Metcalf v. CIR, 5526.

• Decision Date: 04 November 1959
• Docket Number: No. 5526.,5526.
• Citation: 271 F.2d 288
• Parties: Arthur G. B. METCALF, Petitioner, Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent, Appellee.
• Court: U.S. Court of Appeals — First Circuit

271 F.2d 288 (1959)

Arthur G. B. METCALF, Petitioner, Appellant, v. COMMISSIONER OF INTERNAL REVENUE, Respondent, Appellee.

No. 5526.

United States Court of Appeals First Circuit.

Heard October 8, 1959.

Decided November 4, 1959.

COPYRIGHT MATERIAL OMITTED

John B. Dolan, Boston, Mass., for petitioner.

Carter Bledsoe, Atty., Dept. of Justice, Washington, D. C., with whom Howard A. Heffron, Acting Asst. Atty. Gen., and Lee A. Jackson and A. F. Prescott, Attys., Dept. of Justice, Washington, D. C., were on the brief, for respondent.

Before WOODBURY, Chief Judge, and HARTIGAN and ALDRICH, Circuit Judges.

ALDRICH, Circuit Judge.

This is a petition for review of a decision of the Tax Court refusing to redetermine a deficiency in taxpayer's income tax liability for the year 1951. The sole question is whether, and to what extent, a taxpayer is entitled to deduct, as alimony, certain payments made by him to his divorced wife during the taxable year. Sections 22(k) and 23(u), Internal Revenue Code of 1939, 26 U.S.C. §§ 22(k), 23(u).¹

Section 23(u) allows as a deduction, "in the case of a husband described in section 22(k), amounts includible under section 22(k) in the gross income of his wife, payment of which is made within the husband's taxable year." Section 22(k) includes in the gross income of a divorced wife payments made to her by her former husband in discharge of a legal obligation "imposed upon or incurred by such husband under such divorce decree or under a written instrument incident to such divorce * * *. This subsection shall not apply to that part of any such periodic payment which the terms of the decree or written instrument fix, in terms of an amount of money or a portion of the payment, as a sum which is payable for the support of minor children of such husband."

The facts were stipulated. In July, 1950, taxpayer's wife filed a libel for divorce. In September a decree pendente lite for custody of the minor children and for support in the amount of $150 a week was entered in favor of the wife. On November 10, 1950, in contemplation of an impending divorce, an agreement was executed by the parties² providing for a division of their property, for the wife's custody of the children, and for a continuance of the obligation of taxpayer to pay $150 a week to the wife for the support of herself and the children. On November 13 the Probate Court entered a decree nisi of divorce which conformed to the agreement (although not mentioning it), but which omitted certain details important to the instant proceeding. This decree became final six months later. On June 6, 1951, the wife (as we shall continue to refer to her for the sake of convenience) petitioned for an increase in the weekly payments, and on November 23, 1951, an order was entered increasing the weekly payments to $175.

None of the decrees made any allocation or apportionment of the weekly payments between support of the wife and support of the children. Neither did the agreement, in so many words. But the agreement did specify that the parties had five minor children. It provided that as each child reached the age of twenty-one years "or dies before reaching such age or marries or becomes self-supporting," the weekly payments would be reduced by $25. It further provided that upon the remarriage of the wife there would be a reduction of $25. The Tax Court held that this was an obvious per capita arrangement, and that the fair intent of the agreement was to fix $125 of the $150 as payable for the support of the children, and therefore not deductible by taxpayer. It further held that the decree of November 23, 1951, did not change this.

We agree with the Tax Court. The cases on this subject are not in such conflict as has been suggested. In Budd v. Commissioner, 6 Cir., 1947, 177 F.2d 198, the agreement provided, in separate paragraphs, that the husband would pay his divorced wife $500 a month for the support of herself and their son; that after the death or majority of the son she would receive $300 a month for her support, for so long as she remained unmarried; and that if she remarried she would receive $200 a month for the son. The court held that during the period she was receiving $500 a month, $200 was adequately "earmarked" for the son even though the other provisions had not become operative. In Deitsch v. Commissioner, 6 Cir., 1957, 249 F.2d 534, the agreement was similar to the one considered in Budd in that it made provision for a reduction upon remarriage, and dissimilar in that it provided that one-half the payments should cease upon the majority of the elder child, and that all payments should cease upon the majority of the younger child. The court distinguished Budd for this reason and held that no amount was adequately "earmarked" for the children. In view of the remarriage provision, this conclusion seems sound. Some of the language of the court must be read with caution, however, in view of the fact that the court expressly reaffirmed the Budd case.

In Eisinger v. Commissioner, 9 Cir., 1957, 250 F.2d 303, certiorari denied, 1958, 356 U.S. 913, 78 S.Ct. 670, 2 L.Ed. 2d 586, the husband agreed to pay $125 a week for his wife, and she agreed to support the two children. Payments were to be reduced by $31.25 as each child attained majority, or died. If the wife remarried, the payments were to cease, and in lieu thereof the husband was to pay to the wife $31.25 per child for their support. The court stated that it "disapproved" Deitsch, and held that one-half the payments were sufficiently fixed as for the support of the children. There would seem to have been no reason for the court to have disapproved Deitsch, at least in terms of its result. The Deitsch case was clearly distinguishable, the more so in view of its reaffirmance of Budd, which considered an agreement almost exactly like the Eisinger agreement. See also Mandel v. Commissioner, 7 Cir., 1950, 185 F.2d 50.

Analysis of all of the appellate cases supports the instant decision of the Tax Court, with the possible exception of certain language in Weil v. Commissioner, 2 Cir., 1957, 240 F.2d 584, certiorari denied 353 U.S. 958, 77 S.Ct. 864, 1 L.Ed.2d 909, relied upon by taxpayer. The provisions...