On appeal from the Tax Court of New Jersey, Docket No. 1074-07.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Skillman and Grall.
This is an appeal from a final judgment of the Tax Court, which upheld a deficiency notice issued by defendant, Director, Division of Taxation, imposing an additional liability upon plaintiff for gross income tax plus a late payment penalty and interest on alimony payments plaintiff received during 2004.
Plaintiff was divorced in April 2004. The property settlement agreement incorporated in the judgment of divorce, dated April 11, 2004, provides for payment to plaintiff of $100,000 per year of alimony for a period of ten years. The agreement provides that this limited duration alimony will terminate upon the death of either party.
The agreement also provides for payment to plaintiff of what the parties characterize as "additional alimony," which consists of 34% of the money plaintiff's former husband receives from Acosta, Inc., under a "master brokerage agreement" he and his partner entered into in connection with the sale of their business to Acosta. The property settlement agreement sets forth the following schedule for monthly payments of this additional alimony:
a. April 2004-December 2004 $10,649.72
b. January 2005 - December 2005 $9,898.47
c. January 2006 - March 2011 $10,443.89 The agreement also provides that this additional alimony "shall be taxable to the Wife and deductible to the Husband on all future independently filed federal and state income taX returns[,]" and that "the payments shall not terminate upon the remarriage of the Wife or death of either party, nor her cohabitation with an unrelated male."
Plaintiff failed to report the payments she received from her former husband under this part of the property settlement agreement as "alimony" on her 2004 New Jersey Gross Income Tax return. On March 17, 2006, the Division of Taxation sent plaintiff a deficiency notice regarding this alleged underpayment of taxes.
Plaintiff disputed her liability for the payment of income taxes on the "additional alimony" she received under the property settlement agreement with her former husband, and on November 20, 2006, she participated in an informal administrative conference with the Division of Taxation. However, the Division rejected plaintiff's arguments regarding her tax liability for these payments, and on December 13, 2006, the Division issued a final deficiency notice to plaintiff.
Plaintiff brought this action in the Tax Court challenging the Division's determination. The Tax Court denied plaintiff's motion for summary judgment and subsequently granted defendant's motion for summary judgment.*fn1
The Division of Taxation's determination that plaintiff is required to pay New Jersey gross income taxes on the additional alimony she receives under the property settlement agreement with her former husband was based on N.J.S.A. 54A:5-1(n), which provides that a taxpayer must pay income tax on "alimony and separate maintenance payments to the extent that such payments are required to be made under ...