1955 U.S. Tax Ct. LEXIS 160">*160
Alimony Payments Under
24 T.C. 497">*497 OPINION.
Respondent determined a deficiency in income tax for the taxable years 1950, 1951, and 1952 in the total amount of $ 1,554.09. Petitioner's returns for the years in question were filed with the collector of internal revenue for the district of Indiana.
The issue involved is whether the payments made by petitioner pursuant to a separation and property settlement agreement entered into by petitioner and his former wife, and made a part of their divorce 24 T.C. 497">*498 decree, are periodic payments within the meaning1955 U.S. Tax Ct. LEXIS 160">*161 of
Other adjustments in petitioner's returns have been made by respondent, and the parties have stipulated the amount of the deficiency conditional upon our determination of the alimony question.
All of the facts have been stipulated, are so found, and are included herein by reference. Those facts necessary to an understanding of the issue involved are set forth below.
Petitioner is an individual residing in Linden, Indiana. He and his former wife, Acie Isfalt, entered into a separation and property settlement agreement on April 18, 1950, which insofar as material here provided as follows:
The said John A. Isfalt further agrees to pay to the said Acie Isfalt the sum of Twenty-four Thousand dollars ($ 24,000.00) payable as follows: the sum of two hundred dollars ($ 200.00) shall be paid on the first day of the month succeeding the month of the execution of this instrument and the sum of two hundred dollars ($ 200.00) shall be paid on the first day of each calendar month thereafter for a total period of ten (10) years from the time of the execution of this agreement or until the full sum of twenty-four thousand dollars ($ 24,000.00) 1955 U.S. Tax Ct. LEXIS 160">*162 has been paid. No interest shall be chargeable upon the installment payments unless they become delinquent thirty (30) days or more and then interest shall accrue on delinquent installments at the rate of six (6) per cent per annum from the due date of such installments.
It is expressly agreed that in the event of the death or remarriage of the said Acie Isfalt, if a divorce is granted to her, prior to the completion of the payments on said sum of twenty four thousand dollars ($ 24,000.00) as herein provided, then the unpaid amounts which have not become due shall be discontinued and all payments not yet accrued shall become null and void and this agreement shall be fully paid and satisfied, provided however, that all payments accrued to the time of the death or remarriage of the said Acie Isfalt, together with interest as hereinbefore provided shall be paid and remain an obligation under this agreement.
It is further agreed that in the event a divorce is granted between the parties the said Acie Isfalt shall be given a judgment for the said sum of twenty four thousand dollars ($ 24,000.00) payable as herein provided and such judgment shall provide for the discontinuance of the payments1955 U.S. Tax Ct. LEXIS 160">*163 in accordance with this agreement. It is agreed that said judgment shall expressly provide that all payments to be paid under this agreement and under such judgment shall be a lien upon the real estate * * * of the said John A. Isfalt and shall remain a lien until the full sum of twenty four thousand dollars ($ 24,000.00) has been paid as provided herein unless discontinued by reason of the death or remarriage of the said Acie Isfalt as herein provided. Such judgment shall be without relief from valuation or appraisement laws, and may be paid prior to due date.
On April 19, 1950, a judgment and decree of divorce was granted by the Montgomery Circuit Court, Montgomery, Indiana, to Acie Isfalt against petitioner. The formal decree of divorce ordered as follows:
It Is Therefore considered and ordered by the court that the bonds of matrimony existing between plaintiff and defendant herein be, and they are hereby 24 T.C. 497">*499 dissolved and that plaintiff is hereby granted a divorce from defendant. It is further adjudged by the court that defendant take nothing on his cross complaint.
It is further considered and adjudged by the court that plaintiff have and recover of and from the defendant1955 U.S. Tax Ct. LEXIS 160">*164 the sum of twenty-four thousand dollars ($ 24,000.00) alimony against defendant. That said judgment for alimony shall be payable as follows: the sum of two hundred dollars ($ 200.00) shall be paid on May 1, 1950 and the sum of two hundred dollars ($ 200.00) shall be paid on the first day of each calendar month thereafter until the full sum of twenty-four thousand dollars ($ 24,000.00) has been paid.
* * * In the event of the death or remarriage of the plaintiff, all payments not accrued or due at the time of such death or remarriage shall be discontinued, and said judgment fully paid satisfied and released.
Petitioner's principal source of income was derived from farming, and each of his returns for the taxable years involved here included therewith a Form 1040-F Schedule of Farm Income And Expenses. On page three of each of these forms, petitioner deducted amounts designated as monthly support along with his deductions for regular farm expenditures. The amounts deducted as monthly support payments for 1950, 1951, and 1952 were $ 1,600, $ 2,400, and $ 2,400, respectively. Petitioner used the optional standard deduction for the taxable years involved.
The alimony payments petitioner1955 U.S. Tax Ct. LEXIS 160">*165 made to his former wife are deductible under
Installment payments discharging a part of an obligation the principal sum of which is, in terms of money or property, specified in the decree or instrument shall not be considered periodic payments for the purposes of this subsection; * * *
Petitioner first contends that his payments to his former wife were periodic payments within the meaning of
In reversing us on this point and rejecting the theory of the 1955 U.S. Tax Ct. LEXIS 160">*167
With deference to the Court of Appeals we have adhered to the theory of
That we need not face the reversal of the
The Tax Court held that the $ 2,500 and the $ 300 payments were "installment" payments and not deductible by the husband, the $ 25,000 being a "principal sum" in the case of the $ 2,500 payments and a "principal sum" being ascertainable in the case of the $ 300 payments, 24 T.C. 497">*501 following the theory of the
We are cognizant of the fact that other Courts of Appeals have approved the theory expressed in the
Before concluding, an alternative contention made by petitioner can be disposed of. He argues that if we should hold that the questioned payments1955 U.S. Tax Ct. LEXIS 160">*170 are