Back Taxes: What is alimony? Payments made by an ex-husband to his ex-wife pursuant to a settlement agreement were not alimony payments under Code Sec. 71(b) because the payments would not terminate on the death of the ex-wife; thus, the payments were not deductible under Code Sec. 215(a). The ex-husband's obligation was for a lump sum payable in monthly installments, which, under state (Georgia) law, was a lump-sum alimony that does not terminate upon the death of either the payee or the payor. Further, under state law, the obligation to pay lump-sum alimony does not terminate upon the death of either party because lump-sum alimony is in the nature of property settlement, regardless of whether it was designated as alimony. See Thomas Lettieri v. Commissioner<, T.C. Summary Opinion 2007-114, Docket No. 13055-06S . Filed July 3, 2007.


Section 215(a) provides a deduction to an individual equal to the alimony or separate maintenance payments paid during that individual's taxable year. Section 215(b) defines alimony as any payment that is includable in the gross income of the payee under section 71. Section 71(a) provides for the inclusion in income of any alimony or separate maintenance payments received during the taxable year. Section 71(b)(1) defines "alimony or separate maintenance payment" as any payment in cash if --

(A) such payment is received by (or on behalf of) a spouse under a divorce or separation instrument,

(B) the divorce or separation instrument does not designate such payment as a payment which is not includible in gross income under this section and not allowable as a deduction under section 215,

(C) in the case of an individual legally separated from his spouse under a decree of divorce or of separate maintenance, the payee spouse and the payor spouse are not members of the same household at the time such payment is made, and

(D) there is no liability to make any such payment for any period after the death of the payee spouse and there is no liability to make any payment (in cash or property) as a substitute for such payments after the death of the payee spouse.

Under section 71(b)(1)(D), if the payor is liable for any qualifying payment after the recipient's death, none of the related payments required will be deductible as alimony by the payor. See Kean v. Commissioner, 407 F.3d 186, 191 (3d Cir. 2005), affg. T.C. Memo. 2003-163. Whether a postdeath obligation exists may be determined by the terms of the divorce or separation instrument or, if the instrument is silent on the matter, by State law. Morgan v. Commissioner, 309 U.S. 78, 80-81 (1940); see also Kean v. Commissioner, supra. The parties dispute whether the payments at issue meet the requirement of section 71(b)(1)(D). The parties are in agreement that the divorce decree does not provide any conditions for the termination of these payments. Respondent maintains that the payments made by petitioner to Von Bergen are not deductible from petitioner's income as alimony under section 215(a) because the obligation to make the payments does not terminate at the death of either party under Georgia law. Petitioner contends that the payments are deductible because he intended the payments to be alimony and because the settlement agreement did not specifically state that the payments do not terminate at the death of petitioner or Von Bergen.

Although section 71(b)(1)(D), as it was enacted in 1984, originally required that a divorce or separation instrument affirmatively state that liability for payments terminate upon the death of the payee spouse in order to be considered alimony, the statute was retroactively amended in 1986 so that such payments now qualify as alimony as long as termination of such liability would occur upon the death of the payee spouse by operation of State law. Hoover v. Commissioner, 102 F.3d 842, 845-846 (6th Cir. 1996), affg. T.C. Memo. 1995-183.

Under Georgia law, the obligation to pay periodic alimony terminates at the death of either party, while the obligation to pay lump sum alimony in installments over a period of time does not. Winokur v. Winokur, 365 S.E.2d 94, 95 (Ga. 1988). The Georgia Supreme Court has held that the obligation to pay lump sum alimony does not terminate upon the death of either party because lump sum alimony is in the nature of a property settlement, regardless of whether it is designated as alimony. Id. The Georgia Supreme Court has also established the following test to be used in determining whether particular payments are lump sum alimony payable in installments, as opposed to periodic alimony: "If the words of the documents creating the obligation state the exact amount of each payment and the exact number of payments to be made without other limitations, conditions or statements of intent, the obligation is one for lump sum alimony payable in installments." Id. at 96.

The settlement agreement between petitioner and Von Bergen requires petitioner to pay "the sum of $66,000" to Von Bergen in monthly payments of at least $1,000. Although the exact number of payments would have varied if petitioner had paid more than the minimum $1,000 in any installment, petitioner was not legally obligated to pay to Von Bergen any more than "the sum of $66,000"; if petitioner did not have the option in the settlement agreement of paying more than the required $1,000 each month, he would have been required by the settlement agreement to pay Von Bergen exactly 66 payments of $1,000 each. Petitioner's obligation to Von Bergen is for an exact sum payable in monthly installments, which obligation is lump sum alimony under Georgia law and does not terminate upon the death of either the payee or the payor. Thus, we hold that the $12,000 paid to Von Bergen in 2004 pursuant to the settlement agreement between petitioner and Von Bergen does not qualify to be deducted as alimony paid by petitioner under section 215. Sec. 71(b)(1)(D); see Mukherjee v. Commissioner, T.C. Memo. 2004-98.