Holt v. Comm'r of Internal Revenue
| Decision Date | 13 December 1954 |
| Docket Number | 47862.,Docket Nos. 47636 |
| Citation | 23 T.C. 469 |
| Parties | HAROLD HOLT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.MARGARET K. HOLT, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Bernard J. Long, Esq., for petitioner Harold Holt.
Ellis J. Staley, Jr., Esq., for petitioner Margaret K. Holt.
Donald J. Fortman, Esq., for the respondent.
Husband's agreement for wife's support held, on facts, not ‘incident to a divorce’ subsequently obtained by the husband within the meaning of sections 22(k) and 23(u), Internal Revenue Code of 1939.
Respondent determined deficiencies as follows:
+------------------------------------+
¦ ¦Year ¦Deficiency ¦
+----------------+------+------------¦
¦Harold Holt ¦1948 ¦$550.78 ¦
+----------------+------+------------¦
¦Harold Holt ¦1949 ¦583.34 ¦
+----------------+------+------------¦
¦Margaret K. Holt¦1948 ¦464.58 ¦
+----------------+------+------------¦
¦Margaret K. Holt¦1949 ¦479.00 ¦
+------------------------------------+
The cases were consolidated on the basis of agreement by the parties.
Respondent determined deficiencies as to Harold Holt on the basis of disallowance of deductions for weekly payments made by him to his wife, pursuant to a written agreement of separation, on the theory that the written instrument was not incident to a subsequent decree of divorce within the meaning of section 22(k) of the Internal Revenue Code of 1939. Respondent likewise determined deficiencies as to Margaret K. Holt by including the weekly payments made to her pursuant to said agreement in her gross income, on the theory that the same written instrument was incident to the subsequent decree of divorce.
The question for consideration is whether a written agreement of separation providing for periodic payments by husband to wife was incident to a subsequent divorce procured by the husband. The cases were submitted on stipulation of facts, exhibits, and oral testimony.
The stipulated facts, as amended, are found accordingly, and are incorporated herein by reference.
Petitioner Harold Holt is an individual who resides in Albany, New York. The taxable years involved in this proceeding are the calendar years 1948 and 1949 and the returns for said years were filed with the collector of internal revenue at Albany, New York, on March 15, 1949, and March 15, 1950, respectively.
Petitioner Margaret K. Holt is an individual who resides in Delmar, Albany County, New York. The taxable years involved in this proceeding are the calendar years 1948 and 1949 and the returns for said years were timely filed with the collector of internal revenue at Albany, New York.
Separate notices of deficiency were mailed to Margaret K. Holt and to Harold Holt on January 22, 1953.
The Holts were married on August 28, 1924. The sole issue of the marriage is a daughter, Mary Elizabeth Holt, born January 8, 1927.
In February 1947, Margaret K. Holt commenced an action in the Supreme Court, Albany County, State of New York, for a legal separation.
Upon motion of Margaret K. Holt dated May 13, 1947, the Supreme Court, Albany County, New York, ordered Harold Holt to pay $50 each week commencing May 23, 1947, for his wife's support and maintenance.
On December 24, 1947, Harold Holt and Margaret Holt entered into a separation agreement containing provisions for various payments to Margaret K. Holt, including payments of $50 per week for support and maintenance so long as she shall live and not remarry. Further reference to the provisions of said agreement will be made hereafter. A copy thereof is attached to the stipulation of facts and is a part thereof.
The action for legal separation theretofore instituted by Margaret K. Holt was discontinued by order of the said Supreme Court of New York dated January 5, 1948, upon the basis of a stipulation for discontinuance dated December 24, 1947, signed by the parties to said action.
On January 22, 1948, Harold Holt instituted an action for divorce from the said Margaret Holt upon the ground of desertion in the Circuit Court of the Eleventh Judicial Circuit, Dade County, Florida. On February 27, 1948, the court awarded to Harold Holt a final decree of divorce a vinculo matrimonii from Margaret K. Holt. The agreement of December 24, 1947, was not incorporated in the decree. Said decree made no reference to said agreement and made no provisions for the wife's support and maintenance. The agreement was not presented to the court because it was feared that the Florida court might draw the conclusion that there had been collusion.
Harold Holt paid the sum of $50 to Margaret K. Holt each week from November 28, 1947, and each week thereafter during the years 1948 and 1949, or a total of $2,600 in each of said years.
Of the amount so paid in 1948, a total of $400 was paid prior to the decree of February 27, 1948, and $2,200 was paid subsequent to such decree.
Petitioners had been permanently separated since some time in 1945, although Margaret K. Holt made unsuccessful efforts to bring about a reconciliation. From the time of the separation, Harold Holt wanted a divorce. Margaret K. Holt was aware of this, but at all times opposed the idea. She had no knowledge of any definite intention on the part of Harold Holt to file a particular action to obtain a divorce and was not informed of the action in Florida until after it was instituted. She had previously refused to file divorce proceedings. The separation proceedings in New York were filed by her in the belief that this was the only means by which she could force her husband to furnish support and maintenance. Negotiations during the pendency of these proceedings resulted in the agreement of December 24, 1947, which accomplished her objective, and the proceedings were dismissed.
Margaret K. Holt's objections to divorce were based upon religious grounds. She believed in the principles of the Bahai faith, which oppose divorce.
The usual provision that in the event of a divorce the terms of the separation agreement might be incorporated in the divorce decree was not included in the separation agreement of December 24, 1947, because petitioner Margaret K. Holt would not agree. She was opposed to anything which would in any way indicate a divorce.
During the negotiations which led to the separation agreement of December 24, 1947, neither Margaret K. Holt nor her counsel was informed that Harold Holt had gone or was going to Florida to establish a residence there and institute divorce proceedings. Harold Holt did at that time contemplate such action, and had already begun to establish a Florida residence.
When Margaret K. Holt first received notice of the fact that the Florida divorce proceedings had been instituted, she requested her attorney to appear and defend the proceedings. Later, on her attorney's advice, she decided not to contest.
Margaret K. Holt's counsel advised her, at the time she entered into the agreement of December 24, 1947, that she would not have to pay income tax on the weekly payments provided therein for her support and maintenance.
The agreement of December 24, 1947, contained the following provision:
Except, however, that the wife does not release, nor shall this agreement be construed to release, any obligation of the husband to his wife or her attorneys for legal services and disbursements in action action or proceeding which may arise in the future, including any action or proceeding in connection with the provisions of this agreement.
The husband wanted a divorce.
The wife did not want a divorce, was unwilling to institute proceedings to obtain one, and was unwilling to agree not to oppose a divorce proceeding if her husband instituted it.
The wife was aware that the husband wanted a divorce, but was not aware that he had any definite plans to institute proceedings, or that he was establishing a Florida residence and intended to apply for a divorce there. Her first information concerning the proceeding was when she received formal notice that it has been instituted.
There was no mutuality of intention on the part of Harold and Margaret K. Holt that the agreement of December 24, 1947, and the payments provided therein were to be deemed incident to a subsequent divorce, in Florida or elsewhere.
There was no mutuality of understanding between Harold and Margaret K. Holt that, in the event of subsequent divorce, the agreement of December 24, 1947, was to be incorporated in the decree, or was, from the perspective of Federal income taxes, to be deemed, in the event of such divorce, as determinative of the fact that the payments provided therein were to be taxable to the wife and deductible by the husband, or the opposite.
The agreement did not refer to a possible subsequent divorce or incorporation in any divorce decree. The Florida decree did not refer to the agreement or include any provision for support and maintenance. The agreement was not brought to the attention of the Florida court.
On the foregoing ultimate findings of fact the fundamental question presented is whether a support agreement is ‘incident’ to1 a subsequent divorce under section 22(k) where the wife does not want a divorce, has no knowledge that the husband has plans to institute divorce proceedings, and there is no mutuality of intent or plan and no objective evidence that such agreement was to be deemed incident to a divorce. The case is no stronger for a tax upon the wife in any respect than was Florence B. Moses, 18 T.C. 1020, 1024, where we said:
The evidence does not indicate that the parties entering into the agreement contemplated divorce proceedings as were true in Bertram G. Zilmer, 16 T.C. 365. If plans for a divorce following the agreement were held by Albert Moses (the husband), he did not bring them to light. The fact that one party may be...
To continue reading
Request your trial
-
Lawrence v. Comm'r of Internal Revenue
...Co., 27 B.T.A. 673, 688, affirmed on the bond discount issue (C.A. 4) 74 F.2d 887; Estate of Edward P. Hughes, 7 T.C. 1348, 1350; Harold Holt, 23 T.C. 469, 473. The pressure increased in situations where more than one Court of Appeals differed with the Tax Court, but was relieved if one or ......
-
Borax v. Comm'r of Internal Revenue
...certiorari denied 361 U.S. 824 (1959); Raoul Walsh, 21 T.C. 1063 (1954); Holt v. Commissioner, 226 F.2d 757 (C.A. 2, 1955), reversing 23 T.C. 469 (1954), certiorari denied 350 U.S. 982 (1956); Newton v. Pedrick, 212 F.2d 357 (C.A. 2, 1954); Lerner v. Commissioner, 195 F.2d 296 (C.A. 2, 1952......
-
Cramer v. Comm'r of Internal Revenue
...when divorce has occurred * * * .' Subsequently, the same circuit decided Holt v. Commissioner, 226 F.2d 757 (C.A. 2, 1955), reversing 23 T.C. 469 (1954), certiorari denied 350 U.S. 982 (1956). In this later case, the court reiterated and explained the principle which it had applied in the ......
-
MACFADDEN v. Commissioner, Docket No. 41202.
...Miller, 16 T. C. 1010 Dec. 18,268, revd. (C. A. 2) 199 Fed. (2d) 597 52-2 USTC ¶ 9520, as sustaining her position. She also cites Harold Holt, 23 T. C. 469 Dec. 20,703, revd. (C. A. 2) 226 Fed. (2d) 757 55-2 USTC ¶ 9719 and refers to the fact that in a memorandum opinion (Docket No. 13717 e......