Finance courtroom in short | Aragoni vs Comm’r | Ex-spouse’s authorized charges not acknowledged as alimony | Freeman’s legislation

The Finance Court in Brief – January 23 – January 27, 2023

Freeman Law’s The Tax Court in Brief covers all of the tax court’s main opinions and provides a weekly summary of its decisions in a clear, concise manner.

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Tax Disputes: The week of January 23, 2022 to January 27, 2023

• Lim v. Come on, TC Memo. 2023-11| January 23, 2023 | Lauber, J DR. NO. 14015-20
• Freman v. Comm’r, TC Memo. 2023-10| January 23, 2023 |Jones, J.| dct. No. 8895-20
• Shilgevorkyan vs. Comm’r, TC Memo. 2023-12| January 23, 2023 | Ashford, J. | dct. No. 9247-15
• Belton v. Comm’r, TC memo. 2023-13| January 24, 2023 |Toro, J.| dct. No. 22438-19P
• Adams v. Comm’r, 160 TC No. 1| January 24, 2023 | Toro, J. | dct. No. 1527-21P
• Mulu vs. Comm’r, TC Summary Opinion 2023-2| January 25, 2023 | Leiden, J. | dct. No. 12975-21S
• Johnson vs. Comm’r, 160 TC No. 2| January 25, 2023 |Nega, J.| dct. No. (consolidated) 19973-18, 19975-18, 19978-18, 20001-18

Aragoni v United States Comm’r, TC Summary Opinion 2023-3| January 25, 2023 | Panuthos, J. | dr AS If. 20914-21S

Summary: In this non-priority opinion (see Section 7463(b)), the Tax Court considers a maintenance deduction claimed by taxpayer Terrence Aragoni. Aragoni divorced his wife. A court order ordered Aragoni to pay alimony of $9,146 a month and $15,000 for his ex-spouse’s legal fees until paid in full. Aragoni timely filed Form 1040, US Individual Income Tax Return and was assisted by a chartered accountant. Aragoni sought a child support deduction that included the $15,000 he paid by court order to his ex-spouse’s attorney.

Key Issues: Does Aragoni’s payment of $15,000 to his ex-spouse’s attorney constitute deductible Section 71(b) “support”?

Primary stocks: No. One of the elements required for an alimony deduction is that there is no obligation to make such a payment for any period after the death of the payee’s spouse. Aragoni’s obligation to pay his ex-wife’s $15,000 legal fees would survive her death, according to the Treasury Court’s interpretation of the state court order. Accordingly, Aragoni’s payment of attorneys’ fees to his ex-spouse’s attorney was not alimony for the purposes of Section 71(b)(1).

Key data of the law:

burden of proof. In general, the IRS’s finding in a notice of deficiency is presumed to be accurate, and the taxpayer bears the burden of proving that the finding is erroneous. Rule 142(a); Which v. Helvering, 290 US 111, 115 (1933).3 Deductions are a matter of statutory clemency, and the burden of proving entitlement to any claimed deductions is on the taxpayer. See rule 142(a); deputy v duPont, 308 US 488, 493 (1940). This burden requires the taxpayer to demonstrate that the claimed deduction is allowable under a legal provision and to provide evidence of the expenses that gave rise to the claimed deduction by maintaining and submitting adequate records to enable the IRS to establish correct liability the taxpayer can determine. 26 U.S.C. § 6001; Higbee v Commissioner, 116 TC 438, 440 (2001).

maintenance deductions. Section 215(a) generally allows a deduction for alimony under Section 71(b), which provides:

(1 General. – The term “alimony or separate alimony” means any cash payment where –

(A) such payment is received from (or on behalf of) a spouse pursuant to a deed of divorce or separation,

(B) the certificate of divorce or separation does not identify such payment as a payment not to be included in gross income under this section and not allowable as a deduction under section 215,

(C) in the case of a person legally separated from their spouse by virtue of a divorce decree or a separate maintenance decree, the payee’s spouse and the payer’s spouse are not members of the same household at the time of payment, and

(D) There is no obligation to make any such payment for any period after the death of the payee’s spouse, and there is no obligation to make any payment (in cash or in the form of property) in lieu of such payments after the death of the Payee’s spouse to pay.

item (D). If the divorce deed does not state the existence of liability after death, Section 71(b)(1)(D) may still be satisfied if the payments end upon the death of the payee’s spouse under state law. Johanson v. Commissioner, 541 F.3d 973, 976-77 (9. Cir. 2008), ff’g TC Memo. 2006-105. If state law is not clear on this, a federal court reviewing the matter will read the divorce certificate and make its own determination based on the language of the document. ID. at 977. Payments of an ex-spouse’s legal fees in connection with a divorce proceeding are not deductible alimony payments because the obligation to pay them survives the death of the payee’s spouse. See Logue v. Commissioner, TC memo. 2017-234; Stedman v. Commissioner, TC memo. 2008-239.

Insights: Parties to a divorce decree who are liable to pay alimony or an ex-spouse’s attorneys’ fees should consider consulting a tax attorney to assess whether additional wording for inclusion or exclusion in a divorce decree is appropriate to increase the chances of deductibility increase.

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