Walsh v. Comm'r of Internal Revenue, Docket No. 32317.
| Decision Date | 31 March 1954 |
| Docket Number | Docket No. 32317. |
| Citation | 21 T.C. 1063 |
| Parties | RAOUL WALSH, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT. |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Henry C. Diehl, Esq., for the petitioner.
William P. Flynn, Jr., Esq., for the respondent.
1. When the deficiency notice for 1944 was mailed, the tax involved had already been paid. Held, the deficiency notice for that year was not valid and the Tax Court has no jurisdiction. Stanley A. Anderson, 11 T.C. 841, followed.
2. In 1945, petitioner made certain payments to and for his former wife pursuant to a 1941 written agreement which replaced earlier 1927 and 1934 agreements. The payments which petitioner made were $225 per week for the support and maintenance of his former wife and $3,523.65 premiums on life insurance policies on his own life, in which she held only a contingent interest. The final divorce decree was obtained in 1928. None of the agreements were incorporated in the decree. Held, the insurance premiums are not deductible under section 23(u) because they did not represent income to the former wife under section 22(k). Held, further, the payments of $225 per week were periodical payments in discharge of a legal obligation which, because of a marital relationship, was incurred by the husband incident to the divorce under section 22(k) and payments are deductible by petitioner. Miriam Cooper Walsh, 11 T.C. 1093,affd. 183 F.2d 803, not followed.
3. Petitioner filed his 1945 income tax return on a community property basis and the deductible payments to the former wife were made from community income. Held, it is proper for petitioner to deduct only his community one-half. Robert A. Sharon, 10 T.C. 1177, followed.
The commissioner has determined income tax deficiencies and penalty, as follows:
+--------------------------------+
¦ ¦ ¦5 per cent ¦
+------+------------+------------¦
¦Year ¦Deficiency ¦penalty ¦
+------+------------+------------¦
¦1944 ¦$7,741.85 ¦None ¦
+------+------------+------------¦
¦1945 ¦7,220.84 ¦$361.04 ¦
+--------------------------------+
The contested adjustments are alimony deductions disallowed by the respondent in the deficiency notice, as follows:
The amounts of $7,993.24 and $7,611.83 claimed by you as deductions from gross income for the taxable years 1944 and 1945, respectively, and which are alleged by you to represent alimony payments, are disallowed.
In addition to assigning error in his petition to the above adjustments petitioner now claims alimony deductions of $15,986.47 and $15,223.65 for 1944 and 1945, respectively, instead of the ones actually taken on his return and disallowed by respondent. For the year 1945, petitioner alleges:
During the calendar year 1945, petitioner paid to or for the account of his former wife, Miriam Cooper Walsh, from whom he was divorced prior to said year, $15,223.65, representing the total of periodic payments in discharge of a legal obligation which, because of the marital or family relationship, was imposed upon him under a written instrument incident to their said divorce. In computing his net taxable income for said year, petitioner claimed as a deduction his community half of said amount. Without warrant in fact or law, respondent has not only refused to allow as a deduction the full amount paid but has disallowed as a deduction the half thereof claimed.
Petitioner has a similar allegation except as to amount for the year 1944, but we do not set it out here because we shall presently hold we have no jurisdiction for the year 1944. Petitioner raises the issue of jurisdiction for the year 1944 on the ground that since the deficiency alleged by the Commissioner was paid prior to the issuance of the deficiency alleged by the Commissioner was paid prior to the issuance of the deficiency notice, there was no deficiency at the time the notice was issued.
Petitioner concedes all other issues raised in his petition except those relating to 1944 jurisdiction and alimony deductions for both years.
The facts have all been stipulated and are found accordingly.
Petitioner is an individual residing in Los Angeles County, California. His Federal income tax returns for the calendar years 1944 and 1945 were filed with the collector for the sixth district of California. The returns were filed on the cash basis.
Petitioner and Miriam Cooper Walsh, hereinafter referred to as Miriam, were married on February 19, 1916. They adopted two children, John R. Walsh and Robert R. Walsh, hereinafter referred to, respectively, as John and Robert. On or about October 2, 1926, petitioner and Miriam separated as the result of domestic difficulties and thereafter never lived together.
On February 21, 1927, petitioner and Miriam entered into a written agreement. At the time of the execution of this agreement petitioner and Miriam contemplated a divorce and the agreement was entered into because they intended to be divorced. The agreement included provisions for payments to Miriam of $500 per week, but if petitioner's gross income was less than $1,000 per week, one-half of such income.
On May 23, 1927, Miriam filed suit for divorce against petitioner in the Los Angeles County, California, superior court. An interlocutory decree of divorce was entered in this action on June 10, 1927, and a final decree on August 1, 1928. The 1927 written agreement was not incorporated into the divorce decree.
On and prior to October 15, 1934, petitioner was delinquent in the payments required by the above mentioned agreement and on said date Miriam filed suit against petitioner to recover the delinquent payments. Negotiations between petitioner, Miriam, and their respective attorneys resulted in a reappraisal of the positions of the parties in the light of the economic circumstances then existing, and, on October 17, 1934, a second written agreement was entered into under which weekly payments were reduced from $500 to $325. Miriam's suit against petitioner was dismissed with prejudice on May 11, 1936.
During October of 1939, while away from Los Angeles, petitioner failed for 3 consecutive weeks to make the weekly payments of $325 to Miriam. Upon his return he tendered his check for these delinquent payments and thereafter tendered weekly checks for 325, all of which were rejected by Miriam on the grounds that his delinquency h ad reinstated the $500 per week payments.
On October 27, 1939, Miriam filed suit against petitioner for reinstatement of the $500 weekly payments. On March 6, 1940, she received judgment for payments at $325 per week. Upon her appeal this judgment was affirmed on March 7, 1941. Satisfaction of the judgment was filed December 1, 1941.
On February 15, 1940, John, the son, sued Miriam for money had and received, alleging himself to be a third party beneficiary under the 1927 agreement. Miriam's motion to dismiss was granted on March 18, 1940, but was reversed on August 18, 1941. The suit was dismissed January 10, 1942, without trial.
On February 16, 1940, petitioner filed an action against Miriam for declaratory relief, alleging that she had violated the agreements and that he was no longer liable for payments thereunder. The suit was dismissed January 10, 1942, without trial.
On April 3, 1940, Robert, the other son, sued Miriam for money had and received, alleging himself to be a third party beneficiary under the 1927 agreement. Miriam's motion for summary judgment was granted April 30, 1940, but was reversed on December 31, 1940. The suit was dismissed January 10, 1942, without trial.
On November 13, 1941, a third written agreement was entered into by petitioner and Miriam. This agreement settled the pending family disputes and rescinded the earlier 1927 and 1934 contracts. Again the weekly payment provisions were changed as follows:
Raoul agrees to pay to Miriam, for her support and maintenance, the sum of two hundred twenty-five (225) dollars per week for a period of two hundred (200) weeks, payable on Thursday of each week, commencing on the 6th day of November, 1941, and, after said two hundred (200) payments shall have been made, Raoul will thereafter pay to Miriam on Thursday of each week the sum of two hundred (200) dollars; provided, however, that all unaccrued weekly payments hereinabove provided for shall cease and terminate upon either the death or remarriage of Miriam.
The obligations of this paragraph are undertaken by reason of the fact that heretofore the parties were husband and wife and, under the contracts of 1927 and 1934 hereinabove referred to, Raoul had undertaken to pay certain sums for the support and maintenance of Miriam. Since said contracts are being rescinded and annulled, it is the intent and purpose of the parties hereto that these payments shall have the same characteristic, to wit, of being for support and maintenance, and are made in recognition of the status of the parties as it existed on February 21, 1927. There were provisions for reduced weekly payments in the event petitioner did not receive certain minimum income and also provisions for petitioner's paying premiums for life insurance policies on his own life for the contingent benefit of Miriam. With reference to the life insurance policies on which Raoul agreed to pay the premiums, it was further provided:
SIXTH: * * *
The parties hereto agreed to, and shall immediately, execute such instruments and documents as may be necessary to provide a trust so that, in the event of the death of Raoul prior to the death of Miriam, the net proceeds from said policies shall be payable to Miriam at the rate of two hundred (200) dollars per week, with Miriam having the power of appointment of beneficiaries to succeed to her rights in the event that, prior to her death, she has not received the full return therefrom; further, such papers and documents as may be necessary to provide that, in the event of the death or remarriage of Miriam...
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