Rev. Rul. 81-8

Rev. Rul. 81-8 [FN1]

                       Internal Revenue Service
                                 Revenue Ruling

            ALIMONY; REMARRIAGE OF FORMER SPOUSE; PAYMENTS CONTINUED

                                Published: 1981

SECTION 71.--ALIMONY AND SEPARATE MAINTENANCE PAYMENTS, 26 CFR 1.71-1: Alimony and separate maintenance payments; income to wife or former wife

(Also Sections 61, 215, 7805; 1.61-1, 1.215-1, 301.7805-1.)

  Alimony; remarriage of former spouse; payments continued. Periodic payments made after the remarriage of a taxpayer's former spouse pursuant to a divorce decree granted in a jurisdiction in which the legal obligation to make such payments ceased upon the remarriage of the former spouse are not alimony under sections 71(a)(1) or 215 of the Code, but are includible in the former spouse's gross income under section 61; I.T. 4108 modified and superseded.

ISSUES

  (1) Under the circumstances described below, do payments received from a former spouse under a divorce decree cease to be includible in the recipient's gross income under section 71(a)(1) of the Internal Revenue Code (and cease to be deductible by the former spouse under section 215) upon the recipient's remarriage?

  (2) If the payments cease to be includible in gross income under section 71(a)(1) of the Code, are they includible in the recipient's gross income under section 61?

FACTS

  A married couple, A and B, were divorced under a decree of divorce that required B to make periodic payments to A as permanent support for A. Thereafter, A remarried.  Under the law of the jurisdiction in which the decree was granted, the legal obligation of B to make the payments to A terminated upon A's remarriage.  However, B continued to make the payments described in the decree.

LAW AND ANALYSIS--ISSUE (1)

  Section 71(a)(1) of the Code provides that if an individual is divorced under a decree of divorce, the individual's income includes periodic payments (whether or not made at regular intervals) received after the decree in discharge of a legal obligation that, because of the marital or family relationship, is imposed on or incurred by the former spouse under the decree or under a written instrument incident to the divorce.

  Section 1.71-1(b)(1)(i) of the Income Tax Regulations provides that in the case of divorce, section 71(a)(1) of the Code requires that the recipient spouse include in gross income periodic payments (whether or not made at regular intervals) received after a decree of divorce.  The periodic payments must be made in discharge of a legal obligation imposed upon or incurred by the payor spouse because of the marital or family relationship under a court order or decree divorcing the spouses or a written instrument incident to the divorce status.

  Section 1.71-1(b)(4) of the regulations provides that section 71(a) of the Code applies only to payments made because of the family or marital relationship in recognition of the general obligation to support, which is made specific by the decree, instrument or agreement.

  Thus, if the payor has no legal obligation to make support or alimony payments to a former spouse, and payments, even if characterized as support or alimony, are not periodic payments within the meaning of section 71(a)(1) of the Code.  See Hoffman v. Commissioner, 455 F.2d 161 (7th Cir. 1972), aff'g 54 T.C. 1607 (1970), acq., page 1, this Bulletin, and Martha K. Brown, 50 T.C. 865 (1968), aff'd per curiam; 415 F.2d 310 (4th Cir. 1969), acq., page 1, this Bulletin.

HOLDING--ISSUE (1)

  The payments received by A from B after A's remarriage are not includible in A's gross income under section 71(a)(1) of the Code and are not deductible by B under section 215.

LAW AND ANALYSIS--ISSUE (2)

  Section 61 of the Code and the regulations thereunder provide that, except as otherwise provided by law, gross income means all income from whatever source derived.

  In Joss v. Commissioner, 56 T.C. 378 (1971), the United States Tax Court stated that, although payments received by a taxpayer from a former spouse after the taxpayer's remarriage are no longer includible in gross income as alimony under section 71(a) of the Code, they are includible in gross income under section 61, unless they are a gift, payments on a loan, or excludable under some section of the Code.

HOLDING--ISSUE (2)

  The payments received by A are includible in A's gross income under section 61 of the Code, since facts are not present to indicate that the payments are excludable under any section of the Code.

PROSPECTIVE APPLICATION

  Pursuant to the authority contained in section 7805(b) of the Code, this revenue ruling will not be applied to disallow deductions under section 215 for payments made on or before January 12, 1981, the date this revenue ruling is published in the Internal Revenue Bulletin.

EFFECT ON OTHER REVENUE RULINGS

  I.T. 4108, 1952-2 C.B. 113, holds in part, that similar payments continued to be 'periodic payments in discharge of a legal obligation imposed because of the marital relationship under a decree of divorce' and were, therefore, includible in the recipient's gross income and deductible by the payor under section 22(k) and 23(u) of the Internal Revenue Code of 1939, the predecessors of sections 71(a)(1) and 215, respectively, of the 1954 Code.  I.T. 4108 is modified to the extent that it holds that such payments were made in discharge of a legal obligation of the payor and, therefore, includible in the recipient's gross income and deductible by the payor.  I.T. 4108, as modified, is superseded.

FN1. Prepared pursuant to Rev. Proc. 67-6, 1967-1 C.B. 576.

Rev. Rul. 81-8, 1981-1 C.B. 42.