Hyde v. Comm'r of Internal Revenue, Docket No. 78999.

• Decision Date: 12 June 1961
• Docket Number: Docket No. 78999.
• Citation: 36 T.C. 507
• Parties: KATHARINE T. HYDE, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

36 T.C. 507

KATHARINE T. HYDE, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket No. 78999.

Tax Court of the United States.

Filed June 12, 1961.

George A. Burrell, Esq., for the petitioner.

Warren S. Shine, Esq., for the respondent.

Pursuant to separation agreement and divorce decree H transferred to W (his wife) certain life insurance policies of which she became the absolute owner; therefor, pursuant to the agreement and decree, H paid premiums on such policies. Held, such premiums represented alimony payments to W under section 71(a), I.R.C. 1954. Anita Quinby Stewart, 9 T.C. 195, followed. Florence H. Griffith, 35 T.C. 882, distinguished.

OPINION.

RAUM, Judge:

Respondent determined deficiencies in petitioner's income tax in the amounts of $814.87 in 1954 and $873.16 in 1955. The only issue is whether the annual premiums of $1,892.99 paid by petitioner's former husband in each of the taxable years on four life insurance policies previously assigned to her are includible in her gross income as periodic payments under a decree of divorce or written instrument incident thereto as provided in section 71(a)(1) of the Internal Revenue Code of 1954. The facts have been stipulated.

Petitioner resides at 1192 Park Avenue, New York, New York. She filed her individual income tax returns for the years 1954 and 1955 with the district director of internal revenue, Upper Manhattan District, New York, New York.

Petitioner and Gordon E. Hyde were married on January 31, 1925. There were three children of this marriage: Donald R., born in 1926; Barbara L., born in 1929; and Harriet, born in 1934.

On December 1, 1947, petitioner and Gordon E. Hyde entered into a written separation agreement providing for, among other things, the support and maintenance of the petitioner and the two younger children. In addition to provisions for annual cash alimony, the agreement provided in paragraph Second (b) as follows:

SECOND: The Husband shall provide as and for the exclusive and personal support and maintenance of the Wife during her lifetime, or until the Wife shall remarry, as follows:

(b) Pay to the Wife, or, at her direction to the insurance companies direct, all insurance premiums on life insurance policies referred to in Paragraph THIRD (a) during his lifetime, as and when such premiums become due and payable, (exclusive of grace period) and when paid by Husband direct deliver to the Wife, at least 15 days after such due date, the insurance companies' receipts evidencing such payments, with the limitation however, that if the Wife shall subsequently be divorced and shall remarry, then the obligation for the Husband to pay premiums shall cease upon such remarriage.

Paragraph Third (a), referred to in paragraph Second (b), provided as follows:

THIRD: The Husband does hereby convey, transfer, assign and set over to the Wife, the following:

(a) Whole or straight existing life insurance policies, payable to Wife as beneficiary without limitation or reservation, presently in the face amount of $51,500.00, enumerated and listed in Schedule A, attached hereto and made a part hereof, which policies Husband represents are free of loans, claims, or other adverse interests.

Schedule A of the separation agreement listed the four life insurance policies referred to in paragraph Third (a) and described them by the name of the insurer, the policy number, the amount of the insurance, the date of the policy, and the annual or quarterly premium. The total life insurance represented by the four policies amounted to $51,500.

Pursuant to the separation agreement, Gordon formally assigned all his right, title, and interest in the insurance policies to petitioner during 1947 and 1948. These assignments were endorsed or noted by the respective insurance companies on the four policies. As assignee, petitioner's rights in these policies include, among others, the right to change the beneficiary, to obtain cash loans, to receive dividends, to assign the policies, and to surrender the policies for their cash value. Petitioner has at all times since 1948 been in possession of the four life insurance policies.

In paragraph Twelfth of the separation agreement, petitioner and her former husband agreed that in any divorce proceedings instituted by either party the provisions of the agreement would be offered in evidence and, if received, would be incorporated in any order or decree that might be rendered. On April 21, 1948, she instituted divorce proceedings in the Supreme Court of the State of New York, Bronx County, and on July 28, 1948, the court entered an interlocutory divorce decree which became final 3 months thereafter. The third paragraph of page four of the divorce decree provides as follows:

ORDERED, ADJUDGED AND DECREED that the defendant pay to the plaintiff, or, at her direction to the insurance companies direct, all insurance premiums on the life insurance policies attached to and designated Schedule ‘A’ of agreement dated December 1, 1947 between the parties, which agreement hereinbefore referred to and marked plaintiff's Exhibit 1 in evidence, as and when such premiums become due and payable, (exclusive of grace period) and when paid by defendant direct deliver to the plaintiff, at least 15 days after such due date, the insurance companies' receipts evidencing such payments, with the limitation however, that if the plaintiff shall subsequently be divorced and shall remarry, then the obligation for the defendant to pay premiums shall cease upon such remarriage * * *

Pursuant to the separation agreement and the divorce decree, Gordon paid the annual premiums of $1,892.99 due on the four life insurance policies to the respective insurance companies in each year from 1948 to the present. Petitioner has never requested that premium payments be...