Cox v. Comm'r of Internal Revenue, Docket No. 15517.

• Decision Date: 26 May 1948
• Docket Number: Docket No. 15517.
• Citation: 10 T.C. 955
• Parties: BENJAMIN B. COX, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

10 T.C. 955

BENJAMIN B. COX, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 15517.

Tax Court of the United States.

Promulgated May 26, 1948.

Petitioner procured a divorce by default in Florida while stationed there in military service, and shortly thereafter, in 1943, remarried. The decree made no provision for alimony or property settlement. More than seven months later, in 1944, he agreed in writing to make payments for support of his former wife and minor children. Payments made were denied deduction under sections 22(k) and 23(u), I.R.C. Held, the agreement in 1944 was not incident to the divorce, within the intendment of section 22(k), and the deductions were properly disallowed. John A. McCann, Esq., for the petitioner.

Stanley W. Herzfeld, Esq., for the respondent.

This case involves income tax for the calendar year 1944, Deficiency was determined in the amount of $200.47, all of which is in dispute. The only issue presented is whether the petitioner may, under section 23(u), and in connection with section 22(k), both of the Internal Revenue Code, deduct from gross income the sum of $2,225.15 paid to his former wife during the taxable year. The issue involves questions as to whether petitioner's divorce was valid, and whether a written instrument executed by him and his former wife after his divorce was incident to the divorce, within the intendment of section 22(k).

FINDINGS OF FACT.

The petitioner resides in Pittsburgh, Pennsylvania, and filed his Federal income tax return for the calendar year 1944 with the collector for the second collection district of New York at New York, New York.

The petitioner and his wife were living in New Jersey when, on December 26, 1941, he left home and never returned. He lived until May 1943 in New York. From about January 13, 1943, he was employed by the War Department. About May 2, 1943, he went to Florida, knowing when he went that he was going to enter the Army. After some civilian service with the Army, he was commissioned in the Army on May 11, 1943. A geologist, he was put in charge of research at the Desert and Tropic Research Center at Eglin and Orlando, Florida. He intended to stay in Florida, having no other position, and having sinus difficulty as to which his physician had told him Florida would be beneficial.

Except for a short period late in 1943 and early in 1944, when temporarily in New York, he was stationed in Florida until the end of his Army service. He voted in New York between December 1941 and January 1943; thereafter he did not vote there.

About July 1943 both he and his wife employed attorneys, she in New Jersey, he in Florida. Through the attorneys there was correspondence and discussion of divorce and financial arrangements. During that period he was paying his wife about $400 a month, retaining for himself from $60 to $100 a month and his Government allowance. He had his own house in Florida. She had in her home in New Jersey three children of the marriage, two of whom were minors. On October 25, 1943, he secured a divorce in Okaloosa County, Florida. His intent at that time was to stay in Florida, and he was living in that county when the divorce was granted. On November 15, 1943, giving his place of residence as Pensacola, Florida, and his New York address as 5 W. 63rd Street, New York, New York, he and Elizabeth Laura Jordan, of 56 West 36th Street, New York, New York, applied for a marriage license in New York. License was granted November 15, 1943, and on November 21, 1943, the applicants were married in New York. The divorce decree recites that the court has jurisdiction on the subject matter and of the parties. It was granted without personal service on his wife and without appearance on her behalf. He left Florida about December 1944, being discharged from the Army December 25, 1944. He joined the Gulf Oil Corporation at Pittsburgh, Pennsylvania, January 1, 1945, pursuant to negotiations begun in August 1943. He thought when he took the position with Gulf that he would be employed in Florida, where the company was starting a new operation, because the company was doing the kind of work in which he had specialized.

Petitioner and Nancy Campbell Cox executed an instrument in writing, dated June 29, 1944, in material part providing as follows: That the parties had been married on April 4, 1920, but were living apart; that they desired to reach a satisfactory agreement as to property, custody of minor children and support and maintenance of Nancy Campbell Cox; that they would live separate; that he gives her all his interest in household furniture and effects except his personal effects, now in the premises formerly jointly maintained; that he will convey his interest and title in such premises to her, she to indemnify him against liability under the mortgage on the property; that she shall have all interest in certain named life insurance policies on his life, she to pay premiums; that she shall have custody of their minor children, with right of reasonable visitation in him; that he will continue to pay her one-half of his gross income, unless she remarries, after which a new agreement would provide support, maintenance, and education for the minor children; that he would each month furnish her with a sworn statement from himself and employer as to his total income; that she will not contract debts for which he will be liable and indemnifies him against any such debts, all debts incurred by her after December 26, 1941, to be her sole obligation; that she waives right to dower (he releasing all rights in her property) and she agreeing that as long as he performs the agreement she will not contest or bring any action in any court to set aside, nullify or question ‘the purported decree of divorce heretofore allegedly secured in the State of Florida‘ by him; that nothing in the agreement shall be construed as appearance by her ‘in the alleged suit in Florida in which said decree was allegedly obtained or as a waiver of any of her rights in reference to said alleged decree except as herein provided.‘

In his Federal income tax return for 1944 the petitioner reported income of $1,458.33 from U.S. Army Air Force and $5,983.92 from Socony-Vacuum Oil Co., by which Federal income tax of $856.80 was withheld. He deducted $2,225.15 as ‘alimony payments to Nancy Campbell Cox, divorced wife.‘ By letter of protest, January 30, 1945, to the Commissioner of Internal Revenue, he stated that he would file his income tax return for 1944 at the Custom House in New York City ‘as my permanent home address during 1944 was in New York City.‘ The letter also states that the divorce of October 25, 1943, was not valid in New York State, and that he was uncertain as to his marital state and in order to have the wife recognize the divorce he made an alimony agreement of June 29, 1944.

The $5,983.92 was terminal pay received from Socony-Vacuum, under agreement to pay the difference between Army salary and civilian salary for the period of the war and six months thereafter. He received such pay until about January 1945.

OPINION.

DISNEY, Judge:

The single problem here is whether the petitioner's agreement on June 29, 1944, more than seven months after his divorce from his wife, was ‘incident‘ to such divorce, within the intendment of section 22(k) of the Internal Revenue Code.¹ If so, the amounts paid by him to his wife in the taxable year were taxable to her, and deductible by him under section 23(u) of the code.

In a broad sense, the contract here can be seen as incidental to the divorce earlier secured by the petitioner, in that the written contract refers to the divorce and provides that the former wife agreed that so long as the contract was performed by the petitioner, she would not contest or attack the divorce which he had secured. Yet in a different sense it is easily seen that the agreement is not incident to the divorce, which had preceded it by more than seven months. Petitioner had waited for no such agreement, but had proceeded to divorce his wife without arriving at a settlement of property rights or marital obligations, and the decree made no provision in that respect.

It seems obvious that the statute is intended, in the ordinary situation at least, to provide that the husband's marital obligation to support his wife may be continued either by divorce decree or a contract taking its place in that regard; and that in the ordinary sense therefore ‘incident to‘ the divorce would involve an agreement prior thereto or coincident therewith. Can a husband, freed by divorce decree from such obligation, nevertheless later reassume such obligation and shift the taxation of income thereon to the former wife receiving it? Recently, in the case of Robert Wood Johnson, 10 T.C. 647, we held that payments made under a written agreement executed prior to divorce but making no reference to it, the divorce however being agreed to orally by the wife and obtained by her, were under a contract incident to divorce. Here the petitioner can rely on no oral agreement prior to divorce, for he argues only that, prior to the divorce, there had been correspondence between his attorney and one representing his wife, resulting in no...