Wisconsin Tax Appeals Commission Docket No. 00-I-206

STATE OF WISCONSIN

TAX APPEALS COMMISSION

JEANIE LASS

325 Swap St., Apt. 202

Johnson Creek, WI 53038

DAVID J. LASS, SR.

166A Hill Ct.

Hartland, WI 53029-2006,

Petitioners,

vs.

WISCONSIN DEPARTMENT OF REVENUE

P.O. Box 8907

Madison, WI 53708,

Respondent.

DOCKET NO. 00-I-206-SC

DOCKET NO. 00-I-236

DECISION AND ORDER

THOMAS M. BOYKOFF, COMMISSIONER:

This case comes before the Commission on stipulated facts and exhibits of the parties.

Petitioner Jeanie Lass represents herself. Del J. Chmielewski, CPA, represents petitioner David J. Lass, Sr. Attorney Neal E. Schmidt represents respondent Wisconsin Department of Revenue ("Department").

Based on the submissions of the parties and the record in this case, the Commission hereby finds, concludes, and orders as follows:

FINDINGS OF FACT

Stipulated Facts

The Commission makes the following Findings of Fact based upon the parties' stipulated facts, omitting references to exhibits and making non-substantive changes for consistency and form:

1. Under date of March 27, 2000, the Department issued an assessment to each petitioner covering income tax years 1995 through 1998.⁽¹⁾ Mr. Lass' assessment was for $3,384.61, including tax and interest. Ms. Lass' assessment was for $716.34, including tax, interest, and fees.

2. Each petitioner filed a timely petition for redetermination with the Department, Mr. Lass' petition being dated May 22, 2000 and Ms. Lass' petition being undated but received by the Department on April 10, 2000.

3. Under the dates of September 20 and October 9, 2000, respectively, the Department denied Ms. Lass and Mr. Lass' petitions for redetermination. Both petitioners then filed timely petitions for review with the Commission.

4. Petitioners were divorced from each other in a Jefferson County Circuit Court Judgment of Divorce dated January 27, 1989. One provision in the judgment was that, along with regular maintenance payments, "additional maintenance" in the form of a monthly wage assignment was imposed on Mr. Lass for continued health insurance coverage of Ms. Lass.

5. A December 18, 1992 "Stipulated Addition to Amended Post Judgment Orders" continued Mr. Lass' obligation to pay for Ms. Lass' health insurance coverage.

6. In a May 12, 1993 "Findings of Fact and Order", the Court again restated Mr. Lass' obligation to pay Ms. Lass' health insurance premiums.

7. A July 1, 1994 "Stipulation and Order" directed Attorney Gretchen Uber, counsel for Mr. Lass, to establish a new trust fund ("New Trust Fund") for Ms. Lass' medical insurance and expenses.

8. The funds in the New Trust Fund were applied to pay Ms. Lass' medical expenses.⁽²⁾

CONCLUSION OF LAW

The payments at issue were alimony or separate maintenance under IRC § 71 and, therefore, taxable to Ms. Lass and deductible by Mr. Lass.

OPINION

For the years under review, 1995 through 1998, the Wisconsin Statutes adopt many substantive provisions of the federal Internal Revenue Code ("IRC"). See, Wis. Stat. § 71.01(6)(j), (k), (L), and (m).

Among the IRC provisions adopted for Wisconsin income taxation are § 61 (titled "Gross Income Defined"), § 71 (titled "Alimony and Separate Maintenance Payments"), and § 215 (titled "Alimony, Etc., Payments").

IRC § 61(a) provides that "gross income means all income from whatever source derived, including . . ." (8) "Alimony and separate maintenance payments."

IRC § 71(b)(1)(intro.) and (A) define "alimony or separate maintenance payments" as "any payment in cash if(A) such payment is received by (or on behalf of)a spouse under a divorce . . . instrument." (Emphasis added.) IRC § 71(a), like § 61(a)(8), provides that gross income includes amounts received as alimony or separate maintenance payments.

IRC § 215(a) provides, in part, " . . . there shall be allowed as a deduction an amount equal to the alimony or separate maintenance payments paid . . . ."

Applying the above laws, Mr. Lass made payments "on behalf of" Ms. Lass when he paid amounts for her medical insurance and medical expenses to the Trust Account and, later, to the New Trust Fund. These payments must be included in Ms. Lass' gross income and may be deducted by Mr. Lass from his income.

ORDER

1. The Department's action on the petition for redetermination of petitioner Jeanie Lass is affirmed.

2. The Department's action on the petition for redetermination of petitioner David J. Lass, Sr., is reversed.

Dated at Madison, Wisconsin, this 12th day of September, 2001.

WISCONSIN TAX APPEALS COMMISSION

___________________________________________

Don M. Millis, Acting Chairperson

___________________________________________

Thomas M. Boykoff, Commissioner

ATTACHMENT: "NOTICE OF APPEAL INFORMATION"

¹ Unless otherwise specified, these facts relate to the period under review.

² The stipulation does not specify how the funds in the New Trust Fund were applied. However, correspondence in the record between petitioners and the Department, as well as the parties' briefs, indicate that the moneys Mr. Lass paid to the New Trust Fund were for the health insurance and medical expenses of Ms. Lass.