- 8 - because the divorce decree, in effect, so states. Although petitioner’s ownership interest in the townhouse was properly a matter before the divorce court, her 1994 Federal income tax liability was not. State law determines the property ownership of a taxpayer; Federal law controls the Federal income tax consequences of transactions involving the property. See Aquilino v. United States, 363 U.S. 509, 512-513 (1960). The divorce court did not adjust petitioner’s preexisting ownership interest in the townhouse. Had it done so, the Federal income tax consequences resulting from the sale of the townhouse could have been affected. See Urbauer v. Commissioner, T.C. Memo. 1997-227. The relevant provisions in the divorce decree relied upon by petitioner in support of her argument might create a remedy for her as against her former spouse, but because those provisions did not adjust her preexisting ownership interest in the townhouse, they are not controlling here. See Neeman v. Commissioner, 13 T.C. 397, 399 (1949), affd. 200 F.2d 560 (2d Cir. 1952); Urbauer v. Commissioner, supra. Accordingly, petitioner’s share of the gain realized from the sale of the townhouse cannot be excluded from her income because of certain provisions contained in the divorce decree. Petitioner next argues that she should not have to include any gain from the sale of the townhouse in her 1994 income because, as of the close of that year, she had not received anyPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 Next
Last modified: May 25, 2011