Man deducts alimony in annulment.

* Before the end of the six-month waiting period required by the divorce decree in his first marriage, Fred J. Pettid married for the second time. Ten years later, he attempted to void the marriage to his second wife. She countered his suit for annulment by charging him with fraud, breach of promise and intentional infliction of emotional distress.

Eventually, the Pettids, who had married in the state of Nebraska, settled the suit and the marriage was annulled. He agreed to give her various properties and to pay her $4,000 per month for 84 months.

When Pettid deducted the payments as alimony on his individual tax return, the IRS disallowed the deductions, saying the payments were nondeductible damages. In its ruling, the Tax Court held for Pettid, saying a man could deduct alimony paid to a woman to whom he was never legally married. The court's ruling was influenced by Nebraska law, which made little distinction between divorces and annulments (Fred J. Pettid v. Commissioner, TC Memo 1999-126).

--Michael Lynch, CPA, Esq., professor of tax accounting at Bryant College, Smithfield, Rhode Island.