Weil v. Comm'r of Internal Revenue

• Decision Date: 22 June 1954
• Docket Number: Docket Nos. 43366,50411.,43858
• Citation: 22 T.C. 612
• Parties: BEULAH WEIL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.*CHARLES S. WEIL, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.CHARLES S. WEIL AND ADREANA WEIL, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
• Court: U.S. Tax Court

22 T.C. 612

BEULAH WEIL, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.*CHARLES S. WEIL, PETITIONER,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.CHARLES S. WEIL AND ADREANA WEIL, PETITIONERS,

v.COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Docket Nos. 43366

43858

50411.

Tax Court of the United States.

Filed June 22, 1954.

1. Charles and Beulah Weil entered into an agreement which was incident to a decree of divorce. Charles agreed to pay premiums on insurance policies insuring his life. The policies were delivered to Beulah for safekeeping. Held, on the facts, that none of the insurance policies were assigned to Beulah, and she did not become the owner of any of them; her interest in them was contingent. Held, further, that the amounts of premiums paid by Charles are not part of periodic payments within section 22(k) of the Internal Revenue Code and, therefore, they are not deductible under section 23(u) of the Code.

2. The agreement made provision for periodic payments for the support of Beulah and their two minor children. The amount of the total periodic payments which Charles is required to make each year depends upon the amount of his net income for the preceding year so that the total amount may fluctuate from year to year. However, the agreement fixes $800 per month, or $9,600 per year, as the norm, orbasic amount, which Charles is obligated to pay, which amount may be adjusted upward to $12,000 or down to $5,000. Also, if Beulah remarries, Charles will not be obligated to continue periodic payments for her support, but he will be obligated to continue to make payments for the support of his children in the amount of $200 per month for each child, or $400 per month for two minor children. Held, on the facts, that the agreement is to be read in its entirety. Held, further, that the agreement fixes part of the periodic payments in terms of 50 per cent for two minor children, or 25 per cent for one child of periodic payments as a sum which is payable for the support of minor children of Charles. Accordingly, in the taxable years 50 per cent of the required periodic payments is properly to be excluded, under section 22(k) from Beulah's income, and 50 per cent cannot be deducted from Charles' income under section 23(u). Charles Kurz, C. P. A., for the petitioner Beulah Weil.

Hiram S. Gans, Esq., for the petitioners Charles S. Weil and Adreana Weil.

Richard G. Maloney, Esq., for the respondent.

The Commissioner has determined that there are deficiencies in income tax as follows:

+-----------------------------------------------------------------------------+
                ¦Docket   ¦Petitioner                 ¦Year¦Original        ¦Increased        ¦
                ¦No.      ¦                           ¦    ¦deficiency      ¦deficiency       ¦
                +---------+---------------------------+----+----------------+-----------------¦
                ¦43366    ¦Beulah Weil                ¦1947¦$1,762.59       ¦$2,584.16        ¦
                +---------+---------------------------+----+----------------+-----------------¦
                ¦43858    ¦Charles B. Weil            ¦1947¦2,126.92        ¦                 ¦
                +---------+---------------------------+----+----------------+-----------------¦
                ¦50411    ¦Charles B. Weil and Adreana¦1948¦731.10          ¦794.98           ¦
                ¦         ¦Weil                       ¦    ¦                ¦                 ¦
                +-----------------------------------------------------------------------------+
                

The Commissioner has made claim, under section 272(e) of the Code, for increases in deficiencies as follows: In Docket No. 43366, he has made claim for an increase of $821.57, making the total deficiency $2,584.16; and in Docket No. 50411, he has made claim for an increase of $63.88, making the total deficiency $794.98.

In Docket Nos. 43858 and 50411, claims are made that there are overpayments of income tax for 1947 and 1948.

The issues in these proceedings involve sections 22(k) and 23(u) of the Internal Revenue Code.

One issue presents the question whether the amounts of insurance premiums paid by Charles S. Weil in 1947 and 1948, for insurance on his life, come within section 22(k) and represent additional alimony payments to Beulah Weil. The Commissioner, by his amended answer, has determined that Beulah Weil (Docket No. 43366) is taxable under section 22(k) for $1,278.72, insurance premiums paid by her former husband pursuant to an agreement, as additional alimony. Charles S. Weil (Docket Nos. 43858 and 50411) claims in his petitions additional deductions under section 23(u) for insurance premiums paid in 1947 and 1948 in the amounts of $1,278.72 and $1,322.41, respectively.

Another issue presents the question whether the sum of $4,800, a part of total periodic alimony payments made by Charles S. Weil to Beulah Weil in 1947 and 1948, constitutes a sum fixed, or specifically designated in an agreement incident to divorce ‘as a sum which is payable for the support of minor children of’ Charles S. Weil within the meaning of section 22(k) so that the sum of $4,800 is neither taxable to Beulah Weil under section 22(k) nor deductible by Charles S. Weil under section 23(u). Beulah Weil contends that $4,800 is fixed in the agreement as a sum for the support of the minor children and, therefore, is not taxable to her in 1947. Charles S. Weil claims that he is entitled to deduct $4,800 in each of the years 1947 and 1948 because the agreement did not fix any sum for the support of his minor children. The Commissioner, in order to protect the revenue, has made inconsistent determinations. He has determined in the case of Beulah Weil that no part of the periodic payments to her by her former husband were fixed in the agreement incident to their divorce as a sum payable for the support of their minor children so that, under section 22(k), she is not entitled to exclude from periodic payments taxable to her the sum of $4,800. He has determined in the cases of Charles S. Weil, that the sum of $4,800 represents a sum fixed for the support of his minor children so that he is not entitled, under sections 22(k) and 23(u), to deduct $4,800 in 1947 and 1948, along with the rest of the alimony payments he made to Beulah Weil in those years.

In Docket No. 43858, Charles S. Weil, there is a further question whether a payment of $500 which he made to Beulah Weil on January 16, 1947, was part of the 1947 periodic alimony payments due to Beulah Weil under the agreement. Charles S. Weil contends that the deduction allowable under section 23(u) should include the disputed payment of $500. Beulah Weil contends that it is not taxable to her under section 22(k) because it was a reimbursement for part of her 1946 income tax.

In Docket No. 43858, Charles S. Weil, it is now conceded that Charles S. Weil is not entitled to include in his allowable deduction under section 23(u), the sum of $490. Effect will be given to this concession under Rule 50.

FINDINGS OF FACT.

The facts which have been stipulated are found accordingly. The stipulation of facts is incorporated herein by this reference.

Beulah Weil, hereinafter referred to as Beulah, is a resident of New York City. Her individual return for 1947 was filed with the collector for the third district of New York.

Charles S. Weil, hereinafter referred to as Charles, maintains his office in New York City. His individual return for 1947 and his joint return for 1948 were filed with the collector for the second district of New York. Adreana Weil, the present wife of Charles, is involved in these proceedings only because a joint return was filed for 1948. None of the questions presented relate to her.

Beulah and Charles were married in 1928. They have two sons: Charles, born in 1928; and Donald, born in 1930. In 1947, Charles was 19 years old, and Donald was 17 years old.

On August 24, 1940, Beulah obtained a decree of divorce, in Idaho, from Charles. Prior to the divorce on August 9, 1940, Beulah and Charles entered into a separation agreement, which is sometimes referred to hereinafter as the agreement. The decree of divorce referred to the agreement; it was incident to the decree of divorce. Under the divorce decree, Beulah was awarded the custody of the minor children. The agreement is incorporated herein by this reference.

At all times since her divorce, Beulah has remained unmarried. During 1947 and 1948 the two children, Charles and Donald, were unmarried and they resided with Beulah.

Issue 1: Insurance Premiums.

Article 12 of the agreement provides as follows:

TWELFTH: The Husband represents that he has heretofore insured his life, according to certain policies of life insurance which are enumerated in Schedule A annexed hereto and hereby made part hereof, in order to provide for the support and maintenance of the Wife and support, maintenance and education of the children after the death of the Husband. At the time of delivery of this agreement, the Husband will deliver said policies to the Wife and the Wife shall promptly put said policies in a safe deposit box for safe keeping. The Husband covenants and agrees that he will at all times hereafter maintain said insurance in full force and effect; that he will promptly and punctually pay the premiums thereon as and when they shall become due and payable respectively. In the even that the Wife shall remarry during the lifetime of the Husband, irrespective of the validity of such remarriage, or in the event that the Wife shall predecease the Husband, all her interest in all said insurance policies shall terminate forthwith and the Husband shall become entitled to the immediate possession and control of said insurance and insurance policies. Upon the remarriage of the Wife after the death of the Husband, one-half of the proceeds and benefits of said insurance shall be payable to her and one-half to all children of the Husband. The Husband agrees that he will not assign, transfer or encumber said policies or any of them and that he will not surrender or in any other...