Sydnes v. Comm'r of Internal Revenue , Docket No. 7214—74.

• Citation: 68 T.C. 170
• Decision Date: 12 May 1977
• Docket Number: Docket No. 7214—74.
• Parties: RICHARD J. SYDNES,1 PETITIONER v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: United States Tax Court

68 T.C. 170

RICHARD J. SYDNES,1 PETITIONER

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 7214—74.

United States Tax Court

Filed May 12, 1977.

Pursuant to a court separation decree, petitioner and his wife continued, without cohabitation, to share their common residence, and petitioner paid her certain temporary support payments. Held, petitioner was not ‘separated’ from his wife within the meaning of sec. 71(a)(3) and was not entitled to deduct the support payments. Held, further, on the facts, mortgage payments made by petitioner were not alimony. Richard J. Sydnes, pro se.

Albert B. Kerkhove, for the respondent.

HALL, Judge:

Respondent determined a $413.93 deficiency in petitioner's income tax for 1971. Other issues having been disposed of any agreement of the parties, the two issues remaining for decision are:

(1) Whether certain temporary support payments made by petitioner to his wife under a court order were made while the parties were ‘separated.’

(2) Whether mortgage payments made by petitioner on property awarded to his former wife under a divorce decree were support payments or part of the property settlement.

FINDINGS OF FACT

Some of the facts have been stipulated and are found accordingly.

Petitioner resided in Des Moines, Iowa, at the time he filed his petition. He filed an individual income tax return for 1971 as a single taxpayer.

Petitioner and R. Lugene Sydnes (Lugene) were married on June 15, 1946. On February 17, 1971, Lugene filed a petition for dissolution of marriage in the District Court, Polk County, Iowa. This petition set forth the property owned by petitioner and Lugene, including the family residence in Des Moines, certain household goods and furnishings, two automobiles, rental property in Des Moines, and certain life insurance policies. In this petition Lugene requested that she be granted temporary and permanent alimony, the family residence, the household goods and furnishings, and one of the automobiles. In addition, she requested the District Court to determine a fair and equitable division of the other property owned by her and petitioner.

Subsequently on March 8, 1971, Lugene filed an application for temporary support, fees and costs in which she requested temporary alimony of $100 per week. Thereafter, on April 1, 1971, the District Court entered a ruling on the application requiring petitioner to continue paying the usual family bills, including the home mortgage, taxes, groceries, etc., and allowing Lugene to use the joint bank account to write checks (not in excess of $30 per check). The ruling also provided:

That an order for conciliator will be entered herein and during the time these proceedings are being conducted the parties will continue to live separately but in the same home.

During the period from April 1 to July 9, 1971, petitioner and Lugene both continued to reside at the family home, but they occupied separate bedrooms. Lugene kept her clothing and various items of personal property there and spent some period of time there nearly every day. However, Lugene often slept at the home of friends, rarely seeing petitioner and never eating meals with him. During this period petitioner spent $1,229.90 for Lugene's support. This amount reflected one-half of the household expenses petitioner had been ordered to pay under the April 1, 1971, District Court ruling, $15 per week for food, and the total amount of checks drawn by Lugene on the parties' joint bank account.

On July 9, 1971, the District Court entered a decree of dissolution of marriage. Prior to entry of this decree, petitioner and Lugene, through their attorneys, had attempted to resolve questions of alimony and property settlement. Petitioner was adamant in his opposition to granting his wife alimony in any amount.² As a result of the negotiations between the parties, an agreement was reached which was reflected in the District Court's decree. Under the terms of the decree, Lugene was granted title to the family residence and the rental property located in Des Moines. She was to assume and pay the existing mortgage on the family residence, while petitioner was to assume and pay the existing mortgage on the rental property. The latter mortgage had a principal balance of $8,473.62 on the date this decree was entered, and was scheduled to be paid in 150 monthly payments of $76.84 and one payment of $67.46. Lugene also was granted title to most of the household goods and furnishings, and one of the family automobiles. Petitioner was granted title to the other family automobile and certain items of personal property. The decree did not dispose of petitioner and Lugene's life insurance or their joint bank account. In addition the decree provided:

IT IS FURTHER ORDERED, ADJUDGED AND DECREED

That (R. Lugene Sydnes) shall have no alimony nor is she entitled to any alimony.

On his 1971 income tax return petitioner reported gross income of $16,777.56. He deducted $1,229.90 as temporary support for Lugene for April through July 1971. Petitioner also deducted as alimony the mortgage payments, totaling $545.30, made by him for the period July 9 through December 31, 1971, on the rental property granted to Lugene under the July 9, 1971, decree.

Respondent disallowed both deductions in their entirety.

OPINION

The first issue for decision is whether certain temporary support payments made by petitioner under a court order were made while he was ‘separated’ from his wife. If the payments were made while petitioner and his wife were ‘separated,‘ as petitioner claims, then the amounts are includable in her gross income under section 71(a)(3),³ and petitioner is entitled to a deduction for those amounts under section 215(a).⁴ However, if petitioner and his wife were not ‘separated’ when the payments were made, as respondent claims, then the amounts are not includable in her gross income and petitioner is not entitled to a deduction.

In February 1971, R. Lugene Sydnes filed a petition in District Court, Polk County, Iowa, seeking a divorce from petitioner. The following month she filed an application for temporary support. The District Court's ruling on this application required petitioner to pay certain household expenses and to allow Lugene to write checks on a joint bank account. The ruling also provided that ‘during the time these proceedings are being conducted the parties will continue to live separately but in the same house.’ Thereafter petitioner and Lugene continued to reside in the same house until the District Court entered a decree of dissolution of marriage. However, during the intervening period, petitioner and Lugene occupied separate bedrooms, rarely seeing one another and never eating meals together. They had come to a parting of ways and had ceased living together as husband and wife and had no intention of resuming marital relations.

Respondent asserts that petitioner and Lugene were not ‘separated’ within the meaning of section 71(a)(3) during the period from April 1 through July 9, 1971, since they both lived in the same residence during that period. In support of his assertion respondent relies upon section 1.71—1(b)(3)(i), Income Tax Regs., which provides that where a husband and wife are ‘separated and living apart,‘ payments made under a decree for support are includable in the gross income of the wife. Respondent interprets this regulation and section 71(a)(3) as imposing a requirement that a husband and wife live in separate residences in order for payments made under a decree for support to be includable in the wife's gross income and deductible by the husband, and we agree.

Prior to 1942, alimony payments were not taxed to the recipient and no deduction for such payments was allowed to the payor. Gould v. Gould, 245 U.S. 151 (1917), sec. 19.24—1, Regs. 103. Congress in 1942 made alimony and separate maintenance payments taxable to the recipient and deductible by the payor. Secs. 22(k) and 23(u), I.R.C. 1939;⁵ sec. 120, Revenue Act of 1942, ch. 619, 56 Stat. 816—817. However, this treatment extended only to payments made pursuant to a decree of divorce or separate maintenance or a written agreement incident to such divorce or separation. Sec. 22(k), I.R.C. 1939. In 1954 Congress extended this tax treatment to payments made pursuant to a written separation agreement and a decree of support (sec. 71(a)(2) and 71(a) (3)) in order to end the ‘discriminat(ion) against husbands and wives who have separated although not under a court decree.’ S. Rept. No. 1622, 83d Cong., 2d Sess. 10 (1954). ⁶

The statutory history of the 1954 changes emphasizes that the factual status of whether the parties are separated rather than their marital status under local law is the key in determining whether amounts paid under a court order are includable in the recipient's gross income and deductible by the payor. See S. Rept. No. 1622, 83d Cong., 2d Sess. 10 (1954). We conclude that ‘separated’ as used in the statute and ‘separated’ as used in the regulations mean living in separate residences. Only when living in separate residences do the parties incur the duplicate living expenses normally incurred by divorced or separated couples. In the absence of such duplication, and in the absence of any legislative history cited to us which expressly elucidates what Congress intended, we find it hard to believe that a mere continuation of shared living expenses following estrangement was intended by Congress to generate a deduction when the identical expenses would have been unavailable to the husband as a deduction before the estrangement took place. Moreover, the Court should not be required to delve into the intimate question of whether husband and wife are in fact living apart while residing in the same house. We therefore conclude that petitioner and Lugene were not separated during the period from April 1 to July 9, 1971, and that petitioner is not entitled to a deduction under section 215...