Burkle v. C.I.R., 082586 FEDTAX, 10774-81
|Docket Nº:||10774-81, 11637-82, 12271-82, 16953-82.|
|Opinion Judge:||CLAPP, JUDGE:|
|Party Name:||ETHEL H. BURKLE, ET AL.,  Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent|
|Attorney:||Judith Burkle Reynolds, pro se in docket No. 11637-82. Robert E. Marum and Powell W. Holly, Jr., for the respondent.|
|Case Date:||August 25, 1986|
|Court:||United States Tax Court|
John E. Drew and John S. Mason, Jr., for the petitioner in docket Nos. 10774-81 and 16953-82.
David R. Schaefer and Stephen L. Saltzman for the petitioners in docket No. 12271-82.
MEMORANDUM FINDINGS OF FACT AND OPINION
Respondent determined deficiencies in petitioner Ether Burkle's Federal income tax in the amounts of $34,782.08 and $50,381.05 for the years 1977 and 1978 (docket Nos. 10774-81 and 16953-82, respectively). Respondent also determined a deficiency in the Federal income tax of the Estate of Robert N. Burkle, and Margaret M. Burkle, Surviving Spouse in the amount of $35,881.42 for the year 1977 (docket Nos. 11637-82 and 12271-82).
The issues for decision are (1) whether certain payments received by petitioner Ethel Burkle from her former husband's estate in 1977 and 1978 constitute alimony payments under section 71;  and (2) whether such payments are deductible by the estate under section 215 for the year 1977.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts and attached exhibits are incorporated herein by this reference.
Petitioner Ethel Brkle (hereinafter referred to as Ethel) resided in North Haven, Connecticut at the time her petitions were filed. Robert N. Burkle, deceased (hereinafter referred to as Robert), was a resident of Connecticut on August 24, 1977, the date of his death and his estate was probated there. The co- administratrices, Margaret M. Burkle, who is also the surviving wife, and Judith Burkle Reynolds, daughter of the deceased, resided in Connecticut when the petitions in Docket Nos. 11637-82 and Docket No. 12271-82 were filed. Ether timely filed individual income tax returns for the taxable years 1977 and 1978, using the cash basis method of accounting. A timely joint income tax return was filed for Robert, deceased, and Margaret M. Burkle, surviving spouse, for the taxable year 1977, using the cash basis method of accounting.
Robert and Ethel were married on April 29, 1935. Ethel initiated an action to dissolve the marriage on June 19, 1973. On January 14, 1975, a judgment dissolving the marriage was entered by the State of Connecticut Superior Court. Incorporated within the judgment was an agreement, dated January 2, 1975 executed by Robert and Ethel and negotiated by their separate counsel. The pertinent provisions of the agreement provide as follows:
Whereas, on the 19th day of June, 1973, the Wife commenced an action for divorce or dissolution of said marriage seeking alimony, returnable to the Superior Court for New Haven County, and * * *
Whereas, the parties desire to settle amicably and to determine as between themselves, and out of Court, the question of the right of the Wife to alimony, and the amount thereof, it is therefore AGREED:
2. The following agreements have been reached with respect to transfers by Husband to Wife as lump sum alimony absolutely and without condition.
(a) The Husband shall transfer to Wife his interest in premises located at 82 Hartley Street in North Haven, Connecticut. * * *
(b) The Husband shall forthwith pay Ten thousand ($10,000.) dollars in cash to the Wife.
(c) The Husband shall forthwith pay the sum of Three thousand, five hundred ($3,500.) dollars on account of attorney fees incurred by Wife.
3. The following agreements have been reached with respect to periodic payments by Husband to Wife from income of Husband which shall continue so long as Husband shall live and subject to termination in the event of death or remarriage of Wife:
(a) Effective October 1, 1974, Husband shall pay to Wife fifty (50%) percent of gross salary thereafter earned by him from Autac, Inc. and/or Wire, Inc. up to a salary of Thirty thousand ($30,000.) dollars. * * *
(b) Effective October 1, 1974, Husband shall pay to Wife thirty (30%) percent of net income in excess of Thirty thousand ($30,000.) dollars thereafter earned by him from Autac, Inc. and/or Wire, Inc. Net income, for the purpose of this subparagraph, shall earn salary earned by or dividends paid to Husband by Wire, Inc. or Autac, Inc. in excess of Thirty thousand ($30,000.00) dollars less that amount payable to the United States as taxes on all such excess payments, taking into consideration, however, the deduction Husband will have for alimony payments and all other proper deductions.
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4. The following agreement has been reached with respect to control of corporations owned by Husband, Wire, Inc. and Autac, Inc. and with respect to undistributed earnings of either corporation.
(a) Husband shall have full control of both corporations and his decisions as to the necessity for accumulation of corporate funds or what he determines to be good business practice shall be final. * * * In the event of a bona fide sale of either corporation or in the event of the death of the Husband, the Wife shall receive further payment, as follows:
(i) In the event of a sale and after payment of all corporate liabilities, Husband will receive first a payment equivalent to the net worth of the corporation sold as shown on the year-end statement for the Spring of 1974. From the remaining funds resulting from such sale Wife will receive thirty (30%) percent of the net increase in book value occurring during and after the fiscal year which began in the Spring of 1974. * * * It is the purpose of this paragraph to provide for payment of alimony from earnings retained hereafter on hand at time of sale.
(ii) In the event of the death of the Husband the Administrator or Executor of his estate may elect to sell said corporation and in the event of a bona fide sale the provisions of paragraph 4(a)(i) shall apply and Wife shall be deemed to be an interested party in any probate hearing concerninq the bona fides of sale.
(iii) In the event that Husband should did and his Administrator or Executor should elect not to sell his interest in Autac, Inc. or Wire, Inc., then and in that event, Wife shall be paid based on paragraph 4(a)(i) as if there had been a sale permitting full payment of the thirty (30%) percent net increase in book value, said payment to be made within twelve (12) months of the appointment of the Executor or Administrator.
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(c) It is specifically understood and agreed that in the event of the death of the Wife or the remarriage of the Wife prior to the sale of the business or prior to the death of Husband, then the provisions of this Agreement with respect to...
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