Are unallocated support payments alimony?

• Author: Hawley, Richard C.

R and G entered into an agreement and order of support, which required R to pay "the sum of $2,077.00 bi-weekly for and toward the support of wife and three (3) minor children," but which did not allocate the payment between alimony to G and child support to the children. R made 26 payments trader the agreement and deducted them on his 1993-1995 returns. The Tax Court held that the unallocated support payments were not alimony and, thus, neither deductible by R nor includible in income by G; see Gilbert, TC Memo 2003-92. R appealed to the Third Circuit.

Law and Analysis

Payments are considered alimony only if they satisfy all four requirements in Sec. 71(b)(1). The only requirement in dispute is Sec. 71(b)(1)(D)--that there must be no obligation to make any additional or substitute payments after the payee spouse's death. Because the support order did not address the effect of G's death on R's obligation to make the payments, the Tax Court looked to Pennsylvania law to determine whether the requirement was met. It concluded, the "Pennsylvania Supreme Court has not decided the narrow legal issue of whether an unallocated support order covering spousal support and child support terminates upon the death of the custodial spouse."

R contends that the Tax Court erred, because the Pennsylvania Supreme Court decided that an unallocated support order terminates on the ex-spouse's death by amending Pennsylvania Rule of Civil Procedure 1910.16-4(f)(3) in 2000. Thus, R's theory depends on whether the amended rule applies retroactively to the deductions he took for the unallocated payments.

Retroactive Application

In Dombrowski, 245 A2d 238 (PA 1968), the Pennsylvania Supreme Court stated in footnote 4, "[o]ur rules of civil procedure, promulgated under the Act of June 21, 1937, P.L. 1982, [section] 1, as amended, 17 P.S. [section] 61, have the force of a statute." The Pennsylvania Superior Court, in applying Dombrowski, has subsequently noted a presumption against retroactively applying rules in the absence of an express statement in the rule to that effect; see...