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approximately equal division of the community was made, with
petitioner giving up her interest in ex-husband’s military
retirement pension (the pension) and receiving in lieu thereof
“cash settlement payments” (the settlement payments). Relying on
Balding v. Commissioner, 98 T.C. 368 (1992), discussed infra,
petitioner argues that such exchange was nontaxable. Without
further discussion, petitioner concludes that the payments were
not items of gross income.
D. Discussion
1. The Agreement
In pertinent part, the agreement provides: “The Husband
agrees to pay to the Wife her community property interest in his
military retirement pension upon receipt thereof.” (Emphasis
added.) In pertinent part, the addendum provides: “This waiver
in no way waives the Petitioner Wife’s rights regarding the
military retirement pension in which she has a vested community
interest”. (Emphasis added.) We have no doubt that, at the time
petitioner and ex-husband executed the agreement and addendum,
they assumed the pension to be community property. We also have
no doubt that petitioner understood that the pension was not an
asset that could be liquidated, so that she would immediately
receive a portion of the proceeds. While it is true that the
agreement contemplates that ex-husband would collect the pension
payments, petitioner has failed to convince us that she and
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