Wright v. Comm'r of Internal Revenue , Docket Nos. 830-72
| Decision Date | 25 June 1974 |
| Docket Number | 1991-72,1356-72,Docket Nos. 830-72,4104-72. |
| Citation | 62 T.C. 377 |
| Parties | WILLIAM C. WRIGHT AND ELLEN W. WRIGHT, ET AL.,1 PETITIONERS v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT |
| Court | U.S. Tax Court |
OPINION TEXT STARTS HERE
Gerald J. Kahn and John M. Byers, for the petitioners in docket Nos. 830-72 and 4104-72.
Bruce C. O'Neill, for the petitioner in docket Nos. 1356-72 and 1991-72.
Michael W. Ford, for the respondent.
In an oral agreement stipulated to at their divorce trial petitioner William C. Wright and his former wife, petitioner Jean W. Wright, agreed that all property owned by Jean would be granted to her and in addition she would be granted certain property of William's, that William would pay certain of her expenses, and that William would pay to Jean $228,000 over a period of 10 1/2 years, the payment to be secured by stocks placed in escrow, and that William would pay the premiums on a $200,000 term life insurance policy owned by Jean on his life and keep Jean as the beneficiary until she died or remarried or reached age 65. The judgment rendered on Oct. 4, 1967, adopted the stipulation of the parties and granted a divorce to Jean which prohibited either party from remarrying until 1 year thereafter. The stipulation was transcribed by the court reporter as was the judgment of the court. A written decree was entered by the court on Feb. 2, 1968, incorporating the stipulation of the parties. held:
1. The $228,000 to be paid by William to Jean was a payment because of the marital relationship and in discharge of his duty of support to her and not a division of property of the parties. It was a periodic payment under sec. 71(c)(2) since the judgment entered on Oct. 4, 1967, approving William's agreement with Jean which was reduced to writing and reconfirmed in the written decree entered Feb. 2, 1968, required him to make these payments over a period of over 10 years from Oct. 4, 1967. Therefore, the payments made in 1968, 1969, and 1970 as installments on the $228,000 are includable in Jean's income and deductible by William.
2. The premiums paid by William on the term insurance policy did not bestow such a benefit on Jean as to result in her constructive receipt of income therefrom. Therefore, the amount of the premiums paid by William in 1968, 1969, and 1970 are not includable in Jean's income or deductible by William.
Respondent determined deficiencies in the Federal income tax of petitioners William C. and Ellen W. Wright in the amounts of $8,603.13, $14,963.76, and $14,367.14 for the calendar years 1968, 1969, and 1970 respectively. Respondent determined deficiencies in the Federal income tax of petitioner Jean W. Wright in the amounts of $6,667.59, $7,330.41, and $7,093.34 for the calendar years 1968, 1969, and 1970, respectively.2
The parties have disposed of some of the issues by agreement, leaving for decision the following:
(1) Whether the cash payments made by William C. Wright during the calendar years 1968, 1969, and 1970 to his former wife, Jean W. Wright, are includable in her gross income for such years as alimony under the provisions of section 71, I.R.C. 1954,3 and consequently deductible for such years by William C. and Ellen W. Wright under the provisions of section 215; and
(2) Whether annual premiums paid by William C. Wright during the calendar years 1968, 1969, and 1970 on a term life insurance policy owned by his former wife, Jean W. Wright, are includable in her gross income for such years as alimony under the provisions of section 71 and consequently deductible for such years by William C. and Ellen W. Wright under the provisions of section 215.
All the facts have been stipulated and are found accordingly.
Petitioners William C. Wright (William) and Ellen W. Wright, husband and wife, were residents of Milwaukee, Wis., at the time of the filing of their petitions in this case. They filed their joint Federal income tax returns for the calendar years 1968, 1969, and 1970 at the Internal Revenue Service Center, Kansas City, Mo.
Petitioner Jean W. Wright (Jean) was a resident of Cedarburg, Wis., at the time of the filing of her petitions in this case. She filed her Federal income tax returns for the calendar years 1968, 1969, and 1970 at the Internal Revenue Service Center, Kansas City, Mo.
Jean and William filed a joint Federal income tax return for the calendar year 1967.
Jean was born on January 22, 1922, and William was born on February 10, 1921. On January 31, 1948, Jean and William were married in Milwaukee, Wis. Two children were born of their marriage, one on July 22, 1950, and the other on March 25, 1952.
On April 28, 1967, William commenced an action in the Circuit Court for Milwaukee County seeking an absolute divorce from Jean and the custody of their minor children. On August 17, 1967, Jean filed an answer seeking dismissal of William's complaint and asking for support and maintenance of herself and the minor children. On October 4, 1967, Jean filed a counterclaim asking for an absolute divorce from William, alimony and support money, a division of property, attorneys' fees, costs, and custody of the minor children.
On October 4, 1967, the action for divorce came to trial before Judge L. J. Foley, Jr., of the Circuit Court for Milwaukee County, Wis. At that time, William's attorney informed the court that no evidence would be introduced in support of the complaint and that the parties would proceed on Jean's counterclaim.
At the trial William and Jean, relying on a statement of assets and liabilities prepared by William of the property they owned, entered into a stipulation in open court with regard to disposition of property owned by each of them, custody of the minor children, alimony, attorneys' fees, and court costs. The stipulation was taken by stenographic notes by the court reporter and later transcribed, the transcript being certified as true and correct by the reporter under date of October 13, 1967. The stipulation of the parties, with some amplification as to Jean's rights of visitation to the children, was accepted and adopted by the court in its findings of fact, conclusions of law, and judgment orally made by the judge at the hearing and included in the transcript of the hearing. This oral statement included the conclusion of law by the court that based on her counterclaim Jean ‘is entitled to an absolute divorce.’ It was stipulated that William and Jean had a net worth in the amount of $1,065,122 which consisted of the following:
Such assets were owned by William and Jean as follows:
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