Estella Orsatti Burress Bank of America Nat'l Trust & Savings Ass'n v. Comm'r of Internal Revenue (In re Estate of Orsatti), Docket No. 13466.

• Decision Date: 10 February 1949
• Docket Number: Docket No. 13466.
• Citation: 12 T.C. 188
• Parties: ESTATE OF FRANK P. ORSATTI, DECEASED, ESTELLA ORSATTI BURRESS BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, CO-ADMINISTRATORS WITH THE WILL ANNEXED, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

12 T.C. 188

ESTATE OF FRANK P. ORSATTI, DECEASED, ESTELLA ORSATTI BURRESS BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, CO-ADMINISTRATORS WITH THE WILL ANNEXED, PETITIONERS,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 13466.

Tax Court of the United States.

Promulgated February 10, 1949.

Decedent and his wife, incident to a divorce, entered into a property settlement agreement dated July 16, 1942, which provided that the wife was to receive alimony payments of $125 per week for a period of two years or until such time as she died or remarried. Decedent made such payments to his wife each week from July 18, 1942, continuously until and including July 29, 1944. Held, the payments made by decedent to his divorced wife in the taxable years 1942, 1943, and 1944 were ‘installment‘ payments within the meaning of section 22(k) and were therefore not deductible under the provisions of section 23(u) of the Internal Revenue Code. Arthur Manella, Esq., for the petitioners.

Byron M. Coon, Esq., for the respondent.

This proceeding involves deficiencies in income and victory tax for 1943 and income tax for 1944 in the amounts of $7,462.74 and $4,289.71, respectively.

The sole question is whether the decedent was entitled, under the provisions of sections 22(k) and 23(u) of the Internal Revenue Code, to claim as deductions for the years 1942, 1943, and 1944 certain payments made by him during these years to his divorced wife. The Commissioner's disallowance of the deduction claimed by decedent for 1942 is reflected in the deficiency determined for 1943 due to the provisions of the Current Tax Payment Act of 1943.

FINDINGS OF FACT.

The Bank of America National Trust & Savings Association and Estella Orsatti Burress, the petitioners herein, are administrators c.t.a. of the estate of Frank P. Orsatti, hereinafter sometimes referred to as decedent.

Decedent was a resident of Lost Angeles, California, and filed his Federal income tax returns for the years involved with the collector of internal revenue for the sixth district of California.

Frank Orsatti and Lien Orsatti were married on or about December 26, 1940. For some three of four months prior to July 16, 1942, decedent was dissatisfied with his marital status and the conduct of his wife and was advised by his attorney that he had grounds for obtaining a divorce. His attorney also advised him to discuss the matter with his wife and suggested that he have her consult an attorney for the purpose of arriving at a property settlement and perhaps permitting her to obtain the divorce. Lien Orsatti retained counsel and thereafter the parties' attorneys negotiated a property settlement which was embodied in a written instrument executed by Frank P. and Lien Orsatti on July 16, 1942.

This property settlement provided in part as follows:

Husband agrees, by way of alimony and as and for the maintenance and support of Wife, to pay to Wife the sum of One Hundred Twenty Five Dollars ($125.00) per week commencing with the 18th day of July, 1942, and a like payment of One Hundred Twenty Five Dollars ($125.00) per week for each and every week thereafter for a period of two (2) years or until the Wife remarries or dies, whichever of the foregoing first occurs.

This agreement was executed by the parties incident to and in contemplation of a divorce. On July 24, 1942, Lien Orsatti instituted divorce proceedings in the Superior Court of the State of California in and for the County of Los Angeles. On August 20, 1942, she was granted an interlocutory judgement of divorce by that court. On August 23, 1943, the dame court entered a final judgment of divorce between Lien Orsatti and Frank P. Orsatti.

Neither the interlocutory nor the final decree made any reference to the agreement of July 16, 1942, or made any further provision for alimony.

Commencing on July 18, 1942, Frank Orsatti paid to Lien Orsatti $125 per week continuously until and including July 29, 1944, these payments amounting to $3,000 in 1942, $6,500 in 1943, and $3,250 during 1944. Prior to August 20, 1942, the date of the interlocutory decree, 5 such payments, amounting to $625, had been made and prior to August 23, 1943, the date of the final decree of divorce, 58 payments, amounting to $7,250 had been made. These payments were shown on the books of the Orsatti Agency and charged to the account of Frank P. Orsatti, as partner.

Frank P. Orsatti died on May 19, 1947. On July 16, 1947 the Superior Court of the State of California in and for the Count of Los Angeles issued letters testamentary appointing the Bank of America National Trust & Savings Association and Estella Orsatti Burress as administrators c.t.a. of the estate of Frank P. Orsatti.

The deficiency notice in the instant case reads as follows:

In computing your liability under the Current Payment Tax act of 1943 and the calendar year 1944, the amounts of $3,000.00, $6,500.00 and $3,250.00 claimed as deductions on your returns for 1942, 1943 and 1944, respectively, representing payments allegedly made to Lien Orsatti (now Lien Rubin), your divorced wife, have been disallowed since such amounts do not constitute proper deductions within the meaning of section 22(k) of the Internal Revenue Code.

OPINION.

ARUNDELL, Judge:

The principal issue between the parties is whether,...