125 T.C. No. 13
UNITED STATES TAX COURT
DENNIS E. AND PAULA W. LOFSTROM, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 4667-03. Filed November 22, 2005.
Ps are Mr. Lofstrom (H) and Paula Lofstrom (W-2).
H was previously married to Dorothy Lofstrom (W-1). In
satisfaction of his alimony obligations to W-1, H
transferred his $29,000 interest in a contract for deed
to W-1, along with $4,000 in cash. Ps deducted as
alimony the value of the contract for deed. In
addition, Ps claimed to operate the first floor of
their residence as a bed and breakfast (B&B) and
deducted related expenses. H, a retired doctor, also
claimed to be engaged in the business of writing for
profit and Ps deducted expenses attributable to H’s
writing activities.
1. Held: A contract for deed is a third-party
debt instrument under sec. 1.71-1T(b), Q&A-5, Temporary
Income Tax Regs., 49 Fed. Reg. 34455 (Aug. 31, 1984).
Ps may not deduct as alimony the value of a contract
for deed transferred to W-1 because it does not
constitute a cash payment. Id.; see secs. 61(a)(8),
71(a), 215(a) and (b).
Page: 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011