Grummer v. Comm'r of Internal Revenue
| Decision Date | 25 August 1966 |
| Docket Number | Docket Nos. 321-65,3562-65. |
| Citation | 46 T.C. 674 |
| Parties | GERALDINE E. GRUMMER, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENTWILLIAM T. GRUMMER AND BLANCHE E. GRUMMER, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Martin L. Moore, Jr., for the petitioner in docket No. 321-65.
Thomas D. Wright, for the petitioners in docket No. 3562-65.
John W. Tissue, for the respondent.
Held, in view of the decision in Commissioner v. Lester, 366 U.S. 299 (1961), parol and other extrinsic evidence are inadmissible to explain the intent, motives, and conduct of parties to a clear and unambiguous written separation agreement which, pursuant to sec. 71(b), I.R.C. 1954, fixed periodic payments for the support of minor children. Held, further, that the payments are neither deductible by the father of the children as alimony under section 215(a) nor includable in the taxable income of the former wife.
In these consolidated proceedings respondent has determined the following deficiencies in the income taxes of petitioners:
+-----------------------------------------------------------------+
¦Petitioners ¦Docket ¦Year¦Deficiency¦
+-----------------------------------------+-------+----+----------¦
¦ ¦No. ¦ ¦ ¦
+-----------------------------------------+-------+----+----------¦
¦Geraldine E. Grummer ¦321-65 ¦1956¦$320.33 ¦
+-----------------------------------------+-------+----+----------¦
¦ ¦ ¦1957¦351.14 ¦
+-----------------------------------------+-------+----+----------¦
¦ ¦ ¦1958¦357.88 ¦
+-----------------------------------------+-------+----+----------¦
¦ ¦ ¦1959¦351.95 ¦
+-----------------------------------------+-------+----+----------¦
¦ ¦ ¦1960¦620.55 ¦
+-----------------------------------------+-------+----+----------¦
¦ ¦ ¦1961¦889.78 ¦
+-----------------------------------------+-------+----+----------¦
¦ ¦ ¦1962¦897.35 ¦
+-----------------------------------------+-------+----+----------¦
¦William T. Grummer and Blanche E. Grummer¦3562-65¦1959¦1,853.40 ¦
+-----------------------------------------+-------+----+----------¦
¦ ¦ ¦1960¦2,659.56 ¦
+-----------------------------------------+-------+----+----------¦
¦ ¦ ¦1961¦3,437.98 ¦
+-----------------------------------------+-------+----+----------¦
¦ ¦ ¦1962¦3,540.00 ¦
+-----------------------------------------------------------------+
The only issue for decision is whether payments made by William Grummer to Geraldine Grummer, his former wife, pursuant to a written separation agreement entered into incident to divorce, constituted alimony or child support during the year in controversy.
Some of the facts have been stipulated by the parties. The stipulations of facts and exhibits attached thereto are incorporated herein by this reference.
Petitioner in docket No. 321-65, Geraldine E. Grummer (hereafter called Geraldine), is a single person who resides in Pittsburgh, Pa. She filed no Federal income tax returns for the years 1956 through 1962 on advice of counsel, believing that she had no taxable income in such years.
Petitioners in docket No. 3562-65, William T. (hereafter called William) and Blanche A. Grummer, are husband and wife residing in New York, N.Y. They formerly resided in Pittsburgh, Pa., and filed joint Federal income tax returns for the years 1959 through 1962 with the district director of internal revenue at Pittsburgh. Blanche A. Grummer is a party to this action only because she filed joint tax returns with William.
Geraldine and William were formerly husband and wife, having been married on June 1, 1939, at Tulsa, Okla., and are the parents of seven children. The names and dates of birth of these seven children are as follows:
+------------------------------------+
¦William T. Grummer, Jr¦Oct. 11, 1940¦
+----------------------+-------------¦
¦Barbara A. Grummer ¦Nov. 12, 1941¦
+----------------------+-------------¦
¦Gerald A. Grummer ¦Oct. 26, 1942¦
+----------------------+-------------¦
¦Julia E. Grummer ¦Nov. 26, 1943¦
+----------------------+-------------¦
¦Martha L. Grummer ¦Oct. 9, 1946 ¦
+----------------------+-------------¦
¦Mary G. Grummer ¦Aug. 8, 1950 ¦
+----------------------+-------------¦
¦Robert J. Grummer ¦Oct. 22, 1952¦
+------------------------------------+
Geraldine and William ceased living together sometime prior to March 26, 1955. Geraldine filed a complaint, No. 3247 April Term 1955, in the Court of Common Pleas of Allegheny Country, Pa., on March 26, 1955, for a divorce from bed and board. An amendment to this complaint was filed on May 18, 1955, to include a prayer for permanent alimony. On December 21, 1955, Geraldine further amended her complaint, praying that an absolute divorce be granted.
On December 23, 1955, Geraldine and William executed a written agreement which provides, in pertinent part, as follows:
WHEREAS First Party (Geraldine) and Second Party (William) are husband and wife but are not presently living together; and
WHEREAS First Party has filed suit against Second Party at No. 3247 April Term 1955 in the Court of Common Pleas of Allegheny County, Pennsylvania, for divorce from bed and board and intends to file a petition in said Court for alimony pendente lite and for counsel fees; and
WHEREAS First Party desires to change her suit from bed and board to absolute divorce; and
WHEREAS First Party and Second Party desire to settle their property rights and First Party's claim for alimony, counsel fees, and support for their seven minor children:
NOW THEREFORE, it is hereby mutually agreed as follows:
3. Second Party agrees that in lieu of the alimony accompanying a divorce from bed and board, and support for the seven minor children of First and Second Parties, a decree be entered in the County Court of Allegheny County, Pennsylvania, specifying the payment of $650.00 per month for support of said children.
4. * * *
(g) All claims for support and maintenance by First Party against Second Party, and all claims of either party against the other on account of property rights shall, in consideration of the foregoing, be extinguished and released, * * *
5. The payments provided for in paragraph 3 hereof shall continue until the oldest of First and Second Parties' children reaches the age of 21, when the monthly amount of such payment shall be reduced to the sum of $600.00, and the attainment of age 21 by each child subsequently shall result in a reduction of the monthly payment required to be made by the Second Party by an additional sum of $50.00 provided, however, that if at the time the first or any subsequent reduction of $50.00 in monthly payments is due, the sum of $650.00 or the sum then being paid is less than 20 percent of Second Party's current gross monthly salary less Social Security, withholding and insurance deductions, then no reduction shall be made. Insurance deductions shall be limited to deductions for insurance for the benefit of First Party and the children of First and Second Parties. Moreover, before any reductions in monthly payments under the foregoing provision can be made, Second Party must furnish to First Party a sworn statement from his employer as to the amount of his current gross monthly salary and the amount of the above deductions. When the last of First and Second Parties' children reaches the age of 21 years the support order in the County Court of Allegheny County shall be terminated but the monthly payments, as and if reduced, shall continue for the benefit of First Party until her death or remarriage.
On January 24, 1956, a decree of absolute divorce was granted to Geraldine by the Court of Common Pleas of Allegheny County, Pa.
Pursuant to the above agreement, William paid in monthly installments annual amounts of $7,655 in 1956 and $7,800 in each of the years 1957 through 1962. Payments have remained the same ($7,800) up to the date of the hearing in these cases. William claimed deductions for alimony payments of $3,600 in his Federal income tax returns for the years 1959, 1960, and 1961, respectively, and $4,450 in his 1962 tax return. In the statutory notice of deficiency, respondent disallowed $7,800 in alimony payments for each of these years on the ground that they were payments for child support and not for alimony.1 In his notice of deficiency sent to Geraldine, respondent treated these periodic payments as alimony which she should have reported as income in the years in question. Respondent now agrees that these payments cannot be treated as alimony in one case and as child support in the other.
All seven children lived with Geraldine in Pittsburgh, Pa., from the time William and Geraldine ceased living together through 1962, the last year in controversy, except William, Jr., and Barbara who left their mother's household in 1962 to establish their own homes.
OPINIONWilliam contends that parol evidence should be admitted to show that the substance of the written separation agreement was that the payments to Geraldine were intended as both alimony and child support. He argues that, even if the parol evidence he offered is not considered, the agreement itself does not sufficiently ‘fix’ the payments to Geraldine as child support under section 71(b), I.R.C. 1954.2 Under either theory he asserts that all of the payments must be treated as alimony under section 71(a)(2)3 and deductible by him under section...
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