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Section 71 lists several requirements which must be met in
order to characterize payments made pursuant to a divorce decree
as alimony payments for purposes of Federal tax law. If the
requirements of section 71 are met, the payments are includable
in the payee spouse’s income under section 71, and are deductible
by the payor spouse under section 215. One such requirement is
that the payments be made in discharge of a legal obligation
imposed “because of the marital or family relationship.” Sec.
71(a)(1). This requirement has been interpreted to require that
the payments be in the nature of support, rather than a property
settlement. Beard v. Commissioner, 77 T.C. 1275, 1283 (1981).
Payments which are part of a property settlement are capital in
nature and, therefore, are not subject to the provisions of
section 71. Gammill v. Commissioner, 73 T.C. 921, 926 (1980),
affd. 710 F.2d 607 (10th Cir. 1982).
The determination of whether payments are in the nature of
support or part of a property settlement does not turn on labels
assigned by the court or the parties; rather, the issue is a
factual one and requires an examination of all the facts and
circumstances. Beard v. Commissioner, supra at 1283-1284.
5(...continued)
judgment in this case was modified after 1984. However, a post-
1984 modification of a pre-1985 judgment does not cause the DEFRA
changes to apply unless the modification expressly so provides.
Id. at sec. 422(e)(2); Libman v. Commissioner, T.C. Memo. 1990-
629. Nothing in the record indicates such a provision existed in
this case.
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