Appeal from an order of the United States Tax Court, Cohen, J., holding that petitioner's payments for life insurance premiums and children's college expenses pursuant to a separation agreement and judgment were not includable in former wife's income as alimony and therefore not deductible by petitioner under 26 U.S.C. § 215(a) (1976). Affirmed. Judge Friendly concurs in a separate opinion.
Friendly, Van Graafeiland and Meskill, Circuit Judges. Friendly, Circuit Judge, concurring.
This is an appeal from an order of the United States Tax Court, Cohen, J., entered on February 2, 1983 after a written decision ruling that the Petitioner Herbert Sperling's payments of life insurance premiums and children's college expenses pursuant to a separation agreement and judgment were not includable in his former wife's income as alimony and therefore not deductible by him under 26 U.S.C. § 215(a) (1976).
We affirm the order of the tax court.
Appellant Herbert Sperling (Sperling)*fn1 asserts here as he did before the Commissioner of Internal Revenue (Commissioner) that college expenses of Sperling's children by his former wife paid by him pursuant to a stipulated separation agreement and judgment are alimony and thus deductible because a sum certain was not fixed and an economic benefit was conferred on his former wife. Appellant further maintains that life insurance premium payments made by Sperling were constructively received by his former wife and constitute alimony based on an economic benefit theory, even though his former wife did not own the policies and she and her children were not absolute beneficiaries thereof. The Commissioner disagreed and determined deficiencies in appellants' federal income taxes of $19,973.32*fn2 for the tax years 1974-76. The tax court found for the Commissioner. 1982 T.C. Memo 681, 45 T.C.M. (CCH) 193 (1982). We affirm.
When Herbert and Phyllis Sperling's marital problems became insoluble they retained attorneys to negotiate the terms of a separation and divorce agreement. In open court on March 20, 1967 they announced an agreement (separation stipulation) which stated in pertinent part:
1. The wife shall have full custody and control of the three infant issue . . . .
9. The husband agrees to pay to the wife as alimony for her support and for the support, maintenance and education of the children, except as hereinafter set forth, the sum of $33,500 per annum, payable $644.23 per week . . . .
10. In addition to the foregoing payment the . . . husband is to pay for the following items:
(c) tuition, laboratory fees, books and residence fees for each child for four years at college, on condition that the college be selected jointly by the child and by the husband.
12. . . . The husband shall pay the premiums necessary to keep [several enumerated whole life insurance policies on the life of the husband] in full force and effect, and shall not borrow against the cash value of any of them except against the cash value of Policy No. 43359 in order to have the proceeds of the loan applied against the premium of the said policy. So long as the wife remains unmarried and any of the children is under the age of twenty-one years or has not completed his education, the wife shall be the beneficiary of the said policies.
If the wife should remarry, the children, or such of them as shall be under the age of twenty-one years or shallnot [sic] have completed their education, shall be the beneficiaries, in equal shares, of the said policies. If the wife should remarry and if all of the children shall be over the age of twenty-one years and shall have completed their education, the said policies shall be transferred and delivered to the husband who shall thereafter have complete control thereover.
In order to assure the parties hereto that the provisions of this paragraph are carried out, ownership of said policies shall be transferred to David Coral and Milton Kail, who shall hold such policies as trustees in accordance with the terms of this paragraph.
Exhibit 13-M (emphasis added). This stipulation was incorporated into a judgment of separation (separation judgment) dated March 30, 1967. It provided in pertinent part:
That the [wife] is entitled to the general custody of the three children . . . .
Ordered AND ADJUDGED, that for the purpose of carrying out the provisions of this decretal paragraph, ownership of said policies shall be transferred to David Coral, Esq. and Milton Kail, Esq., who shall hold such ...