Before KERNER, DUFFY and FINNEGAN, Circuit Judges.
This petition for review of a decision of the Tax Court of the United States, involves alleged deficiencies in the income taxes of petitioner, Harry Blum, for the years 1943 and 1944. Petitioner's taxable income for the year 1942 is also involved because the deficiency for 1943 was computed on the basis of 1942 and 1943 income under the Current Tax Payment Act of 1943, 26 U.S.C.A. Int. Rev. Acts, page 385 et seq.
The Tax Court on December 21, 1948 confirmed the deficiencies for the respective years in the amounts of $8,562.78 and $7,646.74. Petition for review was filed on January 26, 1949 under the provisions of Section 1141(a) of the Internal Revenue Code, 26 U.S.C.A. § 1141(a).
The controversy originates in claims for credits made by Harry Blum because of payments made to his former wife for her support and maintenance. Petitioner filed suit for divorce against Tillie Blum, his wife, in the Superior Court of Cook County, Illinois on February 29, 1932. She appeared, filed an answer, and a cross bill for separate maintenance. The cause remained undisposed of in the Superior Court until 1935.
On the 27th day of February in that year the petitioner and his wife, Tillie Blum, executed a contract preparatory to and in contemplation of a settlement of their marital difficulties.
The agreement recites that the wife, Tillie Blum, on said 27th day of February A.D. 1935, filed an amendment to her cross complaint for separate maintenance in and by which she prayed for a divorce from Harry Blum on the same grounds she had already set forth as a basis for her prayer for separate maintenance. The agreement provides that it shall become effective only when and if the Superior Court of Cook County, on consideration of the cross bill as amended, and the evidence adduced in support thereof, shall enter a decree severing the bonds of matrimony between said parties. In that event the husband undertakes and promises to pay to Tillie Blum the sum of One Hundred and Twenty Thousand ($120,000) Dollars, in the following manner: Seventy-Five Hundred ($7500) Dollars on or before March 1, 1936, and a like sum of Seventy-Five Hundred ($7500) Dollars on or before the first day of March in each and every year thereafter for the next succeeding eight (8) years with a final payment of Fifty-Two Thousand Five Hundred ($52,500) Dollars on or before March 1, 1945. Under the terms of the agreement, petitioner had the right to make prepayments in multiples of Twenty-Five Hundred ($2500) Dollars at any time thereafter in addition to all installments due under the instrument. He also agreed to pay Tillie Blum interest at 5% per annum on the balance of the principal sum remaining unpaid from time to time. The interest was payable in equal monthly installments beginning April 1, 1935.
On the 28th day of February, A.D. 1935, the day after the agreement was executed, the cause came on to be heard in the Superior Court of Cook County. It is admitted that at the conclusion of the hearing on February 28, the presiding judge signed a decree dissolving the marital bonds between petitioner and Tillie Blum.The decree was not enrolled until March 2, 1935, on which date it was stamped "entered March 2, 1935" by the clerk of the Court.
The decree as entered on February 28, 1935, and enrolled on March 2, 1935, provides as follows:
6. "That the plaintiff and the defendant have, without any collusion or agreement as to the divorce, settled and adjusted their respective property rights and all the demands of the defendant to alimony and support from the plaintiff; that the said plaintiff and the said defendant have exhibited to the court a property settlement contract dated the 27th day of February, A.D. 1935, which by reference is made a part of this decree, with the same force and effect as though the same was fully incorporated herein and made a part hereof; and the court finds that the said property settlement contract is just and equitable and was entered into in good faith, between the parties therein mentioned, and that the said property settlement contract was not executed for the purpose of obtaining a divorce or as a collusion to obtain a divorce."
4. "That the plaintiff, Harry Blum, and the defendant, Tillie Blum, perform and carry out all the terms, provisions, conditions and obligations set forth in that certain property settlement contract entered into between them on the 27th day of February, A.D. 1935, and hereinabove referred to in Finding 6, and which property settlement contract, by reference thereto, is made a part of this decree, with the same force and effect as if fully set out herein; and the court reserves jurisdiction only for the purpose of enforcing the terms, conditions, provisions and obligations contained in said contract, upon application of either of the parties hereto; and for all other purposes this decree shall be and is hereby made final and no further jurisdiction is reserved."
The Internal Revenue Code of the United ...