22 T.C. 203">*203 The Commissioner has determined a deficiency in petitioner's income tax for the year 1948 of $ 251.01. The deficiency is due to the addition to the adjusted gross income of $ 1954 U.S. Tax Ct. LEXIS 219">*220 4,182.63 reported by petitioner on her return of "alimony received from former spouse, $ 1,440.00." The explanation of the adjustment given by the Commissioner in his deficiency notice states, among other things, as follows:

A 30 day letter was issued under date of July 17, 1951 for the year 1948, proposing a deficiency of $ 251.01. The deficiency was based on the determination that the $ 1,440.00 received during the year from her former spouse, Morris Seltzer * * * was alimony within the meaning of Section 22 (k) of the Internal Revenue Code and, therefore, includible in her return as gross income.

This determination was made pursuant to information contained in a letter of April 4, 1951 received by the Maryland Collection District from the Collector 22 T.C. 203">*204 of Internal Revenue for the 14th New York District of Albany, New York, which revealed that during an audit in the latter office of Mr. Seltzer's 1948 return, he had been allowed, under Section 23 (u) of the Internal Revenue Code, a deduction for the $ 1440.00 referred to above. The letter raised the question of whether the instant taxpayer had included this amount in her return.

Petitioner's assignment of error to the adjustment1954 U.S. Tax Ct. LEXIS 219">*221 made by the Commissioner is as follows: "(1) Inclusion in income of the sum of $ 1,440.00, erroneously designated as alimony received from former spouse."

FINDINGS OF FACT.

Most of the facts were stipulated and, as stipulated, are incorporated herein by reference. In addition to the stipulated facts petitioner testified briefly at the hearing.

The petitioner is an individual with residence in Chevy Chase, Maryland. Her return for the calendar year 1948 was filed with the collector of internal revenue for the district of Maryland.

The petitioner was married to Morris Seltzer on September 18, 1933. Two children were born of the marriage, Howard and Stephen, both of whom were minors during the taxable year 1948.

On August 4, 1944, petitioner and her then husband entered into a separation agreement, which terminated a suit for separation and custody of the children then pending in the Supreme Court, Bronx County, New York. The separation agreement is attached to the stipulation of facts. The part of it which seems pertinent to the issue involved is as follows:

SECOND: From and after the date hereof and until any further separation or divorce action shall be taken, the following1954 U.S. Tax Ct. LEXIS 219">*222 shall apply to the parties:

(A) The wife shall retain custody of the two sons; and in retaining such custody may become domiciled and establish both her and her sons' permanent residence in any State of the United States. * * *

(B) The husband shall pay to the wife, at her home or at any place hereafter designated by her, for the support and maintenance of herself and the two sons, the sum of One Hundred Twenty ($ 120.00) Dollars per month. * * *

* * * *

THIRD: In the event that the parties be divorced or separated in any jurisdiction other than New York, she agrees that any judgment or decree received by her shall provide for the following and in the event that it does not so provide, the following shall be binding, in any event, upon the husband and wife, and shall survive the judgment and decree.

(A) The wife shall retain custody of the two sons; and in retaining such custody may become domiciled and establish both her and her son's permanent residence in any State of the United States. * * *

* * * *

(C) The husband shall pay to the wife for the support and maintenance of herself and the sons the sum of One Hundred Twenty ($ 120.00) Dollars per month until both have reached1954 U.S. Tax Ct. LEXIS 219">*223 their majority. * * *

* * * *

22 T.C. 203">*205 (F) If the wife shall remarry, then, in that event, the husband shall pay to the wife the sum of Ninety ($ 90.00) Dollars per month for the support and maintenance of the sons.

On May 21, 1947, petitioner filed a complaint in an action for absolute divorce in a Supreme Court of the State of New York, in which she prayed for a divorce, custody of the children, and "that reasonable provision be made out of the property and income of defendant for the education and maintenance of the aforesaid children, and support of the plaintiff." This action came on for hearing on September 3, 1947, before the court and petitioner then asked for alimony for herself and children, and there was received in evidence the separation agreement entered into by the parties on August 4, 1944, which fixed the right of petitioner to alimony and support for the children. The court, under date of December 30, 1947, made certain findings of fact in the divorce proceeding and in these findings of fact quoted certain provisions of the separation agreement. The court in paragraph 6 of its findings of fact quoted verbatim each and every right, duty, and obligation to which1954 U.S. Tax Ct. LEXIS 219">*224 the parties had bound themselves in article Second of the separation agreement. The court did not quote the provisions of article Third of the agreement which, by its terms, was to be applicable only in the event that the parties be divorced or separated in any jurisdiction other than New York. The court, after making findings of fact, made conclusions of law which, among other things, stated:

that plaintiff shall have the care and custody of HOWARD SELTZER and STEPHEN SELTZER, the children, issue of the marriage, and that the defendant be directed to pay to the plaintiff the sum of ONE HUNDRED TWENTY ($ 120) DOLLARS per month for the support, maintenance and education of the plaintiff and of the children, HOWARD SELTZER and STEPHEN SELTZER, until the further order of the Court; that the defendant shall have the right of visitation with the said children; and that the rights, duties and obligations under and pursuant to the separation agreement entered into between the plaintiff and the defendant dated August 4th, 1944 be incorporated and set forth in the interlocutory decree of divorce.

The decree of divorce was signed the same day and, among other things, contained the following1954 U.S. Tax Ct. LEXIS 219">*225 provisions:

and the Court having been fully advised in the premises and having made a decision in writing stating separately the facts found and the conclusions of law:

* * * *

ORDERED, ADJUDGED AND DECREED that the plaintiff, HENRIETTA SELTZER, shall have the care and custody of HOWARD SELTZER, and STEPHEN SELTZER, the children, issue of the marriage, and that the said plaintiff may establish her domicile and that of the said children in any State of the United States of America; and it is further

ORDERED, ADJUDGED AND DECREED that the defendant, MORRIS SELTZER, is hereby directed to pay to the plaintiff at her home or at any place hereinafter designated by the plaintiff on the 1st day of each month 22 T.C. 203">*206 the sum of ONE HUNDRED TWENTY ($ 120) DOLLARS for the support and maintenance of the plaintiff and of the said children, HOWARD SELTZER and STEPHEN SELTZER. * * *

Thereafter the petitioner received from Morris Seltzer during the taxable year 1948 the sum of $ 1,440, none of which she included in her income tax return for said year. The respondent in the deficiency notice included the full sum of $ 1,440 received by petitioner from Morris Seltzer as taxable income to her.

1954 U.S. Tax Ct. LEXIS 219">*226 OPINION.

In her income tax return for 1948, petitioner did not include in her gross income any of the $ 1,440 which she received that year as alimony for herself and two minor children. However, at the hearing petitioner's counsel conceded that $ 360 of the amount received by petitioner is taxable to her.

Petitioner states the question involved in her brief, as follows:

The question involved is whether the sum of $ 90.00 of $ 120.00 a month, received by petitioner from her former husband, is earmarked as support of minor children of such husband, to relieve the petitioner from taxation thereon under the provisions of section 22 (k) of the Internal Revenue Code.

The applicable provisions of the Code ¹1954 U.S. Tax Ct. LEXIS 219">*227 and Treasury regulations ² are printed in the margin.

The decree of divorce herein provides:

that the defendant, MORRIS SELTZER, is hereby directed to pay to the plaintiff at her home or at any place hereinafter designated by the plaintiff on the 1st day of each month the sum of ONE HUNDRED TWENTY ($ 120) DOLLARS for the support and maintenance of the plaintiff and of the said children, HOWARD SELTZER and STEPHEN SELTZER. * * *

22 T.C. 203">*207 It is clear from the divorce decree that some1954 U.S. Tax Ct. LEXIS 219">*228 part of the $ 120 a month to be paid to Henrietta was intended for the support of the two minor children but the decree does not designate how much is to be used for that purpose. Certainly, if only the decree itself were to be considered respondent's determination should be sustained. See Dora H. Moitoret, 7 T.C. 640. In the Moitoret case, the separation agreement which was incorporated in the decree of divorce provided that the wife should be paid by the husband "for her care and support and the care and support of said minor children, the sum of $ 250.00 each month." Nowhere in the separation agreement or in the decree of divorce was there any indication as to how much of the $ 250 a month was intended for the support of the minor children. Under such state of facts, although Dora Moitoret testified that all of the $ 250 a month was used for the support of the minor children, we held that the entire amount received was taxable to Dora Moitoret under section 22 (k) of the Code. Respondent cites and strongly relies on that case.

Petitioner relies on Robert W. Budd, 7 T.C. 413, affd. 177 F.2d 198.1954 U.S. Tax Ct. LEXIS 219">*229 In the Budd case, the separation agreement provided, among other things:

and so long as Dorothy B. Budd shall remain single and unmarried, in the event a divorce is granted her, and in the interim until said divorce is heard and a decree entered, Robert W. Budd agrees to pay to Dorothy B. Budd the sum of Five Hundred ($ 500.00) Dollars per month for her support and/or alimony, and the support of Robert Ralph Budd until he is ready to enter college to complete his education.

The separation agreement then further provided:

(4) Should a divorce be granted Dorothy B. Budd and she should remarry, it is mutually agreed that the payment to Dorothy B. Budd for the maintenance, care, education and support of Robert Ralph Budd from and after her remarriage shall be Two Hundred ($ 200.00) Dollars per month until Robert Ralph Budd is ready to enter college.

The court adopted the separation agreement in its divorce decree. Our Court held the agreement must be read as a whole, and that when so read "it seems to us apparent that, of the $ 6,000 paid by petitioner to a former wife * * * the sum of $ 2,400 represented an amount fixed by the terms of the agreement, in the terms of an amount1954 U.S. Tax Ct. LEXIS 219">*230 of $ 200 per month, as a sum payable for the support of petitioner's minor child, and we have so found." This decision was affirmed per curiam by the Court of Appeals for the Sixth Circuit in Budd v. Commissioner, supra, the court stating:

We agree with the Tax Court that in considering the separation instrument as a whole it becomes clear that of the $ 6,000 paid to the wife for the taxable year, a minimum of $ 200 per month is earmarked for the support of the petitioner's minor son.

22 T.C. 203">*208 We think the Budd case is distinguishable on its facts. In the instant case, article Third of the separation agreement which contains the provision:

(F) If the wife shall remarry, then, in that event, the husband shall pay to the wife the sum of Ninety ($ 90.00) Dollars per month for the support and maintenance of the sons.

was applicable only in the event that the parties be divorced or separated in any jurisdiction other than New York. In the instant case the parties were divorced by a Supreme Court of the State of New York. Article Third of the separation agreement, therefore, in our opinion never became operative and we fail to see how it can be given any effect in this1954 U.S. Tax Ct. LEXIS 219">*231 proceeding.

We think it is significant that the divorce decree which was actually entered quoted extensively from article Second of the separation agreement which was applicable if the parties were divorced in New York State but did not quote any part of article Third which was to be applicable only if the parties were divorced by some court outside of New York State. Our findings of fact show that the New York divorce decree provided:

that the defendant, MORRIS SELTZER, is hereby directed to pay to the plaintiff at her home or at any place hereinafter designated by the plaintiff on the 1st day of each month the sum of ONE HUNDRED TWENTY ($ 120) DOLLARS for the support and maintenance of the plaintiff and of the said children, HOWARD SELTZER and STEPHEN SELTZER. * * *

Nowhere in the divorce decree itself is any part of the $ 120 a month designated for the support of the two minor sons. Nor do we think that when the divorce decree is read in connection with the separation agreement that it can be said that any part of the $ 120 monthly payments has been designated for the support of the two minor sons. The only provision of the separation agreement which, under certain circumstances1954 U.S. Tax Ct. LEXIS 219">*232 would have had that effect under the doctrine of the Budd case, supra, was, as we have already said, paragraph (F) of article Third which was to be applicable only if the parties were separated or divorced outside of the State of New York. That did not happen. So far as we can see article Third of the separation agreement was not adopted in any manner as part of the divorce decree. Therefore, we think that the facts being as they are we could not hold under the doctrine of the Budd case, supra, that $ 90 of the $ 120 monthly payments was designated by the divorce decree or by a written instrument incident to such divorce for the support of the minor children.

We think we must hold under the doctrine of Dora H. Moitoret, supra, that none of the $ 120 a month payments which petitioner received in 1948 under the New York divorce decree was designated for the support of the minor children. That being so, all of the 22 T.C. 203">*209 $ 1,440 is taxable income to petitioner under section 22 (k) of the Internal Revenue Code and the applicable regulations.

Decision will be entered for the respondent.