Tinsman v. Comm'r of Internal Revenue

• Citation: 47 T.C. 560
• Decision Date: 03 March 1967
• Docket Number: Docket No. 2589-65.
• Parties: CHESTER L. TINSMAN AND HELEN J. TINSMAN, PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT
• Court: U.S. Tax Court

47 T.C. 560

CHESTER L. TINSMAN AND HELEN J. TINSMAN, PETITIONERS

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT

Docket No. 2589-65.

Tax Court of the United States.

Filed March 3, 1967.

Ralph L. Bailey, for the petitioners.

Charles F. T. Carroll, for the respondent.

Petitioner made payments to his former wife pursuant to a decree of separate maintenance entered in the District of Columbia, which did not fix any part of such payments as child support, and pursuant to a divorce decree entered in Maryland, which fixed all of such payments as child support. Both decrees provided for the same amount of payments, and both were in existence during the taxable years. Held, no part of such payments was fixed as child support within the meaning of sec. 71(b), I.R.C. 1954.

SIMPSON, Judge:

Respondent determined deficiencies in petitioners' income tax in the amount of $586.03 for the taxable year 1961 and $745.89 for the taxable year 1962. The only issue remaining for decision is whether the periodic payments made by petitioner Chester L. Tinsman to his former wife are fixed as for the support of a minor child within the meaning of section 71(b) of the Internal Revenue Code of 1954.¹

FINDINGS OF FACT

Some of the facts were stipulated, and those facts are so found.

Petitioners are husband and wife currently residing in Clinton, Md. The petitioners filed their joint Federal income tax returns for the years 1961 and 1962 with the district director of internal revenue at Baltimore, Md. Chester L. Tinsman will be referred to as the petitioner.

In 1960, Lorraine Tinsman, the former wife of petitioner, brought suit against petitioner in the District of Columbia Municipal Court (now the Court of General Sessions) for separate maintenance. On May 2, 1960, petitioner and Lorraine Tinsman entered into a separation agreement, which provided that petitioner should pay $32.50 per week ‘as contribution to the support and maintenance of the wife and child.’ On June 7, 1960, the District of Columbia Municipal Court entered a consent order, based upon the separation agreement, requiring petitioner to pay $32.50 per week to Lorraine Tinsman ‘as maintenance for herself and their minor child, Bonnie Lorraine Tinsman.’ These payments were to be made through the clerk of the court. Petitioner made these payments during the years 1960, 1961, and 1962.

In the latter part of 1960, petitioner brought suit for divorce from Lorraine Tinsman in the Circuit Court of Worcester County, Md. Lorraine Tinsman was served by publication and did not appear to contest the suit. On March 14, 1961, a decree of absolute divorce was entered in this suit, which required petitioner to pay Lorraine Tinsman $32.50 per week ‘for support of his minor child, namely the said Bonnie Lorraine Tinsman.’ Thereafter through the clerk of the Municipal Court of the District of Columbia.

Lorraine Tinsman believed the payments made to her were for child support. Sometimes after 1962, custody of Bonnie Lorraine Tinsman was transferred to petitioner, and at that time, the payments were discontinued.

On their income tax returns, the petitioners' deducted $1,705.60 in each of 1961 and 1962 as alimony payments. Respondent disallowed these deductions. Respondent has since conceded that $292.50 of the payments made in 1961 are deductible because such payments were made before the entry of the Maryland decree of absolute divorce.

OPINION

Petitioner contends that he is entitled to deduct the payments made by him in 1961 and 1962 to his former wife under the provisions of section 215. Section 215 allows a deduction to the husband for amounts includable under section 71 in the gross income of his divorced or legally separated wife. The general rule of section 71 includes in such wife's gross income periodic payments received in discharge of a legal obligation imposed on the husband under a decree of divorce or separate maintenance. However, section 71(b) provides that this general rule does not apply ‘to that part of any payment which the terms of the decree, instrument, or agreement fix, in terms of an amount of money or a part of the payment, as a sum which is payable for the support of minor children of the husband’; consequently, such portion is not deductible by the husband under section 215. The respondent argues that the payments made by the petitioner in this case were fixed as child support payments and that therefore they were not deductible by him.

In Commissioner v. Lester, 366 U.S. 299 (1961), the Supreme Court construed section 71(b), holding that a payment, in order to be excluded from the wife's income as child support, must be ‘specifically designated’ as child support in the instrument providing for it.

Our problem in this case arises because the payments made by the petitioner satisfied his obligation under two decrees. The decree of separate maintenance filed in the District of Columbia and the separation agreement do not specifically designate any part of the payments required under the decree as child support. The decree of absolute divorce filed in Maryland specifically designates all of the payments required under it as child support.

In Lester, the Supreme Court reviewed the legislative history relating to the alimony provisions and concluded that the legislative purpose was to permit the husband and wife to shift the tax burden as they wished so long as they were ‘clear and specific.’ We think that in the situation before us the parties have not been clear and specific.

Though in many situations we examine the circumstances surrounding the execution of legal instruments to ascertain the intent of the parties, in this situation, we are under a mandate to be governed by the form of the instruments. Geraldine E. Grummer, 46 T.C. 674 (1966). Since the alimony provisions do enable the husband and wife to shift the tax burden with respect to the alimony and support payments, it is necessary to have a clear and expressed understanding as to who is assuming that burden. Without such an understanding, the parties do not know who is entitled to a deduction and who is required to pay a tax on the payments; nor does the tax collector know from whom to collect the tax. The situation before us illustrates what can happen when the instruments are ambiguous. The separation agreement and the first decree clearly lacked a specified designation of support payments. When the later decree was secured, it standing alone appeared to contain the required designation. However, it failed to make clear whether the later decree was intended to supplant or modify the earlier decree in characterizing the payments to the wife, and no action was taken in the District of...