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Petitioner argues that she properly excluded the payments in
issue from her gross income because they were intended by the
parties to be a property settlement and not alimony. Prior to
1985, payments were characterized as alimony or as property
settlement by considering all of the surrounding facts and
circumstances. See Beard v. Commissioner, 77 T.C. 1275, 1284
(1981). During 1984, Congress enacted the Deficit Reduction Act
of 1984 (DEFRA), Pub. L. 98-369, sec. 422, 99 Stat. 494, 795,
effective for divorce and separation agreements entered into
after December 31, 1984. The House Committee on Ways and Means,
in its report on H.R. 4170, 98th Cong. 1st Sess., explained the
reason for the enactment of DEFRA section 422 as follows:
The committee believes that the present law
definition of alimony is not sufficiently objective.
* * * The committee believes that a uniform Federal
standard should be set forth to determine what
constitutes alimony for Federal tax purposes. This
will make it easier for the Internal Revenue Service,
the parties to a divorce, and the courts to apply the
rules to the facts in any particular case and should
lead to less litigation. The committee bill attempts
to define alimony in a way that would conform to
general notions of what type of payments constitute
alimony as distinguished from property settlements
* * * .
H. Rept. 98-432 (Part 2), at 1495 (1984).
The settlement agreement in the instant case was entered
into after December 31, 1984. Consequently, the appropriate
inquiry is not whether the payments made pursuant to the
settlement agreement were alimony or property settlement based on
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