Litigation

Temporary unallocated support payments may be tax-deductible on the payor spouse's separate tax return where it can be determined that the payment of the unallocated support would terminate upon the death of the payee spouse. Peterson v. Commissioner of Internal Revenue, No. 12783-02 S, U.S. Tax Court, T.C. Summary Opinion 2003-122, September 2, 2003.

The husband filed an action for a divorce in November 1999. The wife was awarded unallocated temporary support retroactive to December 1999. The parties were also awarded joint custody of their two children. Residential custody of one child was with the wife and of the other child with the husband. The parties' divorce became final in May 2001. When the husband filed his separate taxes for the 2000 taxable year in April 2001, he deducted the sum of $24,424 as alimony paid under the temporary support order. Thereafter, in May 2001, the Commissioner of Internal Revenue determined a deficiency in the husband's federal income tax of $ 6373.56 for the 2000 taxable year. The Commissioner argued that the unallocated support payments did not constitute 'alimony or separate maintenance payments' that the husband would be permitted to deduct under Internal Revenue Code (IRC) Section 215. The husband argued that the unallocated support payments were 'alimony or separate maintenance payments' because under New Jersey law and section 215, the death of the wife would release the husband from his obligation to make the unallocated support payment. His argument was supported by the fact that he and the wife were awarded joint custody of the two children of the parties, each having residential custody of one child. The tax court concluded that the husband did not have an obligation to continue to make the unallocated payments upon the death of the wife. Although the temporary support order issued by the New Jersey court was silent regarding whether the unallocated support payments would cease upon the wife's death, New Jersey law indicated that because the parties had been awarded joint custody of the two children, and each party was awarded residential custody of one child, it was reasonable to conclude that the payments to the wife constituted support for the wife (and not the children) because custody (and therefore support) of the minor children would revert to the husband upon the wife's death.