Opinion
Docket Nos. 38212 38213 38214.
1954-10-28
GEORGE R. JOSLYN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.GEORGE R. JOSLYN AND DOROTHY C. JOSLYN, PETITIONERS, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.GEORGE R. JOSLYN, PETITIONER, v. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
Alvin G. Hubbard, Esq., for the petitioners. Paul Levin, Esq., for the respondent.
Alvin G. Hubbard, Esq., for the petitioners. Paul Levin, Esq., for the respondent.
1. Petitioner was divorced from his wife Charlotte Joslyn in 1940. The original decree of divorce provided that petitioner pay her $100 per month for alimony and also pay $100 per month for support of each of their four children. The original decree was amended on December 16, 1942. The amended decree provided that the petitioner at his election could pay Charlotte $1,000 per month or make payments under the original decree. Held, that payments made in 1942 and 1943 under the amended decree are deductible only to the extent of the provisions of the original decree.
2. Further amendments to the original decree were made on March 16, 1944, and December 29, 1947. Held, that a determination of the portion of the payments regarded as alimony is to be made on the basis of all the evidence bearing on the question, including the terms of the original and amended decrees as well as the reasons prompting the court to decree the amended sums. Held, further, that no portion of the payments made by petitioner during 1944 pursuant to the amendment of March 16, 1944, is deductible as alimony. Held, further, that one-fifth of the payments made by petitioner during 1945, 1946, and 1948 is to be regarded as alimony and was deductible as such in those years.
3. Petitioner married Ethel N. Joslyn who divorced him on January 4, 1946. The divorce decree provided that petitioner was to pay $500 per year for the support of Ethel's son, beginning in the year following that in which the decree was entered. Held, that payments made for support of the son prior to the time provided in the decree are not deductible as alimony.
4. Held, that petitioner is liable for an addition to tax for 1946 because of failure to file his return for that year within the time required by law.
The respondent has determined deficiencies in the income and Victory tax and income tax of the petitioners and an addition to tax under section 291(a), Internal Revenue Code of 1939, as follows:
+----+ ¦¦¦¦¦¦ +----+
Addition Petitioner Docket Year Deficiency to tax sec. No. in tax 291 (a) George R. Joslyn 38212 1 1943 $2,657.28 1944 757.55 1945 3,745.48 George R. Joslyn 38214 1946 7,229.31 $361.47 1947 7,319.16 George R. Joslyn and Dorothy C. Joslyn 38213 1948 3,525.88
The issues presented by the pleadings are the correctness of the respondent's action in determining that (1) petitioners were not entitled to deduct for the years 1942 through 1948 certain amounts as alimony, and (2) the petitioner, George R. Joslyn, was liable for an addition to tax for 1946 under section 291(a) of the 1939 Code. The year 1942 is involved because of the forgiveness feature of the Current Tax Payment Act of 1943.
FINDINGS OF FACT.
Some of the facts have been stipulated and are found accordingly.
Petitioners are residents of South Haven, Michigan, and filed their tax returns for the taxable years in controversy with the collector of internal revenue for the first district of Illinois.
The petitioners' returns for the taxable years in controversy were filed on the following dates:
+---------------------------------+ ¦Taxable year ¦Date filed ¦ +-------------------+-------------¦ ¦ ¦ ¦ +-------------------+-------------¦ ¦1942 ¦Mar. 15, 1943¦ +-------------------+-------------¦ ¦1943 ¦Mar. 15, 1944¦ +-------------------+-------------¦ ¦1944 ¦Mar. 15, 1945¦ +-------------------+-------------¦ ¦1944 amended return¦Dec. 11, 1945¦ +-------------------+-------------¦ ¦1945 ¦Jan. 15, 1946¦ +-------------------+-------------¦ ¦1946 ¦Apr. 15, 1947¦ +-------------------+-------------¦ ¦1947 ¦Mar. 15, 1948¦ +-------------------+-------------¦ ¦1948 ¦Mar. 15, 1949¦ +---------------------------------+
George R. Joslyn, sometimes hereinafter referred to as petitioner, and Charlotte C. Joslyn were married on August 18, 1928. Four children were born of the marriage and during the years at issue they were minors. On October 1, 1940, in a proceeding in the Superior Court of Cook County, State of Illinois, the court entered a decree divorcing Charlotte from petitioner. The decree provided in part:
It is further ordered that the alimony of CHARLOTTE C. JOSLYN be and the same is hereby fixed at the sum of One Hundred ($100.00) Dollars per month and George R. Joslyn is ordered to pay $100.00 each month to CHARLOTTE C. JOSLYN for her alimony, payable on the 15th day of each month.
It is further ordered that GEORGE R. JOSLYN shall pay to CHARLOTTE C. JOSLYN as and for the support of the said four (4) minor children, One Hundred ($100.00) Dollars for each of said children, that is the aggregate sum of Four Hundred ($400.00) Dollars for the support of said children each and every month payable on the 15th day of each month; and the said CHARLOTTE C. JOSLYN shall at the end of each month render a statement to GEORGE R. JOSLYN showing how she has applied or conserved the said Four Hundred ($400.00) Dollars for the use and benefit of the said minor children.
During the first 11 months of 1942 petitioner paid Charlotte $500 each month under the foregoing decree. On October 28, 1942, Charlotte filed a petition to increase the support for the four children. In her petition she advised the court that $400 per month was insufficient to support and maintain the four children; that she had expended for their support more than the amount provided in the divorce decree; that she had incurred liabilities of $2,650.98 for the support of the children which were unpaid and she asked that the decree of October 1, 1940, be modified by increasing the support money for the four children to $950 per month. Petitioner filed an answer contesting her application. On December 16, 1942, a consent decree was entered. This amended decree provided in part:
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that George R. Joslyn shall pay to Charlotte C. Joslyn the sum of One Thousand ($1000.00) Dollars per month for a period of three (3) years next hereafter, payable One Thousand ($1000.00) Dollars on the 15th day of December 1942, and One Thousand ($1000.00) Dollars on the 15th day of each and every month thereafter following, and a final payment of One Thousand ($1000.00) Dollars on the 15th day of November, 1945, and thereafter Five Hundred ($500.00) Dollars on the 15th day of December, 1945 and Five Hundred ($500.00) Dollars on the 15th day of each and every month thereafter until further order of the court.
IT IS FURTHER ORDERED, ADJUDGED and DECREED that George R. Joslyn may at his election discontinue to make the payments herein next above ordered and revert to the decree entered herein on October 1, 1940 and that upon such discontinuance the said George R. Joslyn shall thereafter make the payments as provided in the said decree of October 1, 1940.
IT IS FURTHER ORDERED, ADJUDGED and DECREED that Charlotte C. Joslyn shall upon the receipts (sic) of each payment to be made hereunder set aside a sum sufficient to pay income tax as shall be due thereon to the Collector of Internal Revenue of the United States.
IT IS FURTHER ORDERED, ADJUDGED and DECREED that after setting aside a sum sufficient to pay the income tax above ordered that the said Charlotte C. Joslyn shall apply all sums in excess of Five Hundred ($500.00) Dollars per month to the liquidation of the debts incurred by her prior to the filing of her petition herein asking for an increase.
After the entry of the amended decree on December 16, 1942, petitioner paid Charlotte $1,000 in December 1942. In his Federal income tax return for 1942 petitioner took an alimony deduction of $2,100, composed of $100 of the amount of each payment made during the first 11 months and the $1,000 payment made in December 1942. The respondent disallowed the entire deduction.
In each of the first 4 months of 1943 petitioner paid Charlotte $1,000. In August 1943 petitioner served written notice on her that he would cease to pay under the amended decree of December 16, 1942, and would pay under the original decree of October 1, 1940. In 1943 he paid her $500 per month for the months of May through December. In his Federal income tax return for 1943 petitioner took a deduction of $6,000 for alimony. That amount was composed of $4,000 paid during the first 4 months of 1943, $1,500 representing $500 per month paid for the months of May, June, and July, and $500 representing $100 per month of the payments made for the months of August through December. Respondent disallowed $4,800 of the deduction.
In January and February 1944 petitioner paid Charlotte $500 per month. On January 14, 1944, she filed an application asking for an increase in alimony and support for the children on the ground that the amounts provided in the original decree of October 1, 1940, were insufficient to maintain her and the four children. Petitioner filed an answer denying her allegations. On March 16, 1944, after a hearing, a consent decree was entered providing in part as follows:
IT IS ORDERED, ADJUDGED AND DECREED that George R. Joslyn shall pay to Charlotte C. Joslyn for her support and maintenance and the support and maintenance of the four children of the parties hereto and in complete discharge of any claims under the consent order of December 16, 1942, entered herein, the sum of $1,000 per month, beginning on the 15th day of April, A.D. 1944, and $1,000.00 on the 15th day of each month thereafter for the period hereinafter specified, and said payments shall be made in the manner as hereinafter provided;
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that George R. Joslyn in making each of the said payments of $1,000.00 per month as herein provided, shall pay $500.00 directly to said Charlotte C. Joslyn to be used by her for her support and maintenance and for the support and maintenance of the four children of the parties, and the other $500.00 per month, after making reservation for income taxes as hereinafter provided, shall be applied for the benefit of Charlotte C. Joslyn by payment by George R. Joslyn directly to the creditors of Charlotte C. Joslyn in satisfaction and discharge of the bills of Charlotte C. Joslyn. * * *
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that from the said second $500.00 out of each $1,000.00 per month, the said George R. Joslyn shall reserve and set aside prior to the payment of any of the bills hereinabove listed a sum sufficient to pay such income taxes as shall be due upon each gross one thousand dollar monthly installment to the Collector of Internal Revenue of the United States, on account of income taxes of Charlotte C. Joslyn and that said amount shall be such sum as shall be designated by Charlotte C. Joslyn to the said George R. Joslyn, and said sum shall be held separate and ready at any time to be paid to the Collector of Internal Revenue for the use and benefit of Charlotte C. Joslyn and upon her direction.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED That as soon as the above listed bills shall have been paid in full, this Order shall then have no further force or effect.
Thereafter in 1944 petitioner paid to Charlotte the aggregate amount of $3,592.07. In his Federal income tax return for the calendar year 1944 petitioner claimed a deduction of $3,792.07 for alimony, composed of $100 out of the two payments of $500 each made in January and February and the amount of $3,592.07 paid after March 16, 1944. Respondent disallowed the deduction.
During 1945 petitioner paid to Charlotte eight payments of $500 each, or a total of $4,000. In his Federal income tax return for that year he deducted the amount of $4,000. Respondent disallowed the deduction.
In January 1946 petitioner paid $9,000 as follows: $5,500 direct to Charlotte; deposited $1,320.21 for her on account of income taxes; and discharged the unpaid balance due her creditors as listed in the decree of March 16, 1944. On February 13, 1946, Charlotte filed a supplemental petition asking for an increase in alimony and support for the children to such sum as would be necessary to pay for the estimated necessary expenses of herself and the children for the year ending January 31, 1947, together with a sum adequate to pay her Federal income taxes for 1946. After the filing of the petition and on June 14, 1946, petitioner and Charlotte entered into an agreement which provided in part as follows:
George agrees to the entering of a consent decree in the divorce Court at Chicago for a temporary alimony order increasing Charlotte's present alimony allowance of $500.00 a month for $1,000.00 a month from January 1st, 1946 to December 31st, 1946, and thereafter for three years until December 31st, 1949, said alimony allowance to be at the rate of $800.00 per month.
No decree, consent or otherwise, was ever entered pursuant to the terms of the foregoing agreement and on January 27, 1947, the supplemental petitioner was dismissed. During the months of February through December 1946 petitioner paid Charlotte $500 per month, or a total of $5,500.
Subsequent to his divorce from Charlotte petitioner married Ethel N. Joslyn, who divorced him on January 4, 1946. The decree of divorce provided in part:
ALIMONY
It is further Ordered, Adjudged and Decreed, that the provisions of the Property Settlement Agreement heretofore entered by the parties on the 12th day of October, 1945, shall be incorporated herein and made a part hereof as follows:
George R. Joslyn shall pay the sum of Fifteen Thousand Dollars ($15,000.00) as full consideration for the covenants contained herein, said payments to be made as follows:
$10,000.00 shall be paid direct to second party at the rate of $1,000.00 per year, divided into equal monthly installments, the first payment to be made the month following the decree of divorce and the same to continue with like monthly payments until the full sum of $10,000.00 has been paid.
$5,000.00 shall be paid to Mrs. Hays Unsell, in trust however for the support and education of William Hays Urban, the son of second party. The said $5,000.00 shall be paid at the rate of $500.00 per year commencing the year following the entry of a decree of divorce between the parties hereto and shall continue with like payments until the said sum of $5,000.00 is paid. * * *
Petitioner paid Ethel $1,000 in 1946 and also paid $500 for the support of William Hays Urban, minor child of Ethel by a prior marriage.
In his Federal income tax return for 1946 petitioner claimed a deduction of $16,094.58 for alimony, composed of $14,500 paid to or on behalf of Charlotte, $1,500 paid to or on behalf of Ethel and William Hays Urban, and $94.58 paid to some undisclosed party or for some undisclosed purpose. Respondent allowed $2,200 of the deduction.
In 1947 Charlotte filed another application for an increase in alimony and, with respect thereto, there was entered on December 29, 1947, a consent decree which provided in part as follows:
2. IT IS ORDERED, ADJUDGED and DECREED that on January 15, 1948, the defendant GEORGE R. JOSLYN, pay to the plaintiff, CHARLOTTE C. JOSLYN, the sum of Nine Hundred Fifty Dollars ($950.00) as and for her alimony for the month of January 1948, and that the defendant, GEORGE R. JOSLYN, pay to the plaintiff, CHARLOTTE C. JOSLYN, the sum of Nine Hundred Fifty Dollars ($950.00) on the 15th day of each and every month thereafter until further order of court as and for her alimony; and
3. The plaintiff, through her attorney, has promised the court that in the future she will not incur any credit obligation which cannot be paid in full out of the payments provided hereunder within thirty (30) days from the date such obligation is incurred, and IT IS ORDERED that if at any time in the future the plaintiff, CHARLOTTE C. JOSLYN, violates the aforesaid promise, plaintiff's rights under this order shall cease and the defendant, GEORGE R. JOSLYN, shall thereafter be under no obligation insofar as the provisions of this order are concerned to make any payments to plaintiff, but, on the contrary, the rights of plaintiff shall, in such event, revert to the alimony and support money order originally entered herein. Notwithstanding the fact that his (sic) order is entered by agreement of the parties, the court reserves the right to vacate or modify same in any respect just the same as if this order had not been entered by consent of the parties.
During the year 1948 petitioner paid Charlotte the aggregate amount of $10,438.20 and, in his Federal income tax return for that year, took a deduction of the amount. Respondent allowed only $1,200 of the deduction.
OPINION.
WITHEY, Judge:
The first issue before us consists of two questions, (1) whether the payments made by petitioner, George R. Joslyn, to Charlotte C. Joslyn for the taxable years here involved included amounts for the support of their minor children, and (2) whether the payment made to Ethel N. Joslyn for the support of her minor son is deductible as alimony. If the payments to Charlotte did include amounts for that purpose, then the portions thereof that were for that purpose may not be deducted by the petitioner and are excluded from the income of Charlotte.
Robert W. Budd, 7 T.C. 413, affd. 177 F.2d 198; Dora H. Moitoret, 7 T.C. 640; Warren Leslie, Jr., 10 T.C. 807; Harold M. Fleming, 14 T.C. 1308.
The deficiency for 1943 is in income and victory tax.
Deductions are permitted the husband under section 23(u), I.R.C., 1939, if by the correlative provisions of section 22(k) the payments are includible in the wife's gross income.Section 22(k), I.R.C., 1939, provides in part as follows: 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 * * * received subsequent to such decree 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 * * * . 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. In case any such periodic payment is less than the amount specified in the decree or written instrument, for the purpose of applying the preceding sentence, such payment, to the extent of such sum payable for such support, shall be considered a payment for such support. * * * 2. Jones' Ill. Stat. Ann. 1934-1949 Cum. Supp., ch. 109.186; Maupin v. Maupin, 339 Ill.App. 484, 90 N.E.2d 234; Igney v. Igney, 303 Ill.App. 563, 25 N.E.2d 608.
We have held that in determining the extent to which decrees and agreements fixing alimony and support payments for children provide for the latter, such decrees and agreements are to be construed as a whole and all their provisions examined with regard to each other. Robert W. Budd, supra; Beulah Weil, 22 T.C. 612. Each case depends upon its own facts and specifically on the terms and provisions of the decree or written instrument. Warren Leslie, Jr., supra; Beulah Weil, supra. Further, the Court of Appeals for the Seventh Circuit in Mandel v. Commissioner, 185 F.2d 50, 52, stated:
there is no reason for concluding that the statutes should be construed liberally in the husband's favor as against the wife. While it is clear that the intention was to permit deductions of alimony paid by a husband, nevertheless, the husband was expressly denied the right to deduct that part of a periodic payment which was fixed as payable for the support of minor children.
Examining the facts in the light of the foregoing principles, we find that for 1942 petitioner deducted for alimony the amount of $2,100, composed of eleven $100 monthly payments to Charlotte under the original decree of October 1, 1940, and $1,000 paid to her in December 1942 under the amended decree of December 16, 1942. He contends that the amended decree of December 16, 1942, as well as that of October 1, 1940, was incident to the divorce and that, since no part of the periodic payments under the amended decree of December 16, 1942, was designated for support of the children, he may deduct the entire payment of $1,000, citing Dora H. Moitoret, supra. In making his determination of the petitioner's tax liability for 1942, the respondent allowed no deduction for alimony. However, on brief he concedes that petitioner was entitled to a deduction of $1,200 composed of $1,100 paid during the first 11 months of 1942 and $100 of the payment of $1,000 made in December 1942. Respondent does not deny that the amended decree of December 16, 1942, was incident to the divorce but contends that it did not impose a legal obligation on petitioner and that, therefore, only payments totaling $1,200 were made pursuant to the original decree of October 1, 1940. One of the requisites of section 22(k) of the 1939 Code is that the payment received must have been made in discharge of a legal obligation. Frederick S. Dauwalter, 9 T.C. 580. The report of the Committee on Ways and Means on the Revenue Bill of 1942, H. Rept. No. 2333, 77th Cong., 2d Sess., p. 72, contains the following with respect to section 22(k):
This section applies only where the legal obligation being discharged arises out of the family or marital relationship in recognition of the general obligation to support, which is made specific by the instrument or decree. (1942-2 C.B. 428.)
The amended decree of December 16, 1942, stated in part:
IT IS FURTHER ORDERED, ADJUDGED and DECREED that George R. Joslyn may at his election discontinue to make the payments herein next above ordered and revert to the decree entered herein on October 1, 1940 and that upon such discontinuance the said George R. Joslyn shall thereafter make the payments as provided in the said decree of October 1, 1940.
The foregoing provision made it optional with petitioner as to whether he would pay $1,000 a month or pay under the original decree. His payment of $1,000 monthly until May 1943, when he discontinued such payments, was merely a gratuity and ‘without compulsion of any legal obligation arising out of a marital relationship.’ Frederick S. Dauwalter, supra, p. 585. Charlotte had no legal means of enforcing a monthly payment of $1,000 and, apart from the petitioner's willingness to pay, it is difficult to see how she benefited by the decree. Since petitioner was specifically obligated to make monthly payments of only $500, and since only $100 of such payments was alimony to Charlotte, it is our conclusion that petitioner is limited to an alimony deduction of $100 out of the $1,000 payment in December 1942, or a total alimony deduction of $1,200 for 1942.
During the first 4 months of 1943 petitioner paid Charlotte $1,000 each month under the amended decree of December 16, 1942; he also paid her $500 per month for the remaining 8 months in 1943. In August 1943 he served written notice that he would cease to pay under the amended decree of December 16, 1942, and would pay under the original decree of October 1, 1940. Accordingly, he claims an alimony deduction of $6,000 in 1943. In view of our discussion above regarding the deduction of alimony for 1942, we conclude that for 1943 the petitioner is limited to an alimony deduction of $1,200.
In January and February 1944, petitioner paid Charlotte $500 per month. On January 14, 1944, she applied for an increase in alimony and support for the children, and on March 16, 1944, an amended consent decree was entered which provided that petitioner was to pay her $1,000 per month; $500 was to be paid directly to her for her support and maintenance and for the support and maintenance of the four children, and from the other $500 petitioner was to ‘set aside * * * a sum sufficient to pay such income taxes as shall be due upon each gross one thousand dollar monthly installment’ and any balance was to be applied to the bills listed of Charlotte's creditors. The amended decree of March 16, 1944, was to terminate when the bills were paid in full. During 1944 petitioner paid $3,592.07 to Charlotte under this amended decree and for the year took an alimony deduction of $3,792.07. Respecting the deduction for alimony to be allowed petitioner for the year, respondent contends that since a divorce court retains jurisdiction to modify the provisions originally made for alimony and for support of the children, all amendatory decrees, being modifications of the original decree, should be considered in the light of the original decree; and that since the original decree here involved established one-fifth of the monthly payments as alimony and four-fifths as support for the children, the same proportions should be held applicable with respect to payments under amendatory decrees in which no proportions are specified. Petitioner contends that each amendatory decree must be interpreted as standing alone, and, since the amended decree of March 6, 1944, did not segregate the periodic payments as between alimony and support for the children, the entire amount is deductible as alimony.
Under the law of Illinois, a court granting a divorce may, on application, from time to time make such alterations in the allowance for alimony and for the support of the children as appear reasonable and proper.
It is unquestioned that the court which entered the original and amendatory decrees involved herein retained jurisdiction, upon application, to modify the provisions originally made for alimony and for support of the children. It is true that the original decree entered on October 1, 1940, specifically provided for a monthly payment by petitioner of $100 to Charlotte as alimony and a monthly payment to her of $400 for support of the children. However, we do not think that it necessarily follows that merely because under the original decree the payment for alimony was one-fifth of the total monthly payments to be made by petitioner and the payment for support of the children was four-fifths of such total monthly payments, it is to be presumed that such proportions are to be applied to the payments made by petitioner under amendatory decrees in which payment was ordered of one specified monthly amount to determine the portions thereof that were for alimony and for support of the children. Such determination is to be made on the basis of all the evidence bearing on the question, including the terms of the original and amended decrees, as well as the reasons prompting the court to decree the amended sum. However, where, as here, the evidence does not show that the payments of one specified amount monthly for both alimony and support of the children ordered by the amendatory decrees were intended to be in proportions other than specified for such purposes in the original decree, and where, as here, petitioner does not show a different application of the funds paid under the amended decrees, and where there is no apparent intention of the decreeing court to the contrary, the proportions ordered by the original decree are to be applied. Accordingly, we hold that one-fifth of the monthly payments under the amendatory decrees is to be regarded as alimony and four-fifths as support for the children.
Since the payments made in January and February 1944 were made under the original decree, we conclude $200 is deductible by petitioner under section 23(u) with respect to them.
The amended decree of March 16, 1944, provided for monthly payments by petitioner of $1,000 beginning April 15, 1944, and that $500 of each such payment should be made directly to Charlotte. If all payments ordered by the decree to be made to Charlotte had been made thereafter in 1944 as ordered, the petitioner would have paid to her a total of $4,500, of which $900 would have been for alimony and $3,600 would have been for support of the children. However, petitioner paid her only $3,592.07. In view of this, and since the record does not show whether the $3,592.07 was paid in monthly installments, the situation thus presented comes within the following provision of section 22(k):
In case any such periodic payment is less than the amount specified in the decree * * * , for the purpose of applying the preceding sentence, such payment, to the extent of such sum payable for such support (of minor children), shall be considered a payment for such support.
Since the $3,592.07 does not exceed the amount that was applicable for the support of the children, we conclude that no part of the $3,592.07 may be deducted by petitioner for alimony. See Martha J. Blyth, 21 T.C. 275. Petitioner's deduction for alimony for 1944 is limited to $200.
During 1945 petitioner paid Charlotte eight monthly payments of $500. Under our holding above, one-fifth of these was for alimony. Accordingly, the petitioner was entitled to deduct $800 as alimony for 1945.
In his return for 1946, petitioner deducted $16,094.58 as alimony. He contends here that he is entitled to an alimony deduction for the year of $16,000, composed of $9,000 for the payments made in January 1946 to or for the benefit of Charlotte; $5,500 for the eleven $500 monthly payments made to her for the months of February to December, inclusive; $1,000 for the payment made to Ethel N. Joslyn; and $500 for the payment made for the support of her minor child, William Hays Urban.
Respondent has allowed petitioner a deduction for alimony of $2,200, consisting of $1,200 for payments made to Charlotte and $1,000 for the payment made to Ethel.
Under the amended decree of March 16, 1944, petitioner was ordered to pay Charlotte $1,000 per month. Of that amount $500 was to be paid directly to her and the other $500 was to be applied to her income taxes and to her debts as listed in the decree. When her creditors had been paid in full, the decree was to have no further force or effect. In seeking to limit the deduction for alimony for 1946 to one-fifth of the monthly payments of $500 which were made directly to Charlotte and to disregard payments made to creditors, the respondent contends that during 1946 petitioner paid more than was required by the amended decree. We do not agree with this contention. The evidence establishes that the indebtedness owing to creditors was incurred for the benefit of both Charlotte and the children. The provisions of the amended decree are explicit and required petitioner to make payment in full of the indebtedness owing to the creditors listed therein. The final payment to creditors was made in January 1946.
In view of the foregoing, and in view of what we have said heretofore respecting the portion of payments made under amendatory decrees which is to be regarded as alimony, we hold that petitioner may deduct as alimony paid to Charlotte in 1946, 20 per cent of the $9,000 payment, or $1,800, and $100 for each of the 11 payments made to her from February through December 1946, or a total of $2,900.
Since the respondent has allowed petitioner a deduction of $1,000 for alimony of that amount paid to Ethel in 1946, no issue as to such allowance is presented here. In his return, the petitioner took a deduction of $500 on account of his payment in that amount for the support of William Hays Urban, minor child of Ethel. He contends that since he had to pay the money to the child, whom the mother was obligated to support, the transaction was the same as though he was paying the money to her. Even if we assume the correctness of petitioner's contention, we are still confronted with the portion of the decree of January 4, 1946, in connection with which the payment was made, which provides that such payments were to commence the year following entry of the decree of divorce. Since the decree of divorce was entered in 1946, the first payment was not due until 1947. Therefore, petitioner was not obligated to make the payments in 1946 and, consequently, it was not deductible for that year.
In his income tax return for 1947, petitioner deducted $23,750 for alimony, but the respondent determined that only $1,950 of the amount was deductible. On brief the respondent concedes that the full amount deducted by petitioner was allowable. In a recomputation of the deficiency for 1947, effect will be given to the respondent's concession.
Pursuant to the amended decree of December 29, 1947, petitioner paid Charlotte $10,438.20 during 1948. Of that amount respondent allowed only $1,200. The decree provided for a monthly payment of $950 but did not specify what portion of that amount was for alimony or for support of the children. In view of what has been said heretofore respecting the portion of payments made under amendatory decrees which is to be regarded as alimony, we hold that one-fifth of the amount of the payment, or $2,887.64, was allowable as an alimony deduction.
Petitioner has failed to offer any reason why the addition to tax under section 291(a) should not be assessed. The burden of proof is on the petitioner to show that the failure to file a return within the time prescribed by law, or prescribed by the Commissioner in pursuance of law, was due to reasonable cause and not due to willful neglect. Charles C. Rice, 14 T.C. 503, 509. In view of petitioner's failure, the respondent's determination is upheld.
Decisions will be entered under Rule 50.