Opinion
Docket No. 78849.
1960-11-22
CONSTANCE B. KIRBY, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Chester H. Wilson, Esq., for the petitioner. George H. Becker, Esq., for the respondent.
On March 8, 1957, petitioner, who was pregnant, instituted an action against her husband, John, for separation from bed and board. On March 19, 1957, the court issued an order requiring the husband to pay petitioner $100 per week for support, plus doctors' bills and maternity expenses. Petitioner moved to another residence, and on August 8, 1957, gave birth to a son, the only child that was born to the marriage. On November 4, 1957, an amending court order was issued, to the effect that beginning the next day John should pay $75 per week for the support and maintenance of petitioner and infant son until further order of the court. During 1957 petitioner received an aggregate amount of $3,900 from John. John filed an individual return for 1957, but no return was filed by petitioner. In October 1958, at a conference with a representative of respondent in regard to a proposed deficiency against her, petitioner was told that an ‘amended’ joint return could be filed by her and John which would absolve her from the tax and clear the record. On November 28, 1958, respondent mailed to petitioner a notice of deficiency, in which he included in her income the entire amount of $3,900 received by her from John under the two court orders. On February 18, 1959, petitioner filed her petition herein. On September 2, 1959, she and John filed an ‘amended’ joint return for 1957. Held, that there is no basis for the allocation of a portion of the support payments to the child and the entire amount of $3,900 is includible in petitioner's income for the taxable year 1957. Frances Hummel, 28 T.C. 1131, and Dora H. Moitoret, 7 T.C. 640, followed. Held, further, that the ‘amended’ joint return was not timely filed within the meaning of section 6013(b)(2)(C) of the Internal Revenue Code of 1954, it having been filed after the petition herein had been filed. Chester H. Wilson, Esq., for the petitioner. George H. Becker, Esq., for the respondent.
The respondent determined a deficiency in income tax against the petitioner for the taxable year 1957 in the amount of $473. The only question presented is whether support money received by petitioner from her husband during 1957 should be included in her gross income for that year.
FINDINGS OF FACT.
Some of the facts have been stipulated and are found as stipulated.
Petitioner is an individual, and a resident of Indianapolis, Indiana. She was married to John S. Kirby, Jr., hereafter referred to as John, on March 3, 1956, and they were husband and wife during 1957. Petitioner filed no income tax return for 1957. John filed an individual return for that year with the district director of internal revenue for Indiana.
On March 8, 1957, petitioner instituted, in the Marion County Superior Court, an action against John for separation from bed and board. At the time of the hearing on the said action petitioner was pregnant. She and John lived in a house which John had built prior to their marriage and from which he conducted a business. At the hearing, petitioner was permitted to choose one of two alternatives, namely, $50 per week for support, if she continued to live in the home, and $100 per week, if she provided her own lodging.
She elected to provide her own lodging, and on March 19, 1957, the Marion County Superior Court issued the following order:
Comes now the plaintiff in person and by counsel and the defendant in person and the court being duly advised orders the defendant to pay $100.00 per week support beginning March 19, 1957, plus doctor bills and maternity expenses. Restraining order continued in full force, defendant to live and maintain home expenses, defendant to pay $750.00 for use and benefit of plaintiff's attorney and like sum for defendant's attorney within ten days.
On the same date, March 19, 1957, petitioner and John did in fact separate. She moved to a residence in another part of Indianapolis, which she had secured at a rental of $125 per month. Having no furniture, she paid for the furnishing of the home out of the support money she received.
On August 8, 1957, petitioner gave birth to a son, Christopher Charles Kirby, the only child born of the marriage between petitioner and John. In addition to the rent, petitioner paid for food, telephone, electricity, fuel oil, laundry, drugs, doctors, and the operation of a car. She also purchased for Christopher items such as crib and mattress, bassinet, baby buggy, baby bath, scales, stroller buggy, car seat, playpen, clothes and blanket, chest of drawers, and a chair.
The amounts so expended as shown by petitioner's testimony amounted in the aggregate to $1,646.85. In some instances the amounts were stated as estimates. Other amounts appeared to be as shown by bills, receipts, or the like.
On November 4, 1957, following a change in venue, the Circuit Court for Hendricks County, Indiana, entered the following order modifying the original order of the Marion County Superior Court:
Come now the parties by counsel and the court having heard the evidence on defendant's petition to modify the decree herein for support and suit money pendente lite and for visitation privileges with the parties' infant son, Christopher Charles and having had its decision under advisement and being now duly advised finds and it is ordered that said support order be modified in this that pending litigation herein the defendant shall pay for the support and maintenance of plaintiff and said infant son the sum of $75.00 per week beginning on November 5, 1957, and a like amount each week thereafter until further order of this court. That defendant have visitation privileges with said infant child at the home of plaintiff for a period of one hour from 5 o'clock P.M. until 6 o'clock P.M. on the second and fourth Fridays of each month, beginning on November 8, 1957, and in all other respects the former order for support, suit money, and maintenance pendente lite shall remain in full force and effect, all until further order of this court.
Petitioner was a schoolteacher, but did not work in 1957. The payments received by her in that year pursuant to the above court orders amounted in the aggregate to $3,900. She did not receive any income from any other source.
A decree of final divorce was issued on May 7, 1958.
On October 9, 1958, petitioner had a conference with a representative of the Internal Revenue Service in Indianapolis in regard to a proposed deficiency in income tax for 1957. She learned that John had filed an individual return and not a joint return. She was advised by the representative that if she and John would file a joint return for 1957, she would be absolved from the tax and the record would be cleared.
Whether this statement by the agent was based on the proposition that by filing a joint return she would not, under the statute, have separate taxable income or on the proposition that such a joint return would show no tax, does not appear.
When she asked John to file a joint return with her, he agreed to do so if she would grant him partial custody of their son, a condition she would not consider.
The notice of deficiency was mailed to petitioner on November 28, 1958, and on February 18, 1959, she filed her petition herein.
Thereafter, on August 28, 1959, she and John did sign a joint return for 1957, which return was filed on September 2, 1959, with the district director of internal revenue for Indiana. The return, after showing itemized deductions and three exemptions had been deducted from the adjusted gross income, indicated that no tax was due.
In the determination of deficiency, the $3,900 received by petitioner in 1957 from John, pursuant to the court orders, was determined to be her income, within the meaning of section 71 of the Internal Revenue Code of 1954, and it was further determined that she was entitled to two exemptions, one for Christopher and one for herself.
OPINION.
TURNER, Judge:
Petitioner contends that none of the support money is taxable to her (1) because she and John were still husband and wife during the taxable year 1957, and (2) because she and John subsequently filed an amended joint return for 1957, which absolved her from tax.
Respondent, relying on section 71(a)(3) of the Internal Revenue Code of 1954 and section 1.71-1(b)(3) of the Income Tax Regulations, contends that the $3,900 received by petitioner in 1957 pursuant to the orders of the Indiana courts was taxable to her, irrespective of how much money was expended for the benefit of the child, and further, that the ‘amended’ joint return, when filed, was not effective.
Section 71(a)(3) of the Code
taxes to the wife periodic payments of support received by a wife, who is separated from her husband, under a decree requiring the husband to make payments for her support or maintenance. Section 71(b)[F N3] provides that the foregoing section ‘shall not apply to that part of any payment which the terms of the decree, instrument, or agreement fix, in terms of an amount of money or a part of the payment, as a sum which is payable for the support of minor children of the husband.’
SEC. 71. ALIMONY AND SEPARATE MAINTENANCE PAYMENTS.(a) GENERAL RULE.—(3) DECREE FOR SUPPORT.— If a wife is separated from her husband, the wife's gross income includes periodic payments (whether or not made at regular intervals) received by her after the date of the enactment of this title from her husband under a decree entered after March 1, 1954, requiring the husband to make the payments for her support or maintenance. This paragraph shall not apply if the husband and wife make a single return jointly.(b) PAYMENTS TO SUPPORT MINOR CHILDREN.— Subsection (a) shall not apply to that part of any payment which the terms of the decree, instrument, or agreement fix, in terms of an amount of money or a part of the payment, as a sum which is payable for the support of minor children of the husband. For purposes of the preceding sentence, if any payment is less than the amount specified in the decree, instrument, or agreement, then so much of such payment as does not exceed the sum payable for support shall be considered a payment for such support.
In support of her contention, petitioner cites Commissioner v. Rankin, 270 F.2d 160, affirming a Memorandum Opinion of this Court, which held that payments received by the wife from her husband under a ‘support and maintenance’ order of a Pennsylvania quarter sessions court were not includible in the wife's income, because the husband and wife, under Pennsylvania statutes, were not legally separated. That case was decided under section 22(k) of the 1939 Code, and in its opinion, the court made the following statement:
It must be noted parenthetically that we are not concerned here with the impact of the enlarged alimony provisions, Section 71(a)(3) of the Internal Revenue Code of 1954 which relate to payments ‘of support or maintenance’ under a decree entered after March 1, 1954.' We are not here required to construe the section cited with respect to its impact on support orders of quarter sessions courts in Pennsylvania under the Penal Code in view of the fact that the order in the instant situation was entered on October 19, 1951.
In the instant case, petitioner, in 1957, instituted a separation from bed and board action, and after a hearing, the court issued an order on March 19, 1957, requiring the husband to pay petitioner weekly support.
Section 1.71-1(b)(3) of the regulations provides as follows:
(3) Decree for support.— (i) Where the husband and wife are separated and living apart and do not file a joint income tax return for the taxable year, paragraph (3) of section 71(a) requires the inclusion in the gross income of the wife of periodic payments (whether or not made at regular intervals) received by her after August 16, 1954, from her husband under any type of court order or decree (including an interlocutory decree of divorce or a decree of alimony pendente lite) entered after March 1, 1954, requiring the husband to make the payments for her support or maintenance. It is not necessary for the wife to be legally separated or divorced from her husband under a court order or decree; nor is it necessary for the order or decree for support to be for the purpose of enforcing a written separation agreement.
While section 22(k), the applicable statute in the Rankin case, used the phrase ‘who is divorced or legally separated’ (emphasis supplied), section 71(a)(3) omits the word ‘legally’ before the word ‘separated.’ The omission is clarified in Senate Report No. 1662, 83d Congress, 2d Session, as follows:
Your committee has also added subsection (a)(3) to provide for the inclusion in the wife's income of periodic payments (whether or not made at regular intervals) received under a Court decree (entered after the enactment of the bill) which requires the husband to make the payments for the support or maintenance of the wife. Subsection (a)(3) is applicable only if the wife is separated from her husband, but such separation need not be under a decree nor need the payments be made to enforce a separation agreement. This paragraph also is not applicable if the husband and wife made a single return jointly.
It is apparent that Commissioner v. Rankin, supra, is not in point, since section 71(a)(3) is applicable so long as petitioner and her husband were separated and whether or not they were legally separated under State law. The order issued by the court on March 19, 1957, resulted from the action instituted by petitioner for separation from bed and board. It provided that the husband pay petitioner ‘$100.00 per week support,‘ and the money she received under that order is taxable to her.
The same is true, we think, with respect to the amending order of November 4, 1957, which reduced the support payments to $75 per week, at which time Christopher Charles had been born to the marriage, and the order specified that the weekly payments should be made ‘for the support and maintenance of plaintiff and said infant son.’
Petitioner argues that after the birth of the child a portion of the $3,900 received by her was expended on the child and that that portion is not taxable to her. There is nothing in the first order to permit an allocation of the payments, as there is no mention of a child. It was not until August 8, 1957, that the son was born. The amending order did direct that John pay $75 per week for the support and maintenance of petitioner and her son, but since the order did not fix ‘in terms' an amount or a part of the payment as being payable for the support of the child, as section 71(a) requires, there is no basis under the statute for allocation of any amount for the support of the child, and no allocation can be made. Frances Hummel, 28 T.C. 1131; Dora H. Moitoret, 7 T.C. 640. And proof of expenditures made for the benefit of the child does not supply a basis for allocation. Frances Hummel, supra. There must be a specific designation in the order on which an allocation can be based. Frances Hummel, supra; Dora H. Moitoret, supra.
Petitioner's final argument is that she and John did file a joint return, which, pursuant to the representations of the revenue agent and under the statute, absolved her from the tax. By its last sentence, section 71(a)(3) does provide that support payments are not gross income to the wife, if she and her husband make a single return jointly. That is not to say, however, that the wife has no income tax liability under such circumstances, since where an effective joint return is filed, the liability thereunder, if a tax is shown, is joint and several. Sec. 6013(b)(2) and (3), 1954 Code.
Under section 6013(b1 ), a husband and wife who have filed separate returns may still elect to file a joint return, and may file such a return within the period of the statute of limitation. But under section 6013(b)(2)(C), such election may not be made ‘after there has been mailed to either spouse, with respect to such taxable year, a notice of deficiency under section 6212, if the spouse, as to such notice, files a petition with the Tax Court of the United States within the time prescribed in section 6213.’
Petitioner's position that a contract between her and the Government to the effect that an ‘amended’ joint return would be accepted, when filed, and she would thereby be absolved of the tax was entered into at the conference with the revenue agent, is not well taken. From her testimony, it would appear that the revenue agent did make a suggestion to her as to what could have been done at that time. Under the statute, an effective joint return may not be filed after a notice of deficiency has been mailed to either spouse and a petition with the Tax Court has been filed within the time prescribed therefor, and under no circumstances could a revenue agent waive the statutory conditions under which an effective joint return could be filed.
Even though petitioner and John did file a joint return within the period of the statute of limitations, the filing thereof was after the petition herein had been filed, and it did not constitute an effective return within the meaning of section 71(a)(3) and 6013(b)(2)(C). It follows that the provisions of section 71(a)(3) do apply, and we so hold.
Decision will be entered for the respondent.