2005 Tax Ct. Summary LEXIS 95">*95 PURSUANT TO INTERNAL REVENUE CODE SECTION 7463(b), THIS OPINION MAY NOT BE TREATED AS PRECEDENT FOR ANY OTHER CASE.
ARMEN, Special Trial Judge: This case was heard pursuant to the provisions of
Respondent determined a deficiency in petitioner's Federal income tax for the taxable year 2001 in the amount of $ 633. However, prior to trial, respondent filed a motion for leave to file answer out of time in order to assert an increased deficiency. 2005 Tax Ct. Summary LEXIS 95">*96 See sec. 6214(a). Petitioner did not object to respondent's motion, and the Court granted it. Accordingly, the deficiency at issue in this case is $ 1,900.
After a concession by petitioner, 2 the only issue for decision is whether a $ 16,909 distribution made to petitioner as an alternate payee under a qualified domestic relations order is taxable to her as the distributee of such distribution. We hold that it is.
Background
Some of the facts have been stipulated, and they are so found.
At the time that the petition was filed, petitioner resided in Asheville, North Carolina.
Petitioner and William A. Kelley (Mr. Kelley) were married in August 1954. The couple separated on June 11, 1986. Thereafter, in December 1986, the Superior Court of Orange County, California (the Superior Court), entered a judgment of dissolution of marriage.
In June 1962, Mr. Kelley began employment2005 Tax Ct. Summary LEXIS 95">*97 with Aerospace Corp. of El Segundo, California. In July 1963, Mr. Kelley became a participant in the Aerospace Employees' Retirement Plan (Retirement Plan). 3 Mr. Kelley retired from Aerospace Corp. in November 1985.
Incident to the matrimonial action between petitioner and Mr. Kelley, the Superior Court issued an Order On Division Of Aerospace Employees' Retirement Plan Benefits in July 1986. In its order, the Superior Court found that Mr. Kelley had earned benefits under the Retirement Plan, which the court decided were community property in their entirety. The Superior Court also decided that petitioner had a 50-percent interest in those benefits, and it directed the Retirement Plan to pay petitioner her community interest in those benefits. The Superior Court expressly retained jurisdiction "to make such further orders as are deemed appropriate to enforce or clarify the provisions of this order."
In December 1992, the Superior2005 Tax Ct. Summary LEXIS 95">*98 Court entered a Stipulated Qualified Domestic Relations Order (QDRO), which was approved as to form and content by petitioner and Mr. Kelley, as well as their attorneys, and the plan administrator of the Retirement Plan. The QDRO stated, in relevant part, that petitioner, Mr. Kelley, and the Superior Court intended that the QDRO be a qualified domestic relations order within the meaning of the Internal Revenue Code of 1986, as amended. 4 The QDRO also identified Mr. Kelley as the "plan participant" and petitioner as the "alternate payee". As to petitioner, the QDRO included the following provisions: 4. This Order hereby creates and recognizes as to the [Aerospace Employees' Retirement] Plan described above the existence of the Alternate Payee's right as of June 11, 1986 to 50% in said Plan, plus any cost of living adjustments. 5. The Alternate Payee elects the SINGLE LIFE ANNUITY under the Plan to receive her benefits in the Plan created and recognized in Paragraph 4 of this Order.
2005 Tax Ct. Summary LEXIS 95">*99 After entry of the QDRO, petitioner began to receive, directly from the administrator of the Retirement Plan, her 50-percent interest in Mr. Kelley's retirement benefits. Petitioner received these benefits through direct deposit to her bank account on the first of each month. Shortly after the end of each calendar year, petitioner also received a Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc., or similar statement, from the Retirement Plan reporting the amount of the distribution.
During 2001, petitioner received $ 16,909 pursuant to the QDRO. On her return for that year, petitioner disclosed this amount in its entirety on line 16a, "Total pensions and annuities", but reported "0" on line 16b as the taxable amount. In explanation, petitioner wrote "see addendum (commun. prop.)" and attached to her return a copy of the Superior Court's July 1986 order. Petitioner had consistently followed this approach for every year that she had received a distribution.
Respondent contends that the amount actually paid to petitioner in 2001, i.e., $ 16,909, is includable, in its entirety, in petitioner's income for that year. 2005 Tax Ct. Summary LEXIS 95">*100 Petitioner contends that she received no property settlement per se in her divorce from Mr. Kelley and that her community property interest in his retirement benefits is essentially a "return of capital" and therefore not taxable. Petitioner also points out that on three separate occasions over the years, respondent's Service Centers have issued "no change" letters after inquiring into the status of her interest in Mr. Kelley's retirement benefits.
Discussion 5
Generally, under
However, an alternate payee who is the spouse or former spouse of the participant shall be treated as the distributee of any distribution or payment made to the alternate payee under a qualified domestic relations order (as defined in
As relevant herein,
In the present case, neither party has raised any issue regarding the status of the2005 Tax Ct. Summary LEXIS 95">*103 Superior Court's December 1992 order as a qualified domestic relations order, and there is nothing in the record that would lead us to question its status as such. Indeed, the Superior Court's order expressly states that the parties and the court intend that it constitute a qualified domestic relations order within the meaning of the Internal Revenue Code; moreover, all of the requirements of
In sum, the $ 16,909 distribution that was received by petitioner in 2001 from the Retirement Plan was received by her as an alternate payee under a qualified domestic relations order. Accordingly, pursuant to
We recognize that from a property perspective, petitioner might not have taken anything from her 32-year marriage other than a 50-percent interest in Mr. Kelley's retirement plan. Unfortunately for petitioner, this fact does not serve2005 Tax Ct. Summary LEXIS 95">*104 to overcome the clear mandate of
Finally, we recognize that on several occasions in the past, respondent's Service Centers apparently issued "no change" letters to petitioner after inquiring into the status of her interest in Mr. Kelley's retirement benefits. 7 Suffice it to say that the "mere acceptance or acquiescence in returns filed by a taxpayer in previous years creates no estoppel against the Commissioner nor does the overlooking of an error in a return upon audit create any such estoppel."
In conclusion, we hold for respondent on the disputed issue.
Reviewed and adopted as the report of the Small Tax Case Division.
To reflect our disposition of the disputed issue, as well as petitioner's concession, 8
Decision will be entered for respondent in the amount of the increased deficiency of $ 1,900.
1. Unless otherwise indicated, all subsequent section references are to the Internal Revenue Code in effect for 2001, the taxable year in issue, and all Rule references are to the Tax Court Rules of Practice and Procedure.↩
2. Petitioner concedes that a capital gain distribution of $ 138 that she received from Wachovia Securities Inc. is includable in her income.↩
3. Mr. Kelley's interest in the Retirement Plan was funded by Aerospace Corp.↩
4. The order also stated that it was "intended to be a QDRO pursuant to the [California Family Law] Act, and its provisions shall be administered and interpreted in conformity with the Act."↩
5. We decide the issue in this case without regard to the burden of proof. See generally sec. 7491(a); Rule 142(a);
6. Neither party has raised any issue regarding the qualified status of the Retirement Plan. Suffice it to say that there is nothing in the record that would lead us to think that the employees' trust is not described in sec. 401(a) and not exempt from tax under sec. 501(a).↩
7. The record does not disclose what prompted respondent's Service Centers to issue the "no change" letters. Perhaps the Service Centers acted solely on the basis of the Superior Court's July 1986 order and without knowledge of the December 1992 QDRO. However, we need not speculate on this matter because, as discussed infra in the text, respondent is not estopped from correcting an error.↩
8. See supra note 2.↩
