Lumbard, Chief Judge, Waterman and Hays, Circuit Judges.
Petitioner seeks review of a decision of the Tax Court disallowing a deduction of $8,600 paid in 1958 for the support of his wife.
The stipulation of facts upon which the Tax Court based its decision shows that petitioner and his wife were married in 1931 and ceased living together in 1939. In 1949 the petitioner wrote his wife stating that he would "undertake to place in your account, beginning August 1st,  $300 each month, which amount it is to be understood will cover all your expenses."
The petitioner made his last regular payment under this agreement in January 1954. In August of 1954 he sent his wife $1000 but made no further payments until 1958.
In 1955 the wife brought an action in a Connecticut court to enforce the agreement represented by the 1949 letter. This action resulted in a judgment for the wife for $3500, together with interest, to cover all arrears from January 1954 to April 1955. Petitioner appealed from this decision and the appeal was still pending in 1958.
In 1956 the wife brought another action in the United States District Court for the Southern District of New York for the collection of arrears from May 1955 to April 1956. However, before either the appeal or the federal action was concluded, petitioner's attorneys advised him that the Connecticut decision would be res judicata in New York. Thereupon in the summer of 1958 petitioner and his wife negotiated a new separation agreement providing for the settlement of all unsettled obligations of petitioner to his wife.
Under paragraphs 4 and 5 of the agreement*fn1 the petitioner agreed to pay $8000 which the wife was to accept as "a satisfactory, reasonable and sufficient provision for her support and maintenance past, present and future." She agreed specifically to execute a general release of her claims against her husband excluding, however, his obligation to pay $300 per month from January 1, 1958, "pursuant to this agreement and/or any other or prior agreement, including the agreement sued upon by the wife in the State of Connecticut." In exchange for the $8000 she would also release the claims for payments for the months from January through May 1958 and, for $600 more, payments for the months of June and July 1958. She also agreed to execute a satisfaction piece for the Connecticut judgment and to discontinue the New York action.
On July 25, 1958, the petitioner paid $8600 to the wife's attorneys to be held in escrow by them. The agreement was executed and acknowledged by the wife on August 12, 1958, and by the petitioner on August 15, 1958.
In his 1958 income tax return the petitioner claimed a deduction of $10,100. The Commissioner allowed $1500, representing payment under the agreement for the months of August through December. He disallowed $8600.
The Tax Court affirmed the disallowance, basing its decision on its reading of Sections 71(a)(2) and (3) of the Internal Revenue Code of 1954. 42 T.C. 283 (1964).
In effect, Section 71(a)(2)*fn2 requires the inclusion in income by the wife of alimony and separate maintenance payments if
(1) the husband and wife are separated;
(2) a written separation agreement is executed after August 16, 1954;
(3) the payments are periodic (whether or not made at ...