Andrew Redleaf v. CIR, No. 21-2209 (8th Cir. 2022)Annotate this Case
Appellant made deferred cash payments to his ex-wife, Appellee, pursuant to a marriage termination agreement (MTA) that Appellee “waives any right to . . . permanent spousal maintenance.” At issue is whether those payments were nonetheless “spousal maintenance” payments under Minn. Stat. Section 518.552.
The Eighth Circuit concluded that the answer is clearly no and therefore affirm the decision of the United States Tax Court denying Appellant deductions under now-repealed alimony provisions of the Internal Revenue Code for $51M in cash payments he made to Appellee during his 2012 and 2013 federal income tax years.
The court concluded that that Minnesota law unambiguously establishes that the MTA was not a spousal maintenance agreement. Rather, it was a contractual division of marital property. Contractual obligations under a divorce agreement fall under the general rule that causes of action survive their personal representatives. Minn. Stat. Section 573.01. That being so, Minnesota law unambiguously provides that the payments in question were not deductible because Appellant’s liability to make the payments would survive Appellee’s death. This is consistent with the stated purpose of Section 71(b)(1)(D).