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to Ms. Parker during 1992, 1993, and 1994. Petitioner claims these
payments constitute alimony; respondent claims these payments
represent a division of marital property. The tax consequences to
both the payor and recipient vary significantly depending upon the
characterization of these payments.
Generally, property settlements (or transfers of property
between spouses) incident to a divorce neither are taxable events
nor give rise to deductions or recognizable income. See sec. 1041.
On the other hand, amounts received as alimony or separate
maintenance payments are taxable to the recipient (pursuant to
sections 61(a)(8) and 71(a)) and deductible by the payor (pursuant
to section 215(a)) in the year paid. For tax purposes, the phrase
"alimony or separate maintenance payments" is defined in section
71(b)(1) as any cash payment meeting the following four criteria:
(A) such payment is received by (or on
behalf of) a spouse under a divorce or
separation instrument,
(B) the divorce or separation instrument
does not designate such payment as a payment
which is not includible in gross income under
this section and not allowable as a deduction
under section 215,
(C) in the case of an individual legally
separated from his spouse under a decree of
divorce or of separate maintenance, the payee
spouse and the payor spouse are not members of
the same household at the time such payment is
made, and
(D) there is no liability to make any
such payment for any period after the death of
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