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Respondent determined a deficiency of $11,026 in
petitioner’s Federal income tax for 2002. Respondent also
determined an accuracy-related penalty under section 6662(a) and
(b)(1) and (2) of $2,205.20. The issues for decision are whether
petitioner’s $35,000 payment to his former wife was alimony,
deductible under section 71(b), and whether petitioner is liable
for the penalty for negligence or substantial understatement of
tax.
Background
Some of the facts have been stipulated, and the stipulated
facts are incorporated in our findings by this reference.
Petitioner resided in Knoxville, Tennessee, at the time that he
filed his petition.
On August 19, 2002, petitioner and his then wife, Pamela
Moritz Tulay (Tulay), met with their respective attorneys to
negotiate the terms of their divorce after failed attempts at
mediation. At the time of the August 19 meeting, petitioner was
represented by William A. Mynatt (Mynatt), and Tulay was
represented by Wanda G. Sobieski (Sobieski). Tulay had
previously been represented by different counsel in the divorce
proceedings. A court reporter was present at the August 19
meeting and prepared a transcript. At the end of the meeting,
Sobieski read into the record the understanding that the parties
had reached as follows: Petitioner would pay $3,900 a month in
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