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separation instrument as including a decree of divorce or a
written separation agreement.
There is no question but that the Separation Agreement is
incident to the divorce between petitioner and Dr. Capps. We
note that the Separation Agreement was referred to in their
divorce decree. The Separation Agreement qualifies as a
separation agreement within the meaning of section 71(b)(2). The
transfer of each payment was related to the cessation of the
marriage between petitioner and Dr. Capps, occurred less than 6
years after the cessation of that marriage, and was made to
effect the division of marital property between petitioner and
Dr. Capps. Therefore, section 1041(a) applies to part or all of
each $1,750 monthly payment from Dr. Capps to petitioner.
Section 453B(a) provides that if an installment obligation
is satisfied for less than face value, distributed, transmitted,
sold, or otherwise disposed of, gain or loss shall result.
Section 453B(a) does not apply to transfers of installment
obligations between spouses incident to a divorce as described in
section 1041(a). Sec. 453B(g)(1). In that case, the same tax
treatment with respect to the transferred installment obligation
applies to the transferee as would have applied to the
transferor. Sec. 453B(g)(2). Respondent argues that petitioner
became a transferee with respect to the portion of the Note
represented by the $1,750 monthly payments and that she should be
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Last modified: May 25, 2011