Webb v. Comm'r

(1) In general. -- The term "alimony or separate maintenance payment" means any payment in cash if --

(A) such payment is received by (or on behalf of) a spouse under a divorce or separation instrument,

(B) the divorce or separation instrument does not designate such payment as a payment which is not includible in gross income * * * and not allowable as deduction under section 215,

(C) in the case of an individual legally separated from his spouse under a decree of divorce or of separate maintenance, the payee spouse and the payor spouse are not members of the same household at the time such payment is made, and

(D) there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment (in cash or property) as a substitute for such payments after the death of the payee spouse.

Both parties agree that petitioner's payments to his ex-wife satisfied the requirements set out in section 71(b)(1)(B), (C), and (D). The parties do not agree, however, on whether the payments satisfy the requirement that*99 the payments be made under a divorce or separation instrument. See sec. 71(b)(1)(A).

Section 71(b)(2) provides that a "divorce or separation instrument" means:

(A) a decree of divorce or separate maintenance or a written instrument incident to such a decree,

(B) a written separation agreement, or,

(C) a decree (not described in subparagraph (A)) requiring a spouse to make payments for the support or maintenance of the other spouse.

As a general matter, if the language of a statute is unambiguous on its face, we apply the statute in accordance with its terms. See, e.g., Garber Indus. Holding Co. v. Commissioner, 124 T.C. 1 (2005), affd. 435 F.3d 555 (5th Cir. 2006). Section 71 is not a tremendously complicated statute, and its requirements are clearly set forth. The operative order in effect for 2002 was a written instrument incident to the divorce decree that dissolved petitioner's marriage to his ex-wife. Because the Superior Court's Order was a written instrument incident to a divorce decree, it thus meets the definition of a divorce or separation instrument under section 71(b)(2)(A).

Despite the fact that petitioner falls within the provisions*100 of the applicable statute, respondent argues that because petitioner did not have a legally enforceable duty to make spousal support payments in 2002, petitioner's payments to his ex-wife in 2002 were not made pursuant to a divorce or separation instrument. ⁴ But, as petitioner rightly argues, there is no requirement in the statute that payments be made under a legally enforceable duty in order to qualify for the alimony deduction; the only requirement is that any payment be "received by (or on behalf of) a spouse under a divorce or separation instrument". Sec. 71(b)(1)(A). Although it was once the case that entitlement to an alimony deduction under section 71 required payments to be made under a legally enforceable obligation, it has not been so for more than 20 years.

*101 Prior to the Deficit Reduction Act of 1984, Pub. L. 98-369, sec. 422(a), 98 Stat. 795, section 71(a)(1) of the Internal Revenue Code of 1954 defined alimony as payments made "in discharge of * * * a legal obligation which, because of the marital or family relationship, is imposed on or incurred by the husband under the [divorce] decree or under a written instrument incident to * * * divorce or separation." The statute was amended in 1984, repealing the "requirement that the payment be based on a legal support obligation." H. Rept. 98-432 (Part 2) at 1069 (1984).

The cases cited by respondent in support of his position are cases decided under the old law, or are the progeny of older cases containing no independent analysis reflective of the changes to the statute. Although there certainly have been cases holding that voluntary payments made outside a written instrument incident to divorce are not alimony, those cases have generally dealt with situations where there was no proper divorce decree or separation agreement, where a payment was made before the operative document went into effect, or where the older version of section 71 applied to the particular*102 case. See, e.g., Herring v. Commissioner, 66 T.C. 308, 311 (1976) (holding that payments made under an oral agreement were not alimony because they were made before the issuance of the divorce decree); Taylor v. Commissioner, 55 T.C. 1134, 1140 (1971) (applying the old version of section 71 and concluding that, "absent some sort of currently enforceable judicial decree or order", section 71 would not apply); Leventhal v. Commissioner, T.C. Memo. 2000-92 (stating that letters from one spouse's attorney to another do not constitute a divorce or separation instrument); Peterson v. Commissioner, T.C. Memo. 1998-27 (confirming that a California State court's issuance of a Minute Order was sufficient under State law to constitute a "divorce or separation instrument"); Abood v. Commissioner, T.C. Memo. 1990-453 (applying the pre-amendment version of section 71 to the facts and clarifying that, under those circumstances, "voluntary payments are not within the purview of sections 71 and 215"). This is true even of recent cases. See, e.g., Johnson v. Commissioner, 441 F.3d 845, 850 (9th Cir. 2006) (affirming the Tax*103 Court's holding that the prior version of section 71 applied). There have been no cases firmly on point with the one at bar.

Respondent's own regulations support petitioner's position. Although section 1.71-1, Income Tax Regs., contains the antiquated language reflective of the older version of the alimony statute, see sec. 1.71-1(b), Income Tax Regs. ("Such periodic payments must be made in discharge of a legal obligation imposed upon or incurred by the husband because of the marital or family relationship"), the temporary regulation promulgated along with the amended version of section 71 in 1984 reflects the changes to the statutory language. ⁵The more recent regulation requires only that alimony payments meet the following requirements: (a) That payments be made in cash; (b) that payments not be designated as excludible from the gross income of the payee and nondeductible by the payor; (c) that payments be made between spouses who are not members of the same household; (d) that the payor has no liability to continue to make payments after the death of the payee spouse; and (e) that payments are not treated as child support.*104 Sec. 1.71-1T, Q&A-2, Temporary Income Tax Regs., 49 Fed. Reg. 34455 (Aug. 31, 1984). Further, section 1.71T, Q&A-3, Temporary Income Tax Regs., makes very clear that "the [requirement] that alimony or separate maintenance payments be * * * made in discharge of a legal obligation * * * [has] been eliminated." Accordingly, petitioner's 2002 payments satisfy the requirements for alimony payments as outlined in the relevant regulations.

More than 20 years after the enactment of the amended statute, there is no reason to assume that Congress meant anything other than what it said in enacting the present version of section 71. It is not the Court's place to support respondent's attempt to include language Congress itself*105 did not.

Accordingly, we hold that, under the unique facts of this case, petitioner's payments made to his ex-wife in 2002 satisfied the conditions set forth in section 71 and were thus properly deductible as alimony for that taxable year.

To reflect our disposition of the disputed issue, as well as respondent's concession,

Decision will be entered for petitioner.