Alexandra M. Medlin - Page 8

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            alimony and are thus not includable in Alexandra's gross income                             
            or deductible by Burley and Mary.  The parties do not dispute                               
            that the requirements of section 71(b)(1)(C) and (D) have been                              
            satisfied with respect to the amounts in issue.                                             
            Section 71(b)(1)                                                                            
                  The initial requirement under this section is that the                                
            payments must be in cash.  Sec. 71(b)(1).  Section 1.71-1T(b),                              
            Q&A 5, Temporary Income Tax Regs., 49 Fed. Reg. 34455 (Aug. 31,                             
            1984), explains that only cash payments, including checks and                               
            money orders payable on demand, qualify as alimony or separate                              
            maintenance payments.  Transfers of services or property,                                   
            execution of a debt instrument by the payor, or the use of                                  
            property of the payor do not qualify.  Id.                                                  
                  We are satisfied that the dealership's cash payments for the                          
            lease, insurance, and maintenance of the automobile for                                     
            Alexandra's benefit and for the reimbursement of Alexandra's                                
            medical insurance premiums are properly treated as cash payments                            
            made by Burley during 1994.  He included these amounts in income                            
            as constructive dividends and is entitled to any allowable                                  
            deductions for the amounts paid.                                                            
            Section 71(b)(1)(A)                                                                         
                  We next examine whether the cash payments treated as made by                          
            Burley satisfy section 71(b)(1)(A).  Section 1.71-1T(b), Q&A6,                              
            Temporary Income Tax Regs., 49 Fed. Reg. 34455 (Aug. 31, 1984),                             
            provides that a payment of cash by the payor spouse to a third                              




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