Hesse v. Comm'r of Internal Revenue, Docket No. 9623.

• Decision Date: 10 September 1946
• Docket Number: Docket No. 9623.
• Parties: TUCKIE G. HESSE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

7 T.C. 700

TUCKIE G. HESSE, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 9623.

Tax Court of the United States.

Promulgated September 10, 1946.

Petitioner, a resident of Pennsylvania, received an absolute divorce from the bonds of matrimony in Pennsylvania in 1936. Just prior to the divorce, and incident thereto, the former husband entered into an agreement to pay her $300 per month for life, or until she should remarry. Held, that the payments received after the divorce, in 1942 and 1943, pursuant to the agreement, are includible in petitioner's income under section 22(k) of the Internal Revenue Code. William J. Kenney, Esq., for the petitioner.

Stanley L. Drexler, Esq., for the respondent.

Respondent determined a deficiency in income and victory tax for the year 1943 in the amount of $725.10. Respondent has included the sum of $3,600 in petitioner's income for each of the years 1942 and 1943, under the provisions of section 22(k) of the Internal Revenue Code. Petitioner received these sums annually from her former husband, Frank M. Hesse, from whom she is divorced. The only question is whether the payments from the former husband are includible in the income of petitioner.

Petitioner filed her returns with the collector for the twenty-third district of Pennsylvania.

FINDINGS OF FACT.

Petitioner was married to Frank M. Hesse in August 1914 and they lived together as husband and wife until September 13, 1933, at which time Frank M. Hesse deserted his wife. There were two children born of this marriage, and the children continued to live with petitioner after September 13, 1933. Barbara Hesse was born on August 3, 1921, and Eleanor Hesse was born on November 6, 1927.

After petitioner's husband left his home on September 13, 1933, he made payments to her for her support. Extremely difficult relations developed. Petitioner made use of credit accounts, for which Frank Hesse was liable, to an extent which he considered excessive, with the result that he felt would have to bring matters to a head to protect himself, and to this end he stopped making payments to petitioner for her support. Petitioner countered by instituting a proceeding against Frank Hesse and causing him to be arrested in the spring of 1934. This trouble was terminated by the execution of an agreement on June 1, 1934. This agreement was a separation agreement under which Frank Hesse agreed to pay petitioner $400 a month for the support of herself and her two children and to provide for the education of the two children in a university after the completion of a high school education. The payment of $400 a month was to represent $300 for the support of petitioner and $50 a piece for the support of each child until she attained the age of 21 years. Frank Hesse agreed to establish a trust to provide a fund for the higher education of the children. He also agreed to continue his present life insurance for the benefit of petitioner for so long as she continued to be his wife or until she should remarry; and, in the event of petitioner's remarriage, the insurance would be continued for the benefit of the children. Petitioner agreed to release her husband from all claims for other or additional support for herself and the children. Both of the parties agreed to live separate and apart during their natural lives. They also agreed to release each other and his or her estate from all claims in and to any property now belonging to the other.

Frank Hesse ceased to make payments under the 1934 agreement in the early part of 1935. Petitioner instituted desertion and nonsupport proceedings against him in the County Court of Allegheny County, Pennsylvania, in May 1935, for the purpose of obtaining support for herself and her two children. Thereafter, Hesse commenced to make payments to petitioner again. On July 20, 1935, petitioner and Hesse entered into an agreement entitled ‘Confirmation Agreement,‘ which referred to the agreement of June 1, 1934, and a trust agreement dated September 1, 1934, and which stated that the parties mutually contended that the agreements had been broken, and that they desired that the agreements should be and remain in full force and effect as though no controversies had arisen concerning the matters dealt with in the agreements. Accordingly, the parties agreed that the agreements of June 1 and September 1, 1934, were in full force and of the same effect as when executed, with the understanding that any payment of money which was delinquent would be promptly paid; and that the parties agreed hereafter to comply with the provisions of the above agreements.

On February 14, 1936, Frank Hesse and petitioner entered into an agreement which provided that Hesse assigned to petitioner, her executors, and assigns, 55 per cent of his monthly salary and 55 per cent of any compensation which might become payable to him, the assignment being made to secure his performance under a contemporaneous agreement, dated February 14, 1936, the terms of which are set forth hereinafter.

On June 14, 1936, Hesse executed an agreement to provide for the education and support of his children and for the support of petitioner. On the same day Hesse executed a trust agreement. The parties appointed the Fidelity Trust Co. of Pittsburgh to act as trustee of the trust. Hesse agreed to deposit $1,700 with the trust company upon the execution of the trust agreement, to be held in trust to provide for the college education for each of his two children, and he agreed to pay to the trustee $50 per month, after the deposit of $1,700, for each child until each child became 21 years of age, whereupon such monthly payments were to cease. The trust fund so accumulated is to be used solely to pay for the education expenses of the children. Hesse also agreed to make irrevocable his present life insurance for the benefit of petitioner until she should remarry, and, in the event of her remarriage, for the benefit of the children.

Under the trust agreement of February 14, 1936, Hesse agreed to pay petitioner $400 a month for the support of herself and the two children, provided that the monthly payment should be reduced $50 per month as each child attained the age of 21 years. The monthly payments were to continue as long as petitioner lived or until she remarried. In the event that petitioner should remarry before the children became 21 years of age, then Hesse was to continue to pay for each child the sum of $100 per month until each child became 21 years of age. Hesse also agreed...