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Section 71(a)(1) sets forth the requirements for inclusion in
gross income of payments received pursuant to a decree of divorce
or separate maintenance. In sum, the payments are includable in
income if: (1) The payments are periodic; (2) the payments arise
because of a marital or family relationship; (3) the payments are
made pursuant to a decree of divorce or separate maintenance or
pursuant to a written instrument incident thereto; and (4) the
payor is under a legal obligation to make the payments.
With respect to the instant case, the requirements that
payments be made pursuant to a decree of divorce and that the payor
be under a legal obligation to make the payments are not in issue.
The divorce decree of the Duval County Circuit Court, which
incorporated the dissolution stipulation of petitioner and Dr.
Ibach, satisfies these requirements. Nor is any problem presented
regarding the classification of the payments as periodic. Under
the general rules of section 71(c)(1), installment payments
discharging a principal sum obligation, as opposed to continuing
payments of an indefinite duration, are not treated as periodic
payments. See also sec. 1.71-1(d)(1), Income Tax Regs. Section
71(c)(2) provides a statutory exception to the general rule of
section 71(c)(1). Subject to a percentage limitation,5 section
5 The limitation of sec. 71(c)(2) is that "the
installment payments shall be treated as periodic payments for
purposes of subsection (a), but (in the case of any one taxable
year of the wife) only to the extent of 10 percent of the
principal sum."
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Last modified: May 25, 2011