Steven F. Ohrman, Petitioner

T .C . Summary Opinion 2 008-12 3

UNITED STATES TAX COURT

STEVEN F . OHRMAN, Petitioner v .r . COMMISSIONER OF INTERNAL REVENUE, Respondent Docket no . 9541-07S .

Filed September 16., 2008 .

Michael C . Wetzel -,- for petitioner .

. Kelley A . Blaine , for respondent .

KROUPA, Judge : This case was heard pursuant to the provisions of section 74631 of the Internal Revenue Code i n effect at the :time the petition was filed . Pursuant to sectio n 7463(b), the decision to be entered is not reviewable by an y .'All section references are to the Internal Revenue Code in . effect-'for the-years at issue, and-all Rule references are to the Tax Court Rules l'of, Practice` and Procedure ., unless= otherwis e indicated .

SERVED SEP 16 2008

'-0-ther court, and this opinion shall not be treated as preceden t for'any other case .

Respondent determined deficiencies in petitioner's Federal income tax of $11,447 for 2002, $12,687 for 2003, and $15,600 for 2004 . {Tax years 2002, 2003, and 2004 will be referred to as the yeais . a .t. .issue .)

After concessions,Z the issues for decisio n --»are :

(1) Whether petitioner is eligible for married filing jointly status for 2002 if he resided in the same household as his spouse , from whom he was legally separated .

We hold that he is not .

(2) Whether petitioner is entitled to deduct payments he made to his legally separated spouse as alimony if he continued to reside in the same household as his spouse during the years at issue . We hold that he is not .

(3) Whether petitioner is entitled to various deductions for, expenses reported on Schedule A, Itemized Deductions, for 2002 that petitioner's legally separated spouse made for mortgage interest, real estate taxes , a charitable contribution, and ta x preparation fees . We hold that he is not .

2Respondent conceded that petitioner was not liable for sec .

6662 accuracy-related penalties for negligence for 2002', 2003, and12004, the years at issue .

i .'

.`(4) Whether petitioner is-entitled to claim dependency :

exemptions for his legally separated spouse and her grandniece for 2002 . Wehold that he< is . ' not . - _ (cid:127) .(5) Whether petiti-oner is liable for an addition to tax under section 6651(a)(1) for failure to file-a return timely . .

hold that he' is not .

Background The parties submitted this case fully stipulated under Rule r 122 . The stipulation (cid:127)of . facts and the-accompanying' exhibits are incorporated by ;this reference, and the facts areso found- .

Petitioner,resided in Oregon at the time he filed the .+petition .

. .

Petitioner and his spouse-signed a Stipulated Judgment for Unlimited , Separation (legal separation agreement) in June 2001 citing irreconcilable differences . The legal separation agreement required petitioner to convey to his spouse his interest in their personal residence, an individual retirement account (IRA),,a 401(k) account, and an automobile . The legal separation agreement also provided that petitioner . would pay his spouse certainamounts as spousal support, which were designated as tax deductible alimony and which .terminated at the death of either party . Petitioner paid his spouse spousal-support of $65,000-in 2002, $40,000 in 2003, and $48,000 in 2004 : .

I Petitioner and his spouse continued to reside together afte r their legal separation at the residence that petitioner' s spouse received under the legal separation agreement until his- .spous e sold the residence on June 10, 2002 . The two then rented a room together in a hotel from June 21 until July 15, 2002, whe n petitioner's spouse purchased a new residence, and the two moved there together . They lived there until at least December 31, 2004 .

Petitioner filed Federal income tax returns for the years a t issue as an unmarried individual and claimed alimony deductions for spousal support paid to his spouse under the legal separation agreement per section 1(c) . Respondent examined the returns and proposed adjustments disallowing the claimed alimony deductions because the Ohrmans resided together despite their legal separation .

Petitioner and his spouse subsequently prepared amended returns, however, for the years at issue attempting to elect married filing joint status . Petitioner claimed no alimony deductions on the amended returns for any of the years at issue .

Instead, petitioner sought to deduct .on the joint return for 2002 amounts his spouse had paid, such as $7,952 in property, taxes, $21 ;666 in mortgage interest, a $200 charitable contrib~!ution, and tax'preparation fees . His spouse had also claimed a minor child , her grandniece, known as KAL , 3 as a dependent on the return she had previously filed for 2002, and petitioner and his spouse claimed the same child as a dependent on the joint return .

.

Respondent considered the amended returns and issued a deficiency notice to petitioner regarding the amended return filed with his spouse for 2002 and his original -returns .for 200 3 and 2004, on which 'he filed as . a single individual . Respondent .'

determined . deficiencies . for each 'of. the years at issue, disallowing joint filing status,,the(cid:127)dedticti_ons for expenses his spous .e paid, and the dependency exemptions for his spouse and her grandniece for 2002 . Respondent .also disallowed the deductions for alimony for.. 2003 and 2004`and'determined anaddition to tax" for 2002- . Petitioner filed a timely petition to contest'th e determinations in the deficiency notice .

Discussion ' We are asked to address five issues regarding the' .filing status and .theca.tegory of expenses paid by .a legally'separated couple who : .continued .to live together after their separation . We .

'The Court uses the initials'of-minor . . children . Rul e 27 (a) (3) .

.'We note that petitioner's spouse, Ruthe Ohrman, is no stranger to this-Court . See Ohrman v . Commissioner , T .C . Memo` ., 2003-301, affd . 157 Fed . Appx . 997 (9th Cir . 200.5) . The holding in that case, which involved innocent spouse relief, is not inconsistent with our holding .

first address petitioner's proper . filing status for the years at issue .

Joint Filing Statu s A husband and wife may elect to file jointly . Sec . 6013(a) .

An individual who is legally separated from his or her spouse under a decree of divorce or of separate maintenance shall not be considered,,married, however . Secs . 6013(d)(2 .), 7703(a)(2) . W e look to State law to,determine whether the taxpayer isr"legally separated" ;as of the end of . the year . Under Oregon law, a judgment for a permanent and unlimited separation may be rendered when irreconcilable difference between the parties have caused the irremediable breakdown of the marriage . Or . Rev . Stat . sec .

107' .025(1) (2007) . Oregon law does not require, . however, that the spouses live apart before or after a court rendersa judgment for, permanent and unlimited separation . See Or . Rev . Stat . sec .

107' .025(2) (2007) .

Petitioner and his spouse . signed the legal separation agreement, in 2001 . The legal separation, agreement is a decree-of legal separation . It is of unlimited duration and specifies irreconcilable differences as a jurisdictional basis .

Accordingly, petitioner and his spouse .were no longer eligible to file jointly during the years at issue . We therefore sustain res'pondent's determination that petitioner's filing .status wa s single .

{ Alimony We turn next to whether petitioner' may ' deduct spousa l maintenance payments he made to(cid:127)his spouse in 2003 and 2004 even though they continued to live together .

It is a well=settled principle that tax deductions are a` matter of legislative grace, and taxpayers must show that they come squarely within the terms, of the-law conferring the benefit sought . Rule 142(a) ; INDOPCO, Inc . .v ., .Commissioner , 503 U .S .79, 84 (1992 1) ; New .Col-onial Ice Co . V . Helvering, 292 U .S . 435, 440 (1934) ; Allen v . Commissioner , T .C . Memo . 2006-1 .1, affd . 204 Fed .

Appx . 564 (7th Cir-. 2006) . Alimony, or separate maintenance payments are generally deductible from income by the payor and includable in the income-~o .f-the payee . Secs . 61(a)(8), 71(a), 215 (a) and (b) , The payments must. meet certain requirements to be deductible, however . See secs . 71,' .215 The parties agree that the payments satisfy all requirements of section 71(b) ;(1)5 except that the payee spouse and the payor spouse may not-be members of the same'household-at'the,time'the payment is made . Sec :.

5The other requirements-are . that the payments be in cash, be received by a spouse under a divorce or separation instrument that does not designate the payments as not 'deductible, and' terminate at the death of the payee spouse . Sec . 71(b)(1)(A), (B), and (D) . The legal separation agreement between petitioner and his spouse stated that the cash payments were . deductible to petitioner'and,terminated upon his spouse's death, as-required by sec . 71(b) (1) (A) , (B), (D) .

71(b)(1 )(C) . Petitioner argues that the same - househol d prohibition applies only if the parties are legally separated under a decree of separate maintenance, not a legal separation agreement . Petitioner argues that the legal separation agreement he signed with his spouse is not a .decree of separate maintenance because it fails to require the parties to live apart in th e future . We disagree . Petitioner-relies upon several cases, .

unlike his,own, in which the husband and wife had signed a temporary separation agreement but continued to live together .

Petitioner and his spouse were legally separated under a decree of ;separate maintenance according to Oregon law, and they lived together. . ,Accordingly, we sustain respondent's determination that petitioner may not deduct alimony or separate maintenance payments to his spouse during the years at issue . - Real Property Taxes and Mortgage Interest Deduction for 200 2 We next address whether petitioner may deduct payments for real estate taxes and home mortgage interest that his spouse made, not petitioner . A taxpayer may deduct real property taxes for.. the year in which they are paid or accrued . Sec . 164(a)(1) .

A taxpayer may also deduct mortgage interest payments . Sec . 163 .

The, mortgage must be the obligation of the taxpayer claiming the ded'uction,,however,-not the obligation of another, for the mortgage interest to be deductible by that taxpayer .

.

Golder v .

Commissioner , 604 F .2d 34,(cid:127)35 ( .9th Cir . 1979), affg . T .C . Memo .

1976-150 ; Jones v . Commissioner , T .C . Memo . .2006-176 . Petitioner is not entitled to deduct any amounts for the real property taxes or mortgage interest payments,"which he did not pay and "for which he was not legally responsible . We therefore sustai n respondent's determinations to disallow petitioner deductions for these expenses .

Charitable Contribution Deduction for 200 2 Petitioner also may not deduct a charitable contribution that his'spouse made . A taxpayer may deduct charitable contributions made in the taxable year . Sec . 170 . Accordingly, we sustain respondent's determination denying petitioner a charitable contribution deduction .

Tax Preparation Fees for 200 2 We next address whether petitioner may deduct tax preparation-fees his spouse incurred to prepare a-return for 2002. It is well established that fees incurred in the preparation and determination of Federal taxes may be deductible .

Sec . 212 . Petitioner is not entitled to this deduction, however, because his spouse incurred the expense and they were not entitled to file a joint return . Accordingly, we sustai n respondent's determination denying petitioner any tax preparation .

fees .

Dependency'-Exemption for 200 2 _10- The next issue we decide is whether petitioner is entitled to claim his spouse and her grandniece, KAL, as dependents on the return petitioner filed for 2002 . Petitioner and his spouse were legally separated as of_2001 . Thus, petitioner is not entitle d to a dependency exemption for his spouse because they were legally separated and could not file jointly .

Petitioner presented no evidence of his relationship to KAL, and he provided no evidence to support that he was entitled to an exemption for her . His spouse originally claimed KAL-as a dependent on . the single return she filed . Thus, we sustai n respondent on this issue and hold that petitioner is not entitled to claim his spouse or KAL as a dependent .

Addition to Ta x Respondent determined petitioner. was liable for an $18 .056 addition to tax under section 6651 ( a)(1) for failure to file a return timely for 2002 . Section 6651(a),(1) provides for an addition to tax for failure to file a tax return on or before the specified filing date . -Respondent bears the burden'of production with respect, to the addition to tax .

See sec . 7491(c) ; Higbee v .

Commissioner , 116 T .C . 438, 446-447 (2001) . To meet this burden, respondent must produce sufficient evidence that it i s 6The flush language at the end of sec . 6651(a) provides a minimum of $100 for a sec . 6651(a)(1) addition to tax . There is no explanation in the record why this . does not apply .

appropriate to impose the addition to tax . See Higbee v .

Commissioner , supra at 446-447 . Neither respondent nor petitioner addressed the issue on brief, and there is no information in the record indicating when petitioner filed the return for 2002 . Accordingly, . we find that respondent did not meet his burden of production and therefore find that petitioner is not liable for the late filing addition for 2002 .

. Conclusion We sustain respondent's determinations except with respect to the addition to tax under section 6651(a)(1) ; .

To reflect the foregoin Decision will be entered under Rule 155 .