-10- 71(c)(2) permits installment payments of a principal sum obligation to be treated as periodic payments if the period for payments extends more than 10 years beyond the date of the decree or agreement. See Warnack v. Commissioner, 71 T.C. 541 (1979). That is the case herein.6 All other requirements of section 71(a)(1) having been met, the decisive question is whether the payments were made "because of the marital or family relationship". For the reasons set forth below, we believe they were. The statutory phrase "payments * * * [imposed] because of the marital or family relationship" requires that the payments be in the nature of support rather than property settlement. Beard v. Commissioner, 77 T.C. 1275, 1283 (1981); Martin v. Commissioner, 73 T.C. 255, 265 n.2 (1979); sec. 1.71-1(b)(4), Income Tax Regs. Payments that are part of a property settlement are capital in nature and, therefore, are not deemed alimony subject to the provisions of section 71. Gammill v. Commissioner, 73 T.C. 921 (1980), affd. 710 F.2d 607 (10th Cir. 1982). In evaluating whether a particular payment constitutes support or property settlement, the labels assigned to the payments are not determinative. Id.; Hesse v. Commissioner, 60 T.C. 685, 691 (1974), affd. without published opinion 511 F.2d 1393 (3d Cir. 1975). In deciding the character of an award in a divorce or separation 6 The principal sum of the payments petitioner received was $500,000. Petitioner was therefore treated by respondent as if she had received alimony of no more than $50,000, or 10 percent of the principal sum, during each of the years at issue.Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Next
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