This article examines the recent Tax Court Memorandum decision in John DiTullio v. Commissioner of Internal Revenue, T.C. Memo. 2025-120, concerning the critical requirement under pre-Tax Cuts and Jobs Act (TCJA) law that alimony payments terminate upon the death of the payee spouse to qualify for a deduction under Section 215(a). This case highlights the necessity of explicit termination provisions, especially where state law regarding maintenance obligations is deemed ambiguous.

Factual Overview of the Case

Petitioner John DiTullio and his ex-wife, Lisa M. Lopez, were married from 2005 to 2017. Following a severe work injury in 2013, Mr. DiTullio applied for a disability pension from the New Jersey Public Employees’ Retirement System (PERS) in 2014. He selected the "Maximum Option" which provided the highest possible monthly income but excluded survivor benefits.

The Final Judgment of Divorce (FJOD) was signed on March 22, 2017. Paragraph 6 of the FJOD addressed Mr. DiTullio’s pending disability pension application, stating that if he received retroactive benefits, Ms. Lopez "shall be entitled to share in those retroactive benefits," limited to the amount calculated based on his ordinary retirement benefits. The FJOD required that a Qualified Domestic Relations Order (QDRO) be prepared, with costs shared by both parties, for Ms. Lopez to receive her share. A QDRO was never prepared or executed because Ms. Lopez did not pay her share of the fee.

In March 2020, Mr. DiTullio’s disability claim was approved, resulting in a single lump-sum retroactive pension distribution of $156,564. Subsequently, Mr. DiTullio and Ms. Lopez agreed to settle her entitlement under Paragraph 6 of the FJOD for a single lump-sum payment of $50,000. This agreement was memorialized in a Consent Order executed on June 9, 2020. The Consent Order amended Paragraph 6 of the FJOD, stating that Mr. DiTullio "shall give Lisa Lopez $50,000 of his retroactive disability benefits as full satisfaction of any entitlement [Ms. Lopez] might be owed" and stipulated that no QDRO was necessary. Concurrently with signing the order, Mr. DiTullio paid Ms. Lopez the $50,000, noting “Equitable Pension Distribution – Lump Sum” on the check. Neither the FJOD nor the Consent Order contained any reference to alimony, maintenance, or the termination of the payment obligation upon Ms. Lopez’s death.

Taxpayer’s Request for Relief and Procedural History

For his 2020 tax year, Mr. DiTullio claimed a deduction for the $50,000 payment as alimony or a separate maintenance payment under Section 215(a). The Respondent (Commissioner of Internal Revenue) issued a Notice of Deficiency, disallowing the deduction and determining a deficiency of $12,000. Although the Respondent initially determined a Section 6662(a) accuracy-related penalty, that penalty was conceded.

The sole issue for the Tax Court was whether the $50,000 payment qualified as alimony under Section 71(b)(1). Given that the petitioner did not argue or prove that the requirements of Section 7491(a) were met, the burden of proof rested with the petitioner to demonstrate entitlement to the deduction [Rule 142(a); Welch v. Helvering, 290 U.S. 111, 115 (1933); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992); and New Colonial Ice Co. v. Helvering, 292 U.S. 435, 440 (1934)].

Legal Framework for Alimony and Separate Maintenance

Section 215(a) allows the payor spouse a deduction for alimony or separate maintenance payments that are includible in the recipient spouse’s gross income under Section 71(a) [IRC § 215(b) and § 62(a)(10)].

It is important to note that Congress repealed Sections 62(a)(10), 71, and 215 for divorce or separation instruments executed after December 31, 2018, by the TCJA, Pub. L. No. 115-97, § 11051, 131 Stat. 2054, 2089–90. However, because the FJOD was executed before December 31, 2018, and the subsequent Consent Order did not expressly provide that the TCJA amendments applied, the pre-TCJA law governs this case (TCJA § 11051(c), 131 Stat. at 2090).

For a payment to constitute alimony, it must satisfy all four requirements set forth in Section 71(b)(1) [Jaffe v. Commissioner, T.C. Memo. 1999-196, 1999 WL 398130, at *4]. The statutory definition is objective, enacted to “eliminate the subjective inquiries into intent and the nature of payments” [Hoover v. Commissioner, 102 F.3d 842, 844–45 (6th Cir. 1996), aff’g T.C. Memo. 1995-183].

Specifically, Section 71(b)(1) defines alimony as any cash payment if:

(A) it is received under a divorce or separation instrument.
(B) the instrument does not designate it as non-includible/non-deductible.
(C) the spouses are not members of the same household (if legally separated).
(D) there is no liability to make any such payment for any period after the death of the payee spouse and no liability to make any substitute payments thereafter.

The parties did not dispute that the first three conditions, Section 71(b)(1)(A), (B), and (C), were satisfied. The core controversy centered on whether the payment met the fourth condition, Section 71(b)(1)(D).

The Court’s Analysis of Section 71(b)(1)(D)

The requirement under Section 71(b)(1)(D) mandates that the payor spouse must have no liability to make payments after the death of the payee spouse [Kean v. Commissioner, 407 F.3d 186, 191 (3d Cir. 2005), aff’g T.C. Memo. 2003-163].

Impact of State Law Ambiguity

The court acknowledged that if the divorce instrument is silent regarding post-death obligation, the requirement may still be satisfied if termination occurs "by operation of State law" [Stedman v. Commissioner, T.C. Memo. 2008-239, 2008 WL 4704143, at *2; Johanson v. Commissioner, 541 F.3d 973, 977 (9th Cir. 2008), aff’g T.C. Memo. 2006-105]. However, if State law is ambiguous, federal courts must read the divorce instrument and make an independent determination based on the document’s language, rather than engaging in "complex, subjective inquiries under state law" [Hoover, 102 F.3d at 846; Okerson v. Commissioner, 123 T.C. 258, 264–65 (2004)].

The court confirmed that both the FJOD and the Consent Order were silent regarding the termination of the payment obligation upon Ms. Lopez’s death. Furthermore, the court found that New Jersey State law was ambiguous as to whether the obligation to make maintenance payments terminates on the death of the payee spouse when the instrument is silent.

Petitioner argued that the FJOD’s reference to a “QDRO” incorporated the PERS regulation (N.J. Admin. Code § 17:1-1.12(c) (2009)), which states that withholdings under a matrimonial order cease upon the death of either party. The court rejected this argument, noting that the application of the PERS regulation was predicated on the parties preparing and executing a QDRO, which never occurred. Therefore, simply referring to a QDRO did not automatically incorporate the termination rule. The court also noted that while the Respondent argued the payment was an equitable distribution under New Jersey law (Kikkert v. Kikkert, 427 A.2d 76, 79–80 (N.J. Super. Ct. App. Div. 1981); Weir v. Weir, 413 A.2d 638, 640 (N.J. Super. Ct. Ch. Div. 1980)), the classification under state law does not preclude a payment from being alimony for federal tax purposes [Proctor v. Commissioner, 129 T.C. 92, 95 (2007)].

Application of Law to the Documents

Since State law was ambiguous, the court was compelled to analyze the plain text of the FJOD and the Consent Order.

Paragraph 6 of the FJOD provided that if retroactive benefits were received, Ms. Lopez "shall be entitled to share in those retroactive benefits". The Consent Order formalized the obligation, stating that "John DiTullio shall give Lisa Lopez $50,000 of his retroactive disability benefits".

The Tax Court relied heavily on its prior holding in Webb v. Commissioner, T.C. Memo. 1990-540, 60 T.C.M. (CCH) 1024, 1027, where the court held that the phrase “[t]he Husband shall pay” created a liability that would have been enforceable by the recipient spouse’s estate. The court emphasized that the statute speaks in terms of liability.

The court found the language used in the DiTullio documents—"Wife shall be entitled" in the FJOD and "John DiTullio shall give Lisa Lopez $50,000" in the Consent Order—to be sufficiently similar to the phrase analyzed in Webb [Webb, 60 T.C.M. (CCH) at 1027]. The court determined that the execution of the Consent Order made Mr. DiTullio’s obligation to pay the $50,000 "unqualified". The contractual phrase in the Consent Order that Mr. DiTullio "will provide wife with payment" further indicated a fixed liability.

The court concluded that the plain text of the agreements created a liability that would have been enforceable by Ms. Lopez’s estate had she died after executing the agreement but before the payment was made.

Conclusion

Because the court held that the petitioner’s obligation to make the $50,000 payment survived the death of his ex-wife, the payment failed to meet the requirements of Section 71(b)(1)(D). Therefore, the payment was not alimony and was not deductible under Section 215(a). The court entered the decision for the Respondent regarding the deficiency.

This outcome serves as a crucial reminder for tax professionals: under pre-TCJA law, when drafting divorce instruments involving payments intended as deductible alimony, explicit language must be included confirming that the payment liability terminates upon the death of the payee spouse. Reliance on implied state law or incorporated regulations (such as those tied to QDROs that are ultimately not executed) will likely fail to satisfy the objective test of Section 71(b)(1)(D) if the underlying state law is found to be ambiguous. The Tax Court will examine the precise contractual language of the governing instruments to determine if a liability exists that could be pursued by the payee’s estate.

Prepared with assistance from NotebookLM.