Regs. We must therefore first determine whether William's legal obligation was incurred to compensate Jean for her alleged substantial property rights or “because of their marital or family relationship.” Sec. 71(a) (1). Jean argues that the sum of $225,000 to be paid to her was payment for her inchoate interest in William’s property at the time of the di- _ ¥orce under Wis. Stat. Ann. section 247.26 (1957), relying on cases as McCombs v. Commissioner, 397 F.2d & (CLA. 10, 1963), a‘irming a Memorandunt Opinion of this Court, and ernatschie v. United States, 364 I’. 2d 400 (Ct. Cl. 1986). , — William argues the aforementioned payments were nee sarily pay- ment for his legal obligation of support arising from the marital Teia-, tionship os Jean did not exchange any interests in property for such payments, relying on such eases as William MW. Joslin, &r., 32'T.C. 231 (1969), aifd. 424 F. 2d 1223 (C.A. 7, 1970) ; Porter v. Coinmissconer, 88S F. 2d C70 (C.A. 6, 1968), afirming per curiam a Memorandi:m Opinion of this Court; Blanche Curtis Newbury, 46 T.C. 690 (1968). The determination of whether the cash installment payments of the $223,000 lump sum constitute a settlement resulting from Jean's property rights or from Jean’s rights arising under the marital re- Jationship, rests upon the surrounding facts and circumstances. Wi7- liam M. Joslin, Sr., supra; Bianche Curtis Newbury, supra; Ann Hairston Ryker, 33 T.C. 924, 929 (1560). Labels assigned to payments to a spouse by the parties in their agreement or by the divorce decree > are not conclusive. Wilma Thompson, 50 T.C. 522 (1908) ; EVizadezh H. Bardwell, 38 T.C. 84, 89, $0 (1982), affd. 318 F. 2a 736 (C.A. 10, 1963). As we pointed out in Wilma Thompson, at page 525. the text of section 71 does not use the word “alimony” and the regulations amplify the statute by explaining that section 71 (2) applies only to | "payments made because of the marital relationship and in recomition - Of the general obligation to support. Sec. 1.71-1 (b) (4), Income Tax _ Regs. Nevertheless, many cases refer to these obligations arising be- cause of the marital relationship as “alimony.” While the fact that the payment would not terminate upon the death or remarriage of tho wife is part of the evidence to.be consideredthis fact is not con- clusive that such payments are being made pursuant to a settlement of the respective property rights of the spouses. The intent of the parties is a netcssary factor in determining the nature of the payment. Phin- ney V. Mauk, 411 F.2d 1196 (C.A.5, 1989). Co See ke Ss a a ee 399 62 UNITED STATES TAX COTRT REPORTS (377) On the basis of the record before us we conclude that the amounts of 322,200, $21,600, and $21,607 which Jean received in 1968, 1969, and 1970, respectively, were is: substance and were intended by the - parties to be payments in discharge of a legal obligation which was imposed on her former husband, William, because of the marital rela- tionship. : op aie In reaching this conclusion we have found persuasive that Jean, at the time of the divorce, did not own any property in exchange for which she was to reccive the sum of $228,000. Jean received all the property she owned at the time of the divorce and additionally the Jump stun of $228,000, with a present value of approximately $170,000. Therefore, these payments were not received by Jean in satisfaction of her property rights. Porter v. Commissioner, 388 F. 2d 670 (C.A. 6, 196), afirming per curiam a Memorandam Opinion of this Court; Taylor v. Campbell, 835 F. 2d $41 (C.A. 5, 1964) ; ALarion P. esse, 60 T.C. GS5 (1973) ; William if. Joslin, Sr., supra; Wilma Thompson, supra; Blanche Curtis Newbury. supea: Elizabeth I. Bardwell, supra; cf. Mills v. Commissioncr, 442 F. 2d 1149 (C.A. 10, 1971), aflirming 54 T.C. GOS (1970) ; Welter 77. Feiner, 61 T.C. 155 (1973), on appeal (C.A. 2, Feb. 1, 1974); Enid P. wlirsky, 5C T.C. 664 (1971) . Edith U. Gerlach, 55 T.C. 156 (1970). While Jean transferred 60) shares of Fall River Foundry stock to William at the agvecd price of hook value the record in no way indicates that this price did not reflect the value of such shares. In fact, Jean dces not contend that she was not adequately compensated: for this stock. In her brief Jean recognizes that in addition to receiving all her own property she received property owned by William consist- ing of furnishings valned at $20,060, a Pontiac automobile, an antique automobile, and the discharge of her liabilities in the amount of $41.26, ; . Ss | ie Jean's only contention that the $298,000 to be paid in installment payments was a property scitlement is that she relinquished her property rights under Wis. Stat. Ann. section 217.96 (1957)* Zor the. * Wis, Stat. Ann, see. 247.26 (1957), proviles: _ pee Upon every divorce from the bond of matrimony for any cause excepting that of adnitery committed by the wife, and also upon evezy divorce from bed and beard, the court may further adjudce to the wife suck alimony out of the estate of the husband, for her support and maintenance, and such aliowaace for the support, Maintenance and education of the minor children coumatited to her care and custady as tt shall deem just and rensonable, and the court may finz!!y divide and Gistribute the estate, hoth real and personal, of the husband and so much of the estate of the wife as shall hare heea derived from the husband, between the psrties and avest and transfer the title of any thereof accordingly, having alwars due resard to the legal and equitadte rights of each party, the abitity of the Lusband, the specis! estate of the wife, the character and sttuation of the parties and al! the circumstances of the case; but BO such final division shall impair the power of the court In respect to revision of alowances for minor children under section 247.25. No such judgment shall divest or transfer tie to real estate unless such judgment or a certified copy therco? 1s Tecorded in the ofce of the register of ceeds of the county in which such rea} estate {fs situated. : : ise 514 _ 377) WILLIAM C. WRIGHT . 39] disputed payments. However, Jean's inchoate rights in her husband's roperty under a common law jurisdiction such as Wisconsin have not been recognized as reaching the dignit y of such an interest as to support a division of property among coowners. As the Supreme Court stated in Waited States v. Levis, 370 U.S. 65, TO, T1 (1962), in dealing with the taxability to the kusband of the value over the basis of property transferred by a husband toa wife ino divorce settlement, “the incheate rights granted a wife in her husband's property * * ¢ do not even remotely reach the dignity of co-ownership™ and “the rights of succession and reasonable share (upon dissolution of the marriage] do not, differ significantly from the husband's obligations of support and alimony.” ‘The Su prenxe Court further stated that such inchoate rights “partake more of 4 personal Jiahility of the hushan _ than a property interest of the wife” and while “these marital rielis may ultimately result in the ownership of some of the husband's. property * * * this happenstance does not equate the transaction with a division of property by co-owners.” In our view these principles must be borne in mind in determining whether payments made by a husbend to a wife are payments made because of the marital relationship and in recoguition of the hushand’s . obligation to support the wife. Under Wis. Stat. Ann. section 247.24 (1957), the division of property of the husband is a discretionary and not 2 mandatory duty of the trial court. Jordan y. Jordan, 44 Wis. 28 the factors to ba considered by the divorce court in determining whether to grant property of the husband to the wife and the amownt of the husband's property to bo granted to the wife is whether the wife receives alimony. Lacey v. Lacey, 43 Wis. 2d 31S, 173 NAV. 2d 742 (1970) ; Padundt v. Radondt, 30 Wis. 2d 108, 140 NW. 24 293 (1968). This record is clear that Jean did not surrender any property interesis or give up anything that is recomnized as Supporting a division of e to alimony. wat Sane Son Although in Dernatschhke v. United States, supra, on which Jen - 471, 171 NW. 2d 385 (1909). C£. Lewis P. Jackson. Jr, eupva. One of " property in exchange for the disputed payments other than ker rigat relies, the Court of Claims held that annuity contracts purchased by the husband for the bencfit of his wife were not based on the marital obligation to support but were intended to be in the nature of a divi- sion of property in scttloment of the wife's inchoate dower righis. the - facts of that case are distinguiskable from the instant case. In Bernatschke the evidence showed that the parties never discussed the _ payment of alimony to the wife, that the wife did nct request alimony payments, and the husband did not mention such payments. In fac, the husband discussed only the dower rights of the wife. The record before us here contains no showing that the inchoate rights of Jean in 315 392 62 UNITED STATES TAX COURT REPORTS (377) William's property were ever discussed by either party or were the Subject of negotiations preceding the oral stipulation or of the oral stipulation itself, or of the award by the divorce court. In fact the record demonstrates thet alimony was the subject considered by the parties both before and during the divorce proceedings. In their mutual release signed shortly afier the entry of the divorcee decree, the parties referred to a property seitlement “in lew of alimony.” This is further indication that Jean considered she was giving up her right to support | sought in her counterclaim in return for the installment payments over a 1014-year period. Section 217.26 of the Wisconsin Statutes con- fers upon a divorce court the authority to adjudge to the wife such alimony out cf the estate of the husband for her support as it deems just and reasonable and to divide the estate of the husband between the partic: having regard to the lezal and equitable rights of. each party. This statute contemplates that both alimony payments and divi- . sion of the estate of the husband are means of discharging the obliga- tion of the huzband upon termination of ihe marital relationship to continue to support his wize in the manner to which she has become accustomed. TWrisconsin Department of Tanation v. Siegmen, 24 Wis. 2d 92, 128 N.VW. 2d GS (1964) ; Tonjes v. Tonjes, 24 Wis. 24 120, 123 N.W. 2d 446 (1964). See Lacey v. Lacey, supra; Radznde v. PRadandt, supra, * | This record suggests that Jean preferred and William wes cgreeabla to a division of property rather than payment of alimony since under Wisconsin Jaw the State court would be foreclosed from thereafter modifying its judgment. Grey v. Gray, 240 Wis. 985, 8 NA. 2d 376 (1942). Having determined the disputed payments are alimony in satis- faction of William’s obligation to support and not a division of prop- erty, we must determine whether or not tho disputed payments are periodic payments in discharge of a legal obligation trhich is imposed . under a deerce of divorce or separate inainienance or under 2 written instrument incident to such decree within the meaning of section 71 (a) (1). As the parties do not contend the payments are subject to any contingency, the payment of a principal sum by installments will. qualify as a periodic payment only if the sum is payable over a period of more than 10 years from the date of the deerce or of the written instrument incident to the divorce or separation. Sec. 71(c) (2). The dast installinent payment was due and payable under the terms of the decree as orally rendered, the written decree, the final deeree and the stipulation, 1024 years from October 4, 1967, that being April 4, 1973, Consequently the obligation to pay pursuant to the decree or written instrument must commence prior to T.C. 1102 (1955); Alerle Johnson, 50 T.C. 723 (1963) 3 Wureiner S. Eccles, 19 T.C. 1049 (1953), alirmed per curiam 208 FP. 2d 79g (CA. 4, 1953). Iferle Johnson deals with the right of 2 husband to use “head of household” tax rates after the entry of an interlocutory decree of divorce. Marrincz §. Eccles and Commissioner v. Ostler both deal with . the right of a husband and wie to file a joint return after the entry of an interlocutory decree of divorce. The statutory provisions rele- vant to those cases are so different from the provisions of section 71 as to cause those cases not to be helpful in disposing of the issue here present. Riddell v. Guggenheim and Commissioner v. Evans Geal with divorce decrees entered prior to the effective date of zection 71 (2) (3)? which was a new provision in the 1954 Code. See discussion of the effective date of this subsection in John W. Furrow, Jr, 34 T.C. 931, 935 (1960), ad. 292 F. 2d 604 (C.A. 10, 1961). In our view the differ. ence in the statutes applicable to the Guggenheim and Evens cases and those applicable in the instant case causes those eases to be ina ppo- site to the instant case.?° iA re *SEC. 71, ALIMONY AND SEPARATE MAINTENANCE PAYMENTS. 2 ti« devzee (including an fateslocutory decree of divorcee or a decree of allinony pencente tite) entered after March 1, 1954, requiring the husband to make the payments for he> scpport or maintenanes. It fs not Receasary for the wife to be legally Separated or Clrorced from her husband under a court orver or decree; nor ix tt necessary for the order or decree for support to be for the purpese of enforcing a written separation agreement. 519. ee oat a 5 Weenie tPSey aintig at . GE ae ts Re AO 2 etl sit Ra DATA San 356 62 UNITED STATES TAN COURT REPORTS (377) under section 71(a) (1) and deductible uncer section 215 by William for the taxable years 1955, 1909, 2 and 1979. The partes do not contend that these premium payments are not, payments made in discharge of a legal obligation which because of the marital relationship is in- ~~ eurred by Wiliam. The premium payiients are imposed under a de- eree for the same reasons as we have previously discussed. The pay- ments are periodic as William was obligated to pay them over tie lesser of his or Jean's life, an indefinit [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1645%3A1. Public record. Not legal advice.