Gay M. Pfister - Page 4

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                    (11) Pensions * * *.                                              
          Petitioner does not argue, nor would we agree, that military                
          retirement pay is not a pension within the meaning of section               
          61(a)(11).  Weir v. Commissioner, T.C. Memo. 2001-184; see also             
          Eatinger v. Commissioner, T.C. Memo. 1990-310; sec. 1.61-11,                
          Income Tax Regs.  Additionally, we note:  “It is axiomatic in               
          Federal tax law that income is taxable to the legal owner of the            
          * * * property producing the income”.  Miles Prod. Co. v.                   
          Commissioner, T.C. Memo. 1969-274, affd. 457 F.2d 1150 (5th Cir.            
          1972); see also Helvering v. Clifford, 309 U.S. 331 (1940).  The            
          pension payments are gross income to the party who owns the right           
          to those payments pursuant to the division of property in a                 
          divorce.  See, e.g., Weir v. Commissioner, supra; Eatinger v.               
          Commissioner, supra; Lowe v. Commissioner, T.C. Memo. 1981-350.             
               In McCarty v. McCarty, 453 U.S. 210 (1981), the Supreme                
          Court held that State courts lacked the power to divide military            
          retirement benefits pursuant to divorce.3  The Court found that             

               3  McCarty v. McCarty, 453 U.S. 210 (1981), dealt with the             
          State of California and its community property regime.  The issue           
          before the Court was whether the retiree’s military retirement              
          pay constituted property in which the retiree’s former spouse               
          could claim an interest.  The case at hand deals with the laws of           
          the Commonwealth of Virginia, a common law State, where there is            
          equitable division of the former husband’s military retirement              
          pay.  This distinction is of no consequence to our decision in              
          this case as the McCarty case and the applicable Federal                    
          statutes, infra, apply both to community property jurisdictions             
          and to common law jurisdictions such as Virginia whose laws                 

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