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provisions, neither party cites any authority for the underlying
proposition that military retirement payments are subject to
section 402(a). That section provides:
SEC. 402(a). Taxability of Beneficiary of Exempt
Trust.--Except as otherwise provided in this section, any
amount actually distributed to any distributee by any
employees’ trust described in section 401(a) which is exempt
from tax under section 501(a) shall be taxable to the
distributee, in the taxable year of the distributee in which
distributed, under section 72 (relating to annuities).
The fund used for the payment of military retirement benefits,
known as the Department of Defense Military Retirement Fund, is
one which has been established “on the books” of the Department
of the Treasury. 10 U.S.C. sec. 1461(a) (2000). Thus, the
military retirement pension payments at issue are not
distributions from a section 401(a) qualified trust, and section
402(a) is not applicable.2
It is clear that gross income generally includes income from
pensions, including military retirement benefits. Sec.
61(a)(11); secs. 1.61-2(a)(1) and 1.61-11(a), Income Tax Regs.
However, income from property is taxed to the owner of the
1(...continued)
sec. 402(e)(1)(A).
2Compare the Department of Defense Military Retirement Fund
with another Federal employee retirement fund, the Thrift Savings
Fund. The latter fund, created pursuant to 5 U.S.C. sec. 8437
(2000), is also a fund established within the Treasury. Unlike
the military fund, however, this fund is treated as a sec. 401(a)
qualified trust for purposes of the Internal Revenue Code. Sec.
7701(j); 5 U.S.C. sec. 8440 (2000).
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Last modified: May 25, 2011