Decker v. United States

Malcolm Decker and Ms. Decker (plaintiff) entered into a separation agreement in 1969, which provided that Malcolm make support payments to Ms. Decker. Malcolm failed to make the promised payments, leading to several rounds of litigation. In 1985, the Deckers entered into a settlement whereby all maintenance claims would be discharged by the transfer of a piece of real property located in Connecticut from Malcolm to Ms. Decker with the understanding that Ms. Decker sell the property for at least $100,000. Malcolm filed a deed in December 1985 conveying the property to Ms. Decker. Ms. Decker sold the property in February 1986 with net proceeds of $113,000. Section 71 of the Internal Revenue Code (code), which governed the treatment of alimony payments, had been amended in 1984. Ms. Decker did not report the $113,000 as alimony income. The Internal Revenue Service (IRS) determined that Ms. Decker should have included the proceeds from the sale as alimony income on her 1985 taxes and assessed deficiencies for underpayment and interest. Ms. Decker paid the deficiencies and filed a claim for a refund. In her claim, Ms. Decker did not specify whether she believed that the pre-1984 version (old § 71) of § 71 or the post-1984 version of § 71 (new § 71) governed the matter. The IRS did not respond to Ms. Decker’s refund claim, and Ms. Decker sued the government (defendant) for the amount in district court. In an opposition filing to a motion filed by the government, Ms. Decker argued for the first time that new § 71 applied. The government argued that Ms. Decker was barred from raising the issue of new § 71’s applicability because she did not raise it in her refund claim.