Jeffrey and Sandra Siegel v. Comm., TCM 2019-11

Jeffrey Siegel was divorced in 2003. He was required to make spousal maintenance payments of $10,110 per month and child support of $5,000 per month. After the divorce, Siegel’s business went into bankruptcy, his income fell drastically, and he fell behind in making the payments required by the judgment of divorce. On Feb. 12, 2012, after several legal proceedings, the Supreme Court of New York found Siegel to be in contempt and sentenced him to 150 days in jail unless he paid $225,000 for arrearages owed to his former spouse. The sole issue for decision was whether $225,000 that Siegel paid in response to the 2012 order was deductible.

Was payment required even after former spouse’s death? To be deductible as alimony, among other requirements that the IRS agreed were satisfied, there must be “no liability to make the payments 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.”

Was the 2012 court order a “money judgment”? Alimony arrearages retain their character when paid and are deductible if paid in arrears. A money judgment is not alimony because the requirement to pay the judgment extends beyond the death of the former spouse. The court found that “the 2012 order entered no judgment in favor of Siegel’s ex-spouse and by its terms provided her with no means of enforcing the judge’s order. By its terms, the 2012 order clearly is not a money judgment. The 2012 order is a contempt order to achieve the payment of alimony arrearages.”