Respondent's determination of deficiency in petitioner's 2000 federal income tax sustained.
MEMORANDUM FINDINGS OF FACT AND OPINION
COLVIN, Judge: Respondent determined a deficiency in petitioner's 2000 Federal income tax of $ 34,262.
Petitioner and his former spouse, Shagufta Lisa Ali (Ali), had two children and owned a community interest in the Spearmint Rhino Clubs (SRC), a corporation. Petitioner and Ali separated in 1999. SRC paid Ali $ 24,000 per month from June to December 2000 (a total of $ 168,000). There was no court order, judgment, or written agreement requiring petitioner to pay child, spousal, or family support to Ali when Ali received those payments. On June 25, 2001, a State court filed a stipulation between Ali and petitioner that retroactively (1) deemed petitioner to have paid one-half of the distributions from SRC to Ali, and (2) deemed those payments from June 1 to December 31, 2000, to have been made by petitioner to Ali as unallocated family support in satisfaction of petitioner's obligation to provide support during that period.
The issues for decision are:
1. Whether payments made to Ali before the existence of a written divorce or separation2004 Tax Ct. Memo LEXIS 297">*298 agreement that were retroactively deemed to be unallocated family support payments by State court order are alimony for purposes of
2. Whether petitioner may exclude from income the $ 84,000 that SRC paid on his behalf to Ali in 2000. We hold that he may not.
FINDINGS OF FACT
Some of the facts have been stipulated and are so found.
Petitioner resided in California when he filed his petition. Petitioner and Ali separated on July 14, 1999. Petitioner and Ali have two children.
On May 10, 2000, Ali filed an order to show cause with the Superior Court of California for the County of Orange (State court), the court with jurisdiction over the dissolution of the marriage of petitioner and Ali, in which Ali sought, inter alia, family support payments2004 Tax Ct. Memo LEXIS 297">*299 from petitioner.
In 2000, petitioner and Ali each owned an undivided one-half community property interest in SRC. Ali received monthly distributions of $ 24,000 from SRC from June to December 2000 (totaling $ 168,000) in 2000. Petitioner and Ali had not divided their community property interest in SRC in 2000. There was no court order or judgment or other written agreement requiring petitioner to pay child, spousal, or family support in 2000.
On February 5, 2001, the State court filed a partial stipulation between petitioner and Ali which provided in part that Ali would continue to receive distributions from SRC of $ 24,000 per month as unallocated family support from petitioner commencing February 1, 2001. The State court reserved jurisdiction, retroactive to June 1, 2000, over the character and any allocation of the payments. On May 25, 2001, the State court filed a second stipulation between petitioner and Ali which provided in part that the community interests in SRC of petitioner and Ali would be divided equally.
On June 25, 2001, the State court filed a stipulation between petitioner and Ali which provided that the $ 24,000 monthly distributions from SRC were allocated one-half2004 Tax Ct. Memo LEXIS 297">*300 each to petitioner and Ali. The June 25, 2001, stipulation also deemed that the distributions allocated to petitioner and received by Ali were paid by petitioner to Ali as unallocated family support from June 1, 2000, to March 31, 2001, in satisfaction of his obligation to provide support.
Petitioner deducted $ 84,000 as alimony on his 2000 income tax return for payments made by SRC on his behalf to Ali.
OPINION
A taxpayer may deduct payments which qualify as alimony and separate maintenance payments.
Petitioner acknowledges that no written divorce or separation instrument existed in2004 Tax Ct. Memo LEXIS 297">*301 2000 when SRC made the payments at issue to Ali. Petitioner contends that the
B. Whether Retroactive Treatment by the State Court of Payments as Unallocated Family Support Meets the Requirement of
Petitioner contends that, because of the retroactive action by the State court, the payments from SRC to Ali in 2000 were payments under a divorce or separation instrument.
We disagree for two reasons. First, payments made before the existence of a written divorce or separation instrument are not deductible by the payor spouse under
Petitioner contends that
We do not recognize the retroactive nature of the State court instrument in deciding whether, for purposes of
Petitioner's community property share of income from SRC for 2000 is $ 84,000. Petitioner contends that he may exclude that amount from his income because SRC made the payments directly to Ali. We disagree.
Petitioner has offered no authority for his position. Petitioner is taxed on his share of SRC community income even though he chose to have it paid directly to Ali because income from property is taxed to the owner of the property at the time the income is earned.
A shareholder receives a constructive dividend to the extent of the corporation's earnings and profits if the corporation pays a personal expense of its shareholder or the shareholder uses corporate property for a personal purpose.
Decision will be entered for respondent.
1. Section references are to the Internal Revenue Code in effect for 2000. Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. An exception to the general rule exists when the nunc pro tunc order retroactively corrects an order which failed to reflect the true intention of the court at the time it was rendered.