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Dorothy in part satisfaction of Mr. Lofstrom’s accrued and future
alimony obligations to Dorothy qualifies as alimony.7
A contract for deed is a financing arrangement that allows a
buyer (or vendee) to purchase property by borrowing the money for
the purchase from the seller (or vendor). In re Butler, 552
N.W.2d 226, 229-230 (Minn. 1996). Here, Mr. Lofstrom had
transferred property to Mark Lofstrom in return for periodic
payments from Mark Lofstrom until the full principal amount, with
interest, was paid. The contract for deed represented,
therefore, a debt obligation of Mark Lofstrom to Mr. Lofstrom.
Because the contract for deed transferred to Dorothy is a debt
instrument of a third party, it does not qualify as a cash
payment and is not deductible as alimony.8 See secs. 71(b)(1),
215(a); sec. 1.71-1T(b), Q&A-5, Temporary Income Tax Regs.,
7The Minnesota legislature has sanctioned contracts for deed
because they provide a useful alternative financing mechanism,
which promotes the availability of credit and the transferability
of property. In re Butler, 552 N.W.2d 226, 229-230 (Minn. 1996)
(citing Minn. Stat. sec. 559.205-.216 (1994)).
8Further, once Mr. Lofstrom transferred the contract for
deed to Dorothy, Mark Lofstrom’s liability to make payments under
the contract would not end at Dorothy’s death. We note that
alimony does not include a liability to make payments after the
payee’s death. Sec. 71(b)(1)(D); see also Sugarman v.
Commissioner, T.C. Memo. 1996-410 (payments found in the nature
of a property settlement rather than alimony where payments would
not necessarily have terminated if the taxpayer died before the
end of the payment stream because the taxpayer’s estate would
have had a valid claim for the remainder of the payments).
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