Catherine H. Poole, f.k.a. Catherine H. Dames - Page 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.            

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