(a) Facts: The parties entered into a premarital agreement. The agreement provided, among other things, that the wife would receive, upon divorce, a lump sum of $100,000, plus $10,000 for each year the parties were married.
The parties married but divorced after four years. A separation agreement required the husband to pay the wife $140,000, exactly the amount that the above provision would require for a four-year marriage. The agreement further provided:
The parties each acknowledge that this agreement, and each provision of it, is expressly made binding upon the heirs, assigns, executors, administrators, representatives and successors in the interest of each party.
2017 WL 5713945, at *4.
A modified separation agreement then reduced the payment from $140,000 to $117,970.97 on the ground that the husband had already paid $22,029.03 in expenses for the wife. The husband’s total liability, including the expenses, remained at exactly $140,000. The modified agreement was incorporated into a Texas divorce decree.
The husband paid the wife the $117,970.97. On his next tax return, he took an alimony deduction of $170,000. Of this amount, $32,000 was for alimony paid to a prior spouse, and $140,000 was for the payments made to the wife.
The IRS disallowed the deduction above the $32,000 paid to the former spouse, and the husband petitioned for relief in the Tax Court.
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