Mirsky v. Comm'r of Internal Revenue
| Decision Date | 29 June 1971 |
| Docket Number | 5135-69.,Docket Nos. 1749-69 |
| Citation | 56 T.C. 664 |
| Parties | ENID P. MIRSKY, PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENTMARVIN MIRSKY AND ENID P. MIRSKY, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Joel Yonover, for the petitioners.
William L. Ringuette, for the respondent.
1. Pursuant to an Indian divorce decree and a ‘Separation Agreement’ incorporated therein petitioner received from her former husband five payments aggregating $25,000 over a 4-year period as well as 20 weekly payments aggregating $1,000 for the first 20 weeks following the divorce. Both sets of payments were labeled ‘alimony.’ Held, the payments aggregating $25,000 were in fact in respect of a division of property jointly held during the marriage and were therefore not includable in petitioner's gross income under sec. 71(a) (1), I.R.C. 1954. Held, further, the payments of $50 per week aggregating $1,000 were includable in petitioner's gross income under sec. 71(a)(1), I.R.C. 1954, as ‘periodic payments * * * in discharge of * * * a legal obligation * * * (arising out) of the marital or family relationship.’
2. Held, deduction for legal expenses claimed under sec. 212(1) I.R.C. 1954, denied because petitioner failed to carry burden of proving what portion, if any, of legal expenses incurred in the divorce proceedings were attributable to the collection of amounts includable in her gross
absolute divorce by a decree of Lake Superior Court, Gary, Ind.
Prior to her marriage to Pollak petitioner was employed as an advertising copywriter at ‘Goldblatts' in Chicago, Ill., and she continued to work there for some 6 months after the marriage. At the time of the marriage
income under sec. 71, I.R.C. 1954.
The Commissioner determined deficiencies in the petitioners' income tax as follows:
+---------------------------------------------------------------+
¦ ¦ ¦ ¦Addition to ¦
+-----------------------------+------+----------+---------------¦
¦Petitioner ¦Year ¦Deficiency¦tax, sec. 6653 ¦
+-----------------------------+------+----------+---------------¦
¦ ¦ ¦ ¦(a),I.R.C. 1954¦
+-----------------------------+------+----------+---------------¦
¦Enid P. Mirsky ¦1964 ¦$3,726.84 ¦ ¦
+-----------------------------+------+----------+---------------¦
¦ ¦( 1965¦1,240.74 ¦$62.04 ¦
+-----------------------------+------+----------+---------------¦
¦Marvin Mirsky and Enid Mirsky¦( 1966¦1,453.19 ¦72.66 ¦
+-----------------------------+------+----------+---------------¦
¦ ¦( 1967¦618.02 ¦30.90 ¦
+---------------------------------------------------------------+
After concessions by the petitioners three issues remain for decision: (1) Whether payments received by petitioner Enid P. Mirsky from her former husband Philip L. Pollak pursuant to a divorce decree and separation agreement are includable in her gross income under section 71(a)(1), I.R.C. 1954; (2) whether legal fees paid by petitioner Enid P. Mirsky in connection with divorce proceedings involving her and her former husband are deductible under section 212, I.R.C. 1954; and (3) whether the petitioners are liable for section 6653(a), I.R.D. 1954, additions to tax for 1965, 1966, and 1967.
The parties have filed a stipulation of facts which, together with accompanying exhibits, is incorporated herein by this reference.
At the time of filing of the petitions herein the petitioners, Marvin and Enid P. Mirsky, resided at 5518 South Kenwood Avenue, Chicago. Ill.
Enid P. Mirsky (petitioner) filed a separate individual income tax return for the calendar year 1964 with the district director of internal revenue, Indianapolis, Ind. During the years 1965, 1966, and 1967 petitioner was married to Marvin Mirsky, and they filed joint income tax returns for the calendar years 1965, 1966 and 1967, with the district director of internal revenue, Chicago, Ill.
Petitioner, whose maiden name was Moise, was previously married to Philip L. Pollak (Pollak) on February 17, 1952, in Gary, Ind. They had two children, Michael and Mitchell Pollak. Petitioner and Pollak were husband and wife until January 14, 1964, when petitioner was granted an absolute divorce by a decree of Lake Superior Court, Gary, Ind.
Prior to her marriage to Pollak petitioner was employed as an advertising copywriter at ‘Goldblatts' in Chicago, Ill., and she continued to work there for some 6 months after the marriage. At the time of the marriage she had savings in excess of $1,000. Prior to the marriage Pollak's resources were ‘just a little bit more than $500,‘ and after purchasing a $500 engagement ring for her he had ‘no money at all.’
On February 8, 1952, prior to their marriage, petitioner and Pollak purchased a residence at 1104 Rush Street in Gary (the ‘Rush Street Property’), where they resided after they were married. The purchase price was $20,000, and a downpayment of $8,000 was required. Petitioner contributed $1,000 toward the down payment, and both her parents and Pollak's parents each contributed $3,500. Pollak obtained a bank loan for the remaining $12,000, secured by Veterans' Administration Form Mortgage on the property. Since petitioner and Pollak were not married at the time of the purchase, title was taken originally in Pollak's name alone; however, on February 23, 1952, after the marriage, title was placed in the names of ‘Philip L. Pollak and Enid P. Pollak, husband and wife.’ The effect of this change was to establish a tenancy by the entirety in the spouses.
After about 6 months of marriage to Pollak petitioner terminated her employment at Goldblatts. Her earnings during this period were contributed to the family resources. Thereafter during her marriage to Pollak, she did not engage in compensable employment, but she did work periodically in various businesses successively conducted by her husband.
During approximately the first 8 years of petitioner's marriage to Pollak she managed all the household finances including mortgage payments on the Rush Street Property. For at least part of this time, petitioner and Pollak maintained a joint savings account to which petitioner deposited their savings from Pollak's income.
On or about May 17, 1956, petitioner and Pollak sold the Rush Street Property for $24,800. They received a total of $14,483.35 from the sale. Including the downpayment and mortgage payments (exclusive of interest payments) they had paid a total of $9,980.99 on the property by the time of the sale. The purchasers assumed the balance of Pollak's Veterans Administration mortgage, which had been paid down to $10,019.01, and other costs and liabilities associated with the property and the sale.
Then, on or about May 24, 1956, petitioner and Pollak purchased another residence at 6824 Forest Avenue, Gary, Ind. (the Forest Avenue property) for $42,000. The Forest Avenue Property was taken in the names of ‘Philip L. Pollak and Enid Pollak, husband and wife.’ The downpayment on the Forest Street Property was $27,000, which consisted of the proceeds from the sale of the Rush Street Property and funds in petitioner's and Pollak's joint savings account. They arranged a loan for the $15,000 balance and gave a mortgage on the property as security for the loan. During the time they lived at the Forest Avenue residence petitioner and Pollak made improvements on the property in the amount of approximately $5,000.
In October, 1963, petitioner instituted divorce proceedings against Pollak in Lake Superior Court, Gary, Ind. In her complaint, she asked ‘the court to grant her a divorce and that she have the custody of the parties' minor children and that she be granted alimony in a sum to be determined by the court.’
Just prior to the time they were divorced, petitioner and Pollak were engaged in protracted negotiations through their attorneys concerning principally the division of their marital property. During these negotiations the petitioner maintained that she ‘was only asking for * * * (her) own property.’ At one point during the negotiations Pollak offered the petitioner the Forest Avenue Property in settlement for her interests in their marital property, but the petitioner refused this offer because she thought that she could not afford the cost of maintenance. In making the offer Pollak appeared to be motivated at least in part by the thought that the property would be difficult to sell. After reaching an impasse in respect of the property, Pollak finally offered to pay petitioner $25,000, and she accepted. That amount was to be paid over a period of several years. As originally drafted, however, the agreement included two contingency provisions to which the petitioner objected. One contingency provided that the payments to the petitioner would cease upon her remarriage, and the other contingency provided that the payments would also cease on the death of either the petitioner or Pollak. The petitioner objected to the two contingencies because she considered that under the agreement she was merely to receive her own property. After further negotiations the contingency relating to petitioner's remarriage was deleted from the agreement, but the other contingency relating to the death of either petitioner or Pollak was not. Petitioner came to regard this latter provision as unimportant because she believed if either she or Pollak died their two sons would ultimately receive all of the marital property. Another concern which petitioner expressed during these negotiations was that she did not wish to pay any tax on the property she received as a consequence of the divorce.
Petitioner and Pollak entered into a ‘Separation Agreement’ on January 14, 1964, in contemplation of the divorce that was granted the same day, as hereinafter set...
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