Feldman v. Commissioner, Docket No. 41985-86.
| Decision Date | 04 April 1991 |
| Docket Number | Docket No. 41985-86. |
| Citation | 61 T.C.M. 2341 |
| Parties | Dolores Feldman v. Commissioner. |
| Court | U.S. Tax Court |
Frank W. Louis1 and Dolores E. Feldman, pro se. John J. Ferrante, for the respondent.
Memorandum Findings of Fact and Opinion
Respondent determined deficiencies in Federal individual income tax and additions to tax under section 6651(a)(1)2 () against petitioner as follows:
Additions to Tax
Year Deficiency Sec. 6651(a)(1)
19783 .............. $1,657.38 $414.34
1981 ............... 1,051.00 262,75
1982 ............... 2,186.00 109.30
After concessions, the issues for decision are as follows:
(1) Whether petitioner is entitled to deduct her payments to her former husband for repayment of overpaid alimony;
(2) Whether amounts received by petitioner from her former husband in 1981 and 1982 constitute taxable alimony income;
(3) Whether, to what extent, and for what years petitioner is entitled to a deduction for worthless stock under section 165, or to nonbusiness bad debt deductions under section 166, as a result of petitioner's dealings with various corporations (4) Whether petitioner is entitled to deduct amounts allegedly paid in connection with various litigation; and
(5) Whether petitioner is liable for additions to tax under section 6651(a)(1).
Some of the facts have been stipulated; the stipulations and the stipulated exhibits are incorporated herein by this reference.
When the petition was filed in the instant case, petitioner resided in Greenwich, Connecticut.
On March 17, 1949, petitioner married Martin Feldman (hereinafter sometimes referred to as "Martin"), a dentist with his practice in Brooklyn, New York. Four children were born of this marriage, namely Patricia (born about 1952 or 1953), Sandy (born December 22, 1955), Gwendy (born June 11, 1958), and Robert (born November 3, 1960).
By a decree dated January 27, 1977 (hereinafter sometimes referred to as "the First Decree"), the Supreme Court of New York, County of Nassau (hereinafter sometimes referred to as "the State Court"), granted a judgment of divorce to petitioner.
Martin appealed the State Court's judgment, and the Appellate Division (New York State's intermediate appellate court) modified the judgment by deleting those provisions which fixed the amounts of alimony and child support, custody and visitation rights, and counsel fees, and by remanding to the State Court for a hearing and a new determination of those issues. On remand, the State Court issued a decree (hereinafter sometimes referred to as "the Second Decree") dated November 29, 1978, resettling the January 27, 1977, judgment.
Both the First Decree and the Second Decree grant petitioner's complaint for divorce and dismiss on the merits Martin's counterclaim for divorce.
The First Decree orders joint custody for Robert, but that he should live with petitioner; the Second Decree gives custody to Martin.
Both decrees provide for sale of the marital residence, division of the proceeds, and division of the household furniture.
The First Decree orders Martin to pay to petitioner —
the sum of Five Hundred ($500.00) Dollars per week as and for her support and maintenance, on Friday of each week retroactive to January 16, 1976, and after allowing [Martin] credit against said obligation for all amounts of temporary alimony paid by him to [petitioner] since January 16, 1976, as established by the aforementioned affidavit of [petitioner], dated December 13, 1976, there remains a net balance due to [petitioner] of Fifteen Thousand ($15,000.00) Dollars for the period from and including the week beginning January 16, 1976 to and including the week beginning December 10, 1976, and said sum of $15,000 shall be paid to [petitioner] by her retaining and deducting said amount from the aggregate amounts which, under subsequent portions of this judgment, [Martin] is entitled to recover from [petitioner] under counterclaims fourth, fifth, seventh and eighth of [Martin's] answer herein.
The First Decree further orders —
that commencing with the first Friday after the closing of title to the marital home upon a sale to [Martin] or to a third party or parties, as hereinabove provided, or in the event that [petitioner] vacates the marital home prior to the closing of title thereto, the support and maintenance of [petitioner] to be paid by [Martin] shall be increased to Six Hundred Twenty-Five ($625.00) Dollars per week.
The Second Decree reduces the amounts of "support and maintenance" payments due from Martin to petitioner, stating —
that [Martin] shall pay [to petitioner] * * * Three Hundred Twenty-Five ($325.00) Dollars per week as and for her support and maintenance, on Friday of each week commencing January 16, 1976, and that commencing on the first Friday after [petitioner] leaves the marital residence, [Martin] shall pay [to petitioner] the sum of Four Hundred Fifty ($450.00) Dollars per week as and for her support and maintenance, by check or money order, at the present residence or any other address designated by her in writing
* * *
The Second Decree orders petitioner to —
refund to [Martin] the sum of One Hundred Seventy-Five and 00/100 ($175.00) Dollars per week representing the difference between weekly alimony originally awarded and that fixed herein, for every week that he shall have made payments fixed in the judgment of January 27, 1977, [the First Decree] said payments having been made for one hundred and eleven (111) weeks with a total over-payment of $19,425; and it is further
ORDERED, that [Martin] pay to [petitioner] the sum of $10,535.00, representing education expenses of GWENDY, such amount to be credited towards [petitioner]'s obligation to [Martin] in the preceding decretal paragraph; and it is further ORDERED, that the payment by [petitioner] to [Martin] of $19,425.00 pursuant to this order is accordingly reduced by the sum of $10,535.00 which is payable by [Martin] to [petitioner] pursuant to this order, making a net total payment due by [petitioner] to [Martin] of $8,890.00, payable at the rate of $200.00 per month, commencing thirty (30) days after entry of this order until the entire balance is fully paid * * *.
Both decrees order Martin to make all mortgage payments, and to pay all bills for fuel and utilities (except telephone), and to pay for major repairs or replacements and gardening maintenance expenses, for the marital home until it is sold and title conveyed.
Both decrees order Martin to pay all the education and related expenses (e.g., lodging and transportation) expenses of Gwendy and Robert. The First Decree applies this obligation until the children complete their college education; the Second Decree only until the children reach age 21. Both decrees order Martin to pay $50 per week to petitioner "as and for the additional living expenses of GWENDY" when Gwendy resides with petitioner. The First Decree provides another $50 per week as to Robert; the Second Decree does not, consistent with its award of Robert's custody to Martin.
Both decrees deal with a series of eight of Martin's counterclaims regarding savings accounts, mostly awarding to Martin one-half interests in joint accounts and in accounts in petitioner's name in trust for one or more of petitioner's and Martin's children. Petitioner is, in general, awarded the accounts that are in her name only and specified personality (such as 144 oz. of dental gold).
The First Decree orders Martin to pay to petitioner —
the sum of Twenty Thousand ($20,000.00) Dollars, as and for counsel fees, and the sum of One Thousand Two Hundred Fifty ($1,250.00) Dollars, as and for disbursements necessarily incurred herein, and said amounts shall be paid to [petitioner] by delivery thereof to her attorneys, MORAN & BRODRICK, ESQS., * * * within 30 days after personal service upon [Martin] of a copy of this judgment, with notice of entry, of the sum of Eleven Thousand Two Hundred Fifty ($11,250.00) Dollars from the monies due to [Martin] from [petitioner] on the seventh and eighth counterclaims of his answer, as hereinabove provided; by the payment of an additional Five Thousand ($5,000.00) Dollars within sixty (60) days after personal service upon [Martin] of a copy of this judgment, with notice of entry; and by the payment of an additional Five Thousand ($5,000.00) Dollars within ninety (90) days after said date * * *.
The Second Decree reduces the attorney's fees Martin owes to petitioner to $15,000 plus $1,250 of costs; however, it provides that Martin also owes petitioner $3,000 attorney's fees for the appeal of the first trial and $4,750 attorney's fees for the second trial, making a total of $22,750 plus $1,250 costs.
Petitioner moved out of the marital home in or about January 1977.
On her tax returns, petitioner reports alimony income and offsetting deductions in the amounts shown in table 1.
Table 1
Alimony Offsetting
Year Income Deduction
1977 .................... $28,500 -0-
1978 .................... 17,500 -0-4
1979 .................... 21,600 -0-
1980 .................... 17,200 -0-
1981 .................... 24,400 $24,400
1982 .................... 22,910 22,910
On her 1981 tax return, petitioner claims a $24,400 deduction as "Other adjustments" and she notes the following next to the alimony income item: "Awaiting court decree may be capital distribution presently in suspense with IRS." On her 1982 tax return, petitioner claims a $22,910 deduction as Alimony paid and has a notation similar to that on her 1981 tax return.
Petitioner repaid the $8,890 mandated by the Second Decree, by Martin's self-help mechanism. That is, Martin reduced by $50 each of the alimony...
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