Theurer v. Comm'r , 95 T.C.M. 1226 ( 2008 )

T.C. Memo. 2008-61
UNITED STATES TAX COURT
MARY C. THEURER, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3629-06. Filed March 11, 2008.
Jeffrey D. Moffatt, for petitioner.
John D. Faucher, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
SWIFT, Judge: Respondent determined a $73,524 deficiency in
petitioner’s 1999 Federal income tax, a section 6662(a) accuracy-
related penalty of $14,705, and a section 6654 addition to tax of
$44.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the year in issue.
- 2 -
The primary issue for decision is whether $240,000
petitioner received from her husband in 1999 is to be treated as
taxable alimony.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
At the time the petition was filed, petitioner resided in
Palmdale, California.
On February 25, 1998, after 21 years of marriage and after
having three children together, petitioner and her husband
separated. On April 22, 1998, petitioner filed for divorce in
Los Angeles Superior Court.
On July 7, 1998, in the above divorce proceeding, the Los
Angeles Superior Court ordered petitioner’s husband to pay to
petitioner $20,000 per month continuously “until further order
of court, death of either party, [or] remarriage of * * *
[petitioner], whichever first occurs”. The July 7, 1998, court
order also provided that “It will be determined at a future date
by settlement, or court order, if the [$20,000 monthly] sum
constitutes child or spousal support or some combination
thereof”.
In 1999, pursuant to the above court order, petitioner
received from her husband a total of $240,000.
On January 12, 2000, the Los Angeles Superior Court amended
the July 7, 1998, order by entering a minute order stating that
- 3 -
petitioner’s husband had to pay to petitioner “the sum of $7,507
and for spousal support the sum of $26,850, retroactive to May 1,
1998”.1
On her 1999 individual Federal income tax return, petitioner
reported none of the $240,000 she received from her husband in
1999.
On her 2000 individual Federal income tax return, petitioner
reported as alimony income $531,713 that she received from her
husband. The $531,713 included the $240,000 petitioner received
in 1999, plus $291,713 petitioner apparently received from her
husband in 2000.2
On December 20, 2006, the divorce of petitioner and her
husband became final.
OPINION
The amount of any item of gross income, including alimony,
must be included in a cash basis taxpayer’s gross income for the
taxable year in which the taxpayer receives it. Sec. 451(a).
Generally, cash payments a taxpayer received from a spouse
or former spouse under a divorce or separation agreement are to
1
It is unclear from the record whether the amounts
specified in the Jan. 12, 2000, minute order were to be paid one
time or monthly and whether petitioner actually received them.
2
The record and petitioner’s counsel provide no credible
explanation as to why petitioner reported the $240,000 petitioner
received from her husband in 1999 on her individual Federal
income tax return for 2000.
- 4 -
be treated as taxable alimony unless the payments are designated
as nontaxable child support or unless the payments are to
continue after the death of the taxpayer. Sec. 71(a), (b)(1)(D),
(c)(1).
In determining whether a payment obligation is to end upon
the death of a taxpayer, we first examine the applicable divorce
order, which, if unambiguous, is dispositive of the issue.
Okerson v. Commissioner, 123 T.C. 258, 264 (2004) (citing Hoover
v. Commissioner, 102 F.3d 842 (6th Cir. 1996), affg. T.C. Memo.
1995-183).
Petitioner testified that if she died, her husband would be
obliged, after her death, to continue making to their children
the $20,000 monthly payments due under the July 7, 1998, court
order, and therefore petitioner argues that the $240,000 she
received in 1999 from her husband should not be treated as
taxable alimony income. Alternatively, petitioner argues that
the January 12, 2000, minute order of the superior court somehow
retroactively established that a portion of the $240,000 she
received in 1999 represented child support and should not be
included in her 1999 income.
Respondent argues that because the July 7, 1998, court order
unambiguously stated that petitioner’s husband’s monthly $20,000
payment obligation would end upon petitioner’s death, the
$240,000 petitioner received in 1999 from her husband is to be
- 5 -
treated as alimony and is to be included in petitioner’s 1999
income.
We agree with respondent. The $240,000 petitioner received
in 1999 from her husband under the July 7, 1998, court order
constituted alimony and is includable in petitioner’s 1999
taxable income.
The January 12, 2000, minute order of the superior court
does not retroactively change the character of the $240,000
petitioner received in 1999. See Graham v. Commissioner, 79 T.C.
415, 420 (1982); Gordon v. Commissioner, 70 T.C. 525, 530 (1978);
Ali v. Commissioner, T.C. Memo. 2004-284.
Alternatively, petitioner argues that because the $240,000
she received from her husband in 1999 also was reported on her
2000 Federal tax return, she should not be taxed on the $240,000
again in 1999. To the contrary, as a cash basis taxpayer,
petitioner for 1999 must report and pay taxes on the alimony she
received in 1999. See sec. 451(a). Petitioner should have filed
an amended 2000 Federal income tax return to correct the
overreporting for 2000 of alimony she received in 2000.
For the reasons stated, the $240,000 petitioner received
from her husband in 1999 is to be treated as alimony and is
includable in petitioner’s 1999 income.
Because respondent has sustained his burden of production as
to the section 6662(a) accuracy-related penalty and the section
- 6 -
6654 addition to tax, and because petitioner has offered no
separate arguments with regard thereto, we sustain respondent’s
imposition of this penalty and addition to tax. See Wheeler v.
Commissioner, 127 T.C. 200 (2006).
To reflect the foregoing,
Decision will be entered
for respondent.