Opinion
Docket No. 44790.
1954-04-23
VELMA B. VARGASON, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Joseph C. Buck, Esq. , for the petitioner. Paul D. Lagomarcino, Esq. , for the respondent.
In January 1946, petitioner obtained a divorce from her then husband, Alfred William Barteau, in a New York Supreme Court. With respect to support payments, the divorce decree provided ‘defendant pay to the plaintiff herein * * * the sum of Twenty-two Dollars per week for the support of herself and the issue of this marriage.’ This order was entered through a mistake as there was no intention to award any of the amount provided in the decree for petitioner's support. She was employed and earning sufficient money to support herself. On November 5, 1950, the New York Supreme Court corrected its mistake and ordered ‘defendant pay to the plaintiff herein * * * the sum of Twenty-two Dollars ($22.00) per week for the support of the three children of the marriage.’ It was further ordered that the corrected decree be made retroactive to January 29, 1946. Held, amounts paid petitioner in 1947 by her former husband, being solely for the support of petitioner's three minor children, are not includible in her income. Margaret Rice Sklar, 21 T. C. 349, followed. Robert L. Daine, 9 T. C. 47,affd. (C. A. 2) 168 F.2d 449, and Peter Van Vlaanderen, 10 T. C. 706,affd. (C. A. 3) 175 F. 2d 389, distinguished. Joseph C. Buck, Esq., for the petitioner. Paul D. Lagomarcino, Esq., for the respondent.
The Commissioner has determined a deficiency in petitioner's income tax of $199 for the year 1947.
The petitioner assigns error, as follows:
The determination of taxes set forth in the said Notice of Deficiency is based upon the following error: The Commissioner erroneously increased petitioner's income by the amount of $1,144 on the grounds that that amount received by petitioner from Alfred William Barteau her former husband for the support and maintenance of petitioner's children constituted taxable income to petitioner in the calendar year 1947.
FINDINGS OF FACT.
Most of the facts were stipulated and are incorporated herein by this reference. The depositions of two witnesses were taken and introduced in evidence at the hearing, as a part of the stipulation of facts.
The petitioner is an individual residing at Elmira, New York. She filed her return for the year involved with the collector for the twenty-eighth district of New York.
In January 1946, petitioner obtained a divorce from her then husband, Alfred William Barteau, in New York Supreme Court, Chemung County. With respect to support payments, the divorce decree provided as follows:
ORDERED, ADJUDGED AND DECREED that the defendant pay to the plaintiff herein at Elmira, New York the sum of Twenty-two Dollars per week for the support of herself and the issue of this marriage; * * * The petitioner was granted custody of the three minor children who were the issue of the dissolved marriage. In her testimony at the hearing of the divorce proceeding, petitioner testified, among other things, as follows:
Q. You want the custody of the children?
A. Yes.
Q. You want also provision made for the support of the children?
A. Yes.
* * * * * * *
Q. You are employed?
A. Yes.
Q. You have been employed for a good many years?
A. Three years this March.
* * * * * * *
Q. You are earning how much a week?
A. About thirty-five dollars.
In May 1946, petitioner married Jesse Vargason. He died in February 1948.
Subsequent to the divorce, action was instituted in Children's Court, Chemung County, for the enforcement of the support provisions of the decree on behalf of the minor children of the marriage. In October 1950, as a result of a revenue agent's report showing an alleged deficiency in income tax for the year 1947, petitioner made application to New York Supreme Court, Chemung County, for an order modifying the wording of the support provisions of the 1946 divorce decree and asked that said modification be made retroactive to January 29, 1946. This application was made with notice to petitioner's divorced husband. On November 5, 1950, New York Supreme Court, Chemung County, granted an order, as follows:
ORDERED, ADJUDGED AND DECREED THAT THE support provision contained in the judgment as entered in Chemung County Clerk's Office on January 29, 1946 be modified from
ORDERED, ADJUDGED AND DECREED defendant pay to the plaintiff herein at Elmira, N. Y. the sum of $22.00 per week for the support of herself and the issue of said marriage
to the following:
ORDERED, ADJUDGED AND DECREED defendant pay to the plaintiff herein at Elmira, N. Y. the sum of $22.00 per week for the support of the three minor children of the marriage
And it is further
ORDERED that said modification be retroactive and relate back to January 29, 1946, the date of the entry of the judgment.
Justice Bertram L. Newman, who entered the foregoing modified decree, stated in a letter dated July 9, 1952, addressed to petitioner's counsel and which is attached to the stipulation of facts, as follows:
IN RE BARTEAU VS BARTEAU
DEAR MR. BUCK:
In regard to the judgment of divorce rendered in favor of Velma Blanche Barteau against her husband, Alfred William Barteau, entered Chemung County Clerk's office on 29th of January, 1946, since taking with you, I have gone through the file of this case. The order of November 4, 1950, correcting the judgment which was entered on January 29, 1946, was granted for the purpose of correcting said judgment so that it would conform with the intention of the Court at the time the judgment was entered. The order of November 4, 1950, is not a retroactive order in the sense that it seeks to determine the status of rights of the parties as of a prior date. It corrects the judgment to make it conform to the decision made at the time the judgment was rendered.
The records and the fact that only $22.00 per week was granted for the support of three children, and that the payments have continued subsequent to the remarriage of the plaintiff, prove this fact. The phraseology used by the draftsman of the order is unfortunate in that he used the terminology retroactive. It should have read: ‘The judgment of January 29, 1946, is corrected nunc pro tunc as of January 29, 1946,’ to read ‘Ordered, adjudged, and decreed that the defendant pay to the plaintiff herein at Elmira, New York, the sum of $22.00 per week for the support of the three children of the marriage.’
If it will be of any assistance to you in this matter, you are at liberty to use this letter in any manner you wish.
Yours truly,
(Signed) B. L. Newman
BERTRAM L. NEWMAN
Justice Supreme Court.
The deposition of Justice Newman taken September 22, 1953, was introduced in evidence at the hearing of this proceeding and his testimony was to the same effect as the foregoing letter written to petitioner's counsel dated July 9, 1952. In the course of his testimony given in the deposition, the following question of Justice Newman and his answer appear:
Q. With reference to the Order of November 4, 1950, as it your intention that the wording of the new Order comply with the intention of the Court as it existed in January, 1946?
A. Yes.
The petitioner in her income tax return for 1947 returned as income received from salary earned in that year $2,617.84. She did not return any of the $1,144 which was paid to her by her former husband, Alfred William Barteau, in that year. The Commissioner in his determination of the deficiency added to the income reported by petitioner the $1,144 which had been paid to her by her former husband.
Ultimate Facts.
It was the intention of the court when it entered the order of January 29, 1946, which read:
ORDERED, ADJUDGED AND DECREED that the defendant pay to the plaintiff herein at Elmira, New York the sum of Twenty-two Dollars per week for the support of herself and the issue of this marriage * * * that it should have read
ORDERED, ADJUDGED AND DECREED defendant pay to the plaintiff herein at Elmira, N. Y. the sum of $22.00 per week for the support of the three minor children of the marriage * * * The further order of the court providing ‘ORDERED that said modification be retroactive and relate back to January 29, 1946, the date of the entry of the judgment’ was entered to correct a mistake that had been made in the original decree and not to change the status of the parties as it existed at that date.
OPINION.
BLACK, Judge: Petitioner states the issue involved in this proceeding in her brief, as follows:
Is the taxpayer entitled to exclude from her 1947 gross income payments received from her divorced husband pursuant to the terms of a divorce decree, which payments were made for the support of the taxpayers three minor children?
The applicable provisions of the Internal Revenue Code and Treasury Regulations are printed in the margin.
Internal Revenue Code:SEC. 22(k). ALIMONY, ETC., INCOME.—In the case of a wife who is divorced or legally separated from her husband under a decree of divorce or of separate maintenance, periodic payments (whether or not made at regular intervals) received subsequent to such decree in discharge of, or attributable to property transferred (in trust or otherwise) in discharge of, a legal obligation which, because of the marital or family relationship, is imposed upon or incurred by such husband under such decree or under a written Instrument incident to such divorce or separation shall be includible in the gross income of such wife, and such amounts received as are attributable to property so transferred shall not be includible in the gross income of such husband. This subsection shall not apply to that part of any such periodic payment which the terms of the decree or written instrument fix, in terms of an amount of money or a portion of the payment, as a sum which is payable for the support of minor children of such husband.Regulations 111:SEC. 29.22(k)–1( d). Payments for support of minor children.—Section 22(k) does not apply to that part of any periodic payment which, by the terms of the decree of the written instrument under section 22(k), is specifically designated as a sum payable for the support of minor children of the husband. * * * If, however, the period payments are received by the wife for the support and maintenance of herself and of minor children of the husband without such specific designation of the portion for the support of such children, then the whole of such amounts is includible in the income of the wife as provided in section 22(k). Except in cases of a designated amount or portion for the support of the husband's minor children, periodic payments described in section 22(k) received by the wife for herself and any other person or persons are includible in whole in the wife's income, whether or not the amount or portion for such other person or persons is designated.
Respondent in his brief strongly relies on Robert L. Daine, 9 T. C. 47 (1947), affd. (C. A. 2, 1948) 168 F. 2d 449, and Peter Van Vlaanderen, 10 T. C. 706 (1948), affd. (C. A. 3, 1949) 175 F. 2d 389. We think these cases are distinguishable on their facts. In both the Daine case and the Van Vlaandercn the decree of the State court which was made retroactive in its provisions was not seeking to correct an error which had been made in the original decree but sought to change the status of the parties as it existed in prior years. Our Court held this could not be done, to change Federal tax liability for the prior years, and in this holding we were affirmed by the Circuit Courts.
In the instant case it seems clear to us that the purpose of the modified decree which was entered November 5, 1950, and which was made retroactive to the date of the original decree of January 29, 1946, was to correct a mistake which had been made and to conform the original decree to what was the intention of the court at that time. Under these circumstances we think the case of Margaret Rice Sklar, 21 T. C. 349, is applicable. In that case, we said:
Examination of all of the facts persuades us that the final decree of the state court upon the hearing of the divorce case between petitioner and her husband, and each of the amendatory orders thereafter which had to do only with the amounts to be paid petitioner, provided that the entire sum here in controversy was for the support of the child alone and not in any part for the support of petitioner. The original order and the orders amendatory thereof were in error in stating otherwise, and the last order of the court merely corrected that error. In this respect this case is distinguishable from Peter Van Vlaanderen, 10 T. C. 706, affd. 175 F. 2d 389. We follow the Sklar case, supra, here and decede the issue involved in favor of the petitioner.
Petitioner has an alternative contention in her brief to the effect that her remarriage in 1946 to Jesse Vargason, now deceased, annulled her former husband's obligation to support her. In arguing this point, she says that it is the law of the State of New York that a divorced wife may not receive payments for her support after her remarriage. Having decided petitioner's main contention in her favor, it becomes unnecessary to decide her alternative contention.
Decision will be entered for the petitioner.