Glatfelter 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,²

(B) the divorce or separation instrument does not designate such payment as a payment which *198 is not includible in gross income under this section and not allowable as a 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 such payment (in cash or property) as a substitute for such payments after the death of the payee spouse. [Emphasis added.]

Respondent concedes that petitioner's payment of his former spouse's attorney's fees and costs satisfies the first three subparagraphs of section 71(b)(1). The parties lock horns on whether the payment at issue satisfies subparagraph (D); that is, whether the obligation to *199 pay the court-ordered attorney's fees and costs would have terminated in the event of the death of petitioner's former spouse.

Under section 71(b)(1)(D), a payor must have no liability to continue payments after the recipient's death in order for those payments to constitute alimony. See Johanson v. Commissioner, 541 F.3d 973, 976-977 (9th Cir. 2008), affg. T.C. Memo. 2006-105. In deciding whether payments are alimony under section 71(b)(1)(D), the Court must first examine the divorce or separation instrument to determine whether it contains a provision that terminates the payor spouse's liability for a payment upon the death of the recipient spouse. If the instrument is silent as to the existence of a postdeath obligation, the Court will then look to see whether the payment terminates upon the recipient spouse's death by operation of State law. See Sperling v. Commissioner, T.C. Memo. 2009-141.

California law provides that "Except as otherwise agreed by the parties in writing, the obligation of a party under an order for the support of the other party terminates upon the death of either party or the remarriage of the other party." Cal. Fam. Code sec. 4337 (West 2004). California law *200 also provides that a court in a marriage dissolution proceeding may order one party to pay the other party's attorney's fees and costs. Cal. Fam. Code sec. 2030 (West Supp. 2009). Cal. Fam. Code sec. 2030 provides that such fees and costs may be awarded for legal services rendered or costs incurred before or after the commencement of the proceeding. That section does not provide that the payor's obligation to pay these fees and costs terminates upon the death or remarriage of the other spouse. Id.

California courts have differentiated attorney's fees from spousal support. For example, in Newport v. Newport, 201 Cal. Rptr. 647, 648 (Ct. App. 1984), the court held that, under the statutory predecessor to Cal. Fam. Code sec. 2030, the remarriage of a former spouse did not preclude her right to attorney's fees in a postdissolution proceeding. Moreover, California caselaw holds that the death and remarriage provisions of Cal. Fam. Code. sec. 4337 should be interpreted "in a similar fashion." See Johanson v. Commissioner, supra at 977 n.1; see also Cesnalis v. Cesnalis, 131 Cal. Rptr. 2d 436, 439 (Ct. App. 2003).

Petitioner claimed as an alimony deduction a $3,400 expense payable to his former *201 spouse for attorney's fees and costs. Pursuant to section 71(b)(1)(D), petitioner may deduct as alimony only those expenses his liability for which does not survive his former spouse's death. In the Findings and Orders After Hearing, filed as a property settlement on June 15, 2006, the Superior Court of California ordered that "Petitioner, Michael R. Glatfelter, shall pay four thousand dollars ($4,000) forthwith towards * * * [his former spouse's] attorney fees and costs." The court order also stated that his former spouse's "request for modification of spousal support is denied pending trial." The order is silent as to whether petitioner's liability for the attorney's fees and costs would extend beyond the death of his former spouse.

Accordingly, this Court must determine whether petitioner's $4,000 liability would have terminated upon his former spouse's death by operation of California law. It is clear that the Superior Court of California in its order sought to distinguish between attorney's fees subject to Cal. Fam. Code sec. 2030 and spousal support payments subject to Cal. Fam. Code sec. 4337. The court order contained two separate provisions—the first mandating petitioner's *202 payment of his former spouse's attorney's fees, and the second denying his former spouse modification of petitioner's spousal support payments pending trial.

In addition, California caselaw provides that attorney's fees derived from a postdissolution proceeding do survive a remarriage of the payee spouse. See Newport v. Newport, supra. The Court of Appeals for the Ninth Circuit has decided that the remarriage and death provisions of Cal. Fam. Code sec. 4337 should be interpreted "in a similar fashion." Johanson v. Commissioner, supra at 977 n.1. Applying this reasoning, we conclude that petitioner's liability to pay his former spouse's attorney's fees of $4,000 would survive her death.

Accordingly, petitioner's payment of attorney's fees to his former spouse was not a payment of alimony within the meaning of section 71(b)(1). See Stedman v. Commissioner, T.C. Memo. 2008-239; Ribera v. Commissioner, T.C. Memo. 1997-38, affd. without published opinion 139 F.3d 907 (9th Cir. 1998). As a result, petitioner's deduction of the disputed $3,400 is denied.

To reflect the foregoing,

Decision will be entered under Rule 155.