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On September 3, 2002, respondent issued a notice of
deficiency to petitioner determining a $5,267 deficiency in his
income tax for the 2000 taxable year. In the notice, respondent
disallowed the $37,000 deduction for alimony claimed by
petitioner on the ground that “Lump-sum cash paid as a property
settlement is not deductible as alimony.”
Discussion2
Generally, a property settlement incident to a divorce is
not a taxable event and does not give rise to a deduction. Sec.
1041; Estate of Goldman v. Commissioner, 112 T.C. 317, 322
(1999), affd. without published opinion sub nom. Schutter v.
Commissioner, 242 F.3d 390 (10th Cir. 2000). However, section
215(a) allows a deduction for the payment of alimony during a
taxable year.
Section 215(b) defines alimony as payment which is
includable in the gross income of the recipient under section 71.
Section 71(b) provides a four-step inquiry for determining
whether a cash payment is alimony. Section 71(b) provides:
SEC. 71(b). Alimony or Separate Maintenance Payments
Defined.–-For purposes of this section--
(1) In general.--The term “alimony or separate
maintenance payment” means any payment in cash if--
(A) such payment is received by (or on
2 We decide the issue in this case without regard to the
burden of proof. See sec. 7491; Rule 142(a); Higbee v.
Commissioner, 116 T.C. 438 (2001).
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