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negotiating marital settlements to include the unfairness of
immediately triggering income before cash is in hand and even
causing income actually paid to one spouse to be attributed to
the other.
In Balding v. Commissioner, 98 T.C. 368 (1992), we rejected
the Commissioner's reliance on the assignment of income doctrine
to conclude that the payments a former wife received in
settlement of her claim to a community property interest in her
husband's military pension were nontaxable gifts under sections
1041 and 102.
In the absence of section 1041, we would not hesitate to
uphold respondent's reliance on Jud Plumbing & Heating v.
Commissioner, 153 F.2d 681 (5th Cir. 1946), to apply the clear
reflection of income rule to require Howard Berger to use the
percentage of completion method to determine his share of the
Woodbine income as of the time of the transfer. Jud Plumbing and
Standard Paving Co. v. Commissioner, 190 F.2d 330 (10th Cir.
1951), are only a couple of examples of the numerous occasions on
which a taxpayer winding up its existence as a tax-paying entity
was required to include income in its final taxable year under
the clear reflection of income rule, even though its otherwise
proper method of accounting would not have otherwise required
inclusion in that year. See Stephens Marine, Inc. v.
Commissioner, 430 F.2d 679, 687 (9th Cir. 1970), affg. T.C. Memo.
1969-39; Idaho First Natl. Bank v. United States, 265 F.2d 6 (9th
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