Wyatt v. Commissioner

• Decision Date: 18 May 1962
• Docket Number: Docket No. 84429.
• Citation: 21 TCM (CCH) 638,1962 TC Memo 120
• Parties: Ellen E. Wyatt v. Commissioner.
• Court: U.S. Tax Court

21 T.C.M. (CCH) 638 (1962)

T. C. Memo. 1962-120.

Ellen E. Wyatt v. Commissioner.

Docket No. 84429.

United States Tax Court.

Filed May 18, 1962.

James F. Shea, Esq., Guardian Bldg., Detroit, Mich., for the petitioner. Ralph W. Eisnaugle, Jr., Esq., for the respondent.

Memorandum Opinion

FAY, Judge:

Respondent determined deficiencies in petitioner's income tax for the years 1955 and 1956 in the amounts of $1,696 and $1,466.40, respectively. Petitioner concedes the correctness of respondent's action in disallowing a claimed capital loss deduction of $1,640 for the year 1955. The only contested issue is whether or not the respondent erred in treating as periodic payments of alimony the total amounts received by petitioner from her former husband.

The case was submitted on a stipulation of facts and exhibits which are adopted as our findings of fact.

The petitioner's residence is in Henderson, Kentucky. During the years 1955 and 1956 petitioner was a resident of the State of Michigan and filed her individual Federal income tax returns for said years with the district director of internal revenue, Detroit, Michigan.

Petitioner was formerly the wife of Robert J. Lytle, hereinafter referred to as Robert, whom she had married on November 18, 1942. On August 21, 1954, petitioner filed a Bill of Complaint in Chancery in the Circuit Court for the County of Oakland, State of Michigan, No. D-31514, whereby she sought a divorce from Robert.

On November 29, 1954, petitioner and Robert entered into an agreement entitled "PROPERTY SETTLEMENT AGREEMENT." The agreement recited, inter alia, that the petitioner was to receive all of the household goods, furniture and furnishings; that Robert was to receive the family residence; and that each party could retain all personal clothing, jewelry and other personal effects of a like nature. In so far as is here important, the agreement provided:

4. That the defendant, Robert J. Lytle, shall pay forthwith to the plaintiff, Ellen E. Lytle, the sum of Seventy-five ($7500.00) Hundred Dollars and by execution of this agreement the plaintiff, Ellen E. Lytle, acknowledges receipt thereof.

5. The parties hereto agree that the defendant, Robert J. Lytle, shall pay to the plaintiff, Ellen E. Lytle, in addition to other sums herein payable, certain periodic payments to be provided for in the divorce decree under the entitlement "ALIMONY" and to be in the following form:

"ALIMONY. IT IS FURTHER ORDERED, ADJUDGED AND DECREED that the defendant, Robert J. Lytle, shall pay to the plaintiff, Ellen E. Lytle, on December 6, 1954, and on each and every Monday thereafter the sum of Two Hundred Dollars ($200.00) subject to the following terms, conditions and limitations:

(a) Five (5) full years from and after December 6, 1954, the weekly sum of Two Hundred ($200.00) Dollars paid by the defendant, Robert J. Lytle, to the plaintiff, Ellen E. Lytle, shall be reduced to the sum of One Hundred ($100.00) Dollars, payable on each of said Mondays thereafter.

(b) Upon the remarriage of the plaintiff, Ellen E. Lytle, during said full five (5) year period from and after December 5, 1954, payments made by the defendant, Robert J. Lytle, to the plaintiff, Ellen E. Lytle, shall be reduced to the sum of One Hundred ($100.00) Dollars payable on each of said Mondays thereafter.

(c) Upon the remarriage of the plaintiff, Ellen E. Lytle, subsequent to the full five (5) year period beginning December 5, 1954, payments payable on each of said Mondays shall be terminated and the defendant, Robert J. Lytle, shall make no further payments of any amount whatsoever.

6. The defendant, Robert J. Lytle, further agrees that he will not at any time petition the Circuit Court for the County of Oakland for a decrease in the amount of periodic payments called for in the paragraph of the divorce decree entitled "Alimony" and the plaintiff, Ellen E. Lytle, further agrees that she will not at any time petition the Circuit Court for the County of Oakland for an increase in the periodic payments called for in the paragraph of the divorce decree entitled "Alimony".

On the same day that the petitioner and Robert entered into the property settlement agreement, i. e., November 29, 1954, a decree of divorce from the bonds of matrimony was entered by the Circuit Court for the County of Oakland in the cause entitled "ELLEN E. LYTLE, Plaintiff, v. ROBERT J. LYTLE, Defendant. Number D-31514." The decree was interlocutory and did not become final until 45 days after the date of its entry. The divorce decree incorporated the terms of the property settlement agreement.

During 1955 and 1956 petitioner received the amounts of $10,400 and $10,680, respectively, from Robert pursuant to paragraph 5 of the Property Settlement Agreement as incorporated in the Decree of Divorce.

Robert continued to make the payments as required until March 28, 1957, on which date petitioner remarried. On October 7, 1957, the petitioner here petitioned the Circuit Court for the County of Oakland, Michigan, for issuance of an order requiring Robert to show cause why he should not be adjudged guilty of contempt. The basis for this proceeding was Robert's failure to make the required periodic payments to petitioner following her remarriage. Robert filed an answer to the petition asserting that the provision of the decree with reference to the periodic payments to the petitioner was in the nature of a property settlement rather than a requirement for the payment of alimony, and that, in the alternative, if the Circuit Court determined that the provision in the decree was an award of alimony it should be stricken and he should be relieved of further obligation.

After a hearing the trial court concluded that the provisions of the property settlement agreement and divorce decree, with reference to the "periodic" payments, should be construed as imposing an obligation to pay alimony, and were not by way of property settlement. Robert was, therefore, adjudged guilty of contempt for his failure to make such payments and was ordered to pay within a period of 5 years the total amounts due or to become due at the rate of not less than $25 per week (in lieu of the $100 provided for in the "PROPERTY SETTLEMENT AGREEMENT" of November 29, 1954) beginning on June 2, 1958.

Robert appealed the order of the Oakland County Circuit Court to the Supreme Court of the State of Michigan. On November 24, 1959, the Supreme Court of the State of Michigan in the case of Lytle v. Lytle, 99 N. W. 2d 377, in affirming, in part...