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Petitioner has received a portion of Kenneth's disposable
retired pay since their divorce. She has not included such
amounts in her gross income as reported on her Federal income tax
returns for any taxable year up to and including 1991.
As reported on his 1991 Form 1099-R, the taxable amount of
Kenneth's military retirement pension for 1991 was $22,776. The
amount withheld for Federal income tax was $2,561, so the after-
tax distribution was $20,215. On his 1991 Form 1040, U.S.
Individual Income Tax Return, filed jointly with his wife Faye,
Kenneth included in his taxable income the amount of $22,776. He
also reported as Federal income tax withheld, and credited
against his total tax, the amount of $2,561. On line 29 of the
return, Kenneth deducted as alimony paid the amount of $10,107--
50 percent of $20,215, rounded down--and identified petitioner by
Social Security number as the recipient. Petitioner did not
include the $10,107 distribution in her gross income for 1991 or
otherwise report it on her 1991 Form 1040.
OPINION
Petitioner concedes in her posttrial brief that the portion
of Kenneth's disposable retired pay she received in 1991 is
"inherently" taxable income. However, petitioner argues that
based upon the language of the Settlement Agreement and 10 U.S.C.
section 1408(a)(4) (1994), as amended and in effect during 1991,
such income is not taxable to her because she received it tax
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