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Labow v. Commissioner of Internal Revenue

June 3, 1985

MYRNA LABOW, APPELLANT
v.
COMMISSIONER OF INTERNAL REVENUE, APPELLEE; RONALD LABOW, APPELLEE V. COMMISSIONER OF INTERNAL REVENUE, APPELLANT



Appeal from an order of the United States Tax Court, Arthur L. Nims III, Judge, assessing income tax deficiencies under 26 U.S.C. § 71(a)(3) (1982) based on alimony received during 1975 and 1976. Appellant taxpayer claims that certain payments are not alimony because they were made either pursuant to a court decree or while she and her ex-husband were separated and that certain payments were not made at all. The Commissioner takes a protective appeal in the appellee-taxpayer's case. Affirmed in part and reversed and remanded in part.

Oakes, Meskill, and Pierce, Circuit Judges.

Author: Oakes

OAKES, Circuit Judge:

This appeal arises from two cases consolidated for trial in the United States Tax Court, Arthur L. Nims III, Judge, in which Ronald LaBow and Myrna LaBow each challenged income tax deficiencies assessed for the years 1975 and 1976. The issue in both cases was how much alimony Ronald LaBow paid to Myrna LaBow during those years, alimony being includible in Myrna's income under 26 U.S.C. § 71(a)(3) (1982)*fn1 and deductible from Ronald's income under id. § 215(a)*fn2 The Tax Court concluded that Ronald paid Myrna 5,130.45 in alimony in 1975 and $6,011.25 in 1976, and assessed income tax deficiencies against both parties. Myrna now appeals that decision pro se; Ronald does not. The Commissioner of Internal Revenue has filed a protective appeal with respect to Ronald, in the event that this court finds Myrna not liable for the full amount.

Myrna raises three principal issues. First, she challenges the Tax Court's characterization of any payments received in 1975 and 1976 as alimony. To qualify as alimony under section 71, support payments must be made pursuant to a decree while husband and wife are living separately. Myrna specifically contests the Tax Court's findings that two support orders, dated February 25, 1975, and February 23, 1976, were effective before August 1976, and that Myrna and Donald [sic] lived separately from January 1975 to October 1976. Second, Myrna argues that the court erred in finding that she received 5,130.45 from Ronald in 1975.*fn3 Finally, since most of Myrna's arguments rest on new evidence first presented in an untimely post-trial motion for reconsideration, Myrna implicitly contends that the denial of that motion was an abuse of discretion.*fn4

We hold that the Tax Court did abuse its discretion in denying Myrna's motion and consequently reverse and remand on those issues affected by Myrna's new evidence. We also reverse and remand, with instructions to allow Ronald a reasonable time to present new evidence, the determination that Myrna received alimony payments during 1975. We affirm in all other respects.

BACKGROUND

Ronald and Myrna LaBow were married in 1960 and had three children. The couple resided in a cooperative apartment located at 1050 Park Avenue, New York, New York, and occasionally spent time at their property in Weston, Connecticut, which had two houses on it.

In July 1974, Myrna moved to dissolve their marriage in the Superior Court of Fairfield County, Connecticut. A final judgment of divorce was not entered until August 28, 1978. Meanwhile, the Superior Court had issued an order for alimony pendente lite on February 25, 1975 ("1975 Order"), retroactive to November 1, 1974, which provided in part:

The Defendant shall pay all current bills for maintenance of the apartment in New York and the house in Wilton [ sic ], and shall pay all medical and dental expenses for his wife and children pending disposition of the above-entitled case. The Defendant shall also pay all bills for the education of the minor children. ... The Defendant shall pay to the Plaintiff the sum of $300 per week, and she shall pay all food bills and bills for her personal needs, and she shall pay for the lunches for the children until such time as this matter is finally disposed of. The Defendant is to receive a credit of $500 which was paid on or about November 6, 1974.

Ronald appealed, having appeared specially to contest Connecticut jurisdiction, and on August 17, 1976, the Connecticut Supreme Court affirmed the order. LaBow v. LaBow, 171 Conn. 433, 370 A.2d 990 (1976). On February 22, 1977, the Connecticut Superior Court of Fairfield County found Ronald in contempt of the 1975 Order and fixed arrearages at $36,032 for the period November 1, 1974, through August 31, 1976. Ronald also appealed this order, the appeal having the effect of staying the order. The Superior Court lifted the stay on April 29, 1977, however, believing that the appeal was taken only to delay payment.

Myrna argues, as she did below, that the 1975 Order, like the February 22, 1977, order, was automatically stayed pending resolution of the appeal. But Myrna had no proof below either that such a stay is automatic or that any stay of the 1975 Order remained in effect, and several signs convinced the Tax Court that the order, even if initially stayed, became effective soon after February 25, 1975: Ronald testified that he thought the order was effective; the Superior Court, in assessing arrearages in 1977, treated some earlier payments as made in partial fulfillment of Ronald's obligations under the 1975 Order; and a stay in 1975, like the 1977 stay, would probably have been lifted quickly.

In the motion for reconsideration, however, Myrna marshalled substantial documentation to show that the 1975 Order had in fact been stayed: (1) certification from the clerk of the Fairfield Superior Court that Ronald appealed the 1975 Order; (2) a letter dated October 17, 1975, from Ronald's Connecticut attorney to a New York attorney, stating the following:

The Superior Court also entered an order for alimony and support pendente lite. Our appeal automatically Istays this order. Then the Plaintiff [Myrna] moved for a termination of the automatic stay. A hearing was held...and the...motion was granted. This meant that the order pendente lite went back into effect. From this decision we filed a petition for review to our Supreme Court. ... The petition for review acts as an automatic stay on the last decision. Thus, the status of the case in Connecticut is that there is no order pendente lite until the petition for review is heard and determined by our Supreme Court.

(emphasis in original); (3) an order dated July 16, 1975, signed by Chief Justice Charles S. House of the Connecticut Supreme Court granting the petition for review of the order terminating the stay and directing the trial court to set forth its reasons for terminating the stay; (4) copies of Conn. S. Ct. R. ch. 45, § 3065, which states that an appeal acts as an automatic stay until a final determination is rendered, unless the stay is terminated, and id. § 3067, which states that a petition for review of an order terminating a stay in turn stays the termination order; (5) notification from the clerk of the Superior Court that on December 10, 1975, the Supreme Court vacated the order of the Superior Court terminating the stay; and (6) an affidavit dated December 4, 1975, in which Ronald, pointing out that he had appeared specially in Connecticut to contest jurisdiction, stated several times that there was no alimony order pendente lite in effect until his petition for review was heard and determined by the Connecticut Supreme Court.*fn5

In her motion for reconsideration, Myrna contended for the first time that a later support order was also ineffective, a temporary order entered on February 23, 1976, by the Court of Common Pleas--Bureau of Support, Fairfield County, Connecticut, requiring Ronald to pay Myrna $750 a week. According to Myrna, Ronald purposely evaded service in Connecticut, proof of evasion residing in a letter of Ronald's attached to her motion. Unserved, the Connecticut order had no effect except as a recommendation when Myrna brought her petition anew in New York Family Court. Myrna argued in her motion and continues to argue on appeal that it was not until August 3, 1976, when New York Family Court itself issued a temporary order requiring Ronald to pay $2,580 a month, that Ronald was subject to an effective court decree.

While Ronald and Myrna battled over support orders, they also battled over access to the Park Avenue cooperative apartment, each of them moving in and out at different times. Thus, from 1974 until the New York Supreme Court ordered Ronald to vacate the co-op on October 24, 1976,*fn6 Ronald and Myrna lived together at times, in the co-op, and separately at times, Ronald sometimes staying in a rented apartment ...


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