Gay M. Pfister - Page 3

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                    The parties further agree that effective with the                 
               August 1984 payment, the wife shall be owner of, and                   
               receive, one-half of husband’s disposable retired or                   
               retainer pay, [i.e.], during the joint lives of the parties,           
               the husband and wife shall each receive one-half of                    
               husband’s disposable retired or retainer pay, as defined in            
               the above Act, accruing to him on a monthly basis as a                 
               result of his active duty service in the United States Armed           
               Forces.  The wife shall also be named permanent and                    
               irrevocable beneficiary of husband’s Survivor’s Benefit Plan           
               in connection with said military retirement.                           
                    The parties agree that any decree of divorce hereafter            
               entered between them shall include therein all appropriate             
               language necessary to effectuate the foregoing.  The parties           
               further agree to execute any and all other documentation               
               necessary to effectuate the intent and understandings                  
               expressed in this paragraph. [Emphasis added.]                         
               Pursuant to the provisions of the decree, petitioner                   
          received $13,061 during 1997, representing her half of the                  
          disposable retirement pay.  Petitioner did not report this amount           
          on her 1997 Federal income tax return.                                      
               Respondent determined that the $13,061 was properly                    
          includable in petitioner’s gross income for 1997 as pension                 
          income under section 61(a)(11).  Petitioner maintains that the              
          payments represent a nontaxable division of property.                       
               In general, gross income is defined by section 61 as                   
               SEC. 61.  GROSS INCOME DEFINED.                                        
                    (a) General Definition.–-Except as otherwise provided             
               * * * gross income means all income from whatever source               
               derived, including * * *                                               
               ****** *                                                               

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