DeAnna S. Dotson and Robert L. Dotson - Page 6

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               Respondent argues that the military retirement payments are            
          taxable to petitioner because, pursuant to the terms of the                 
          separation agreement as incorporated in the divorce decree, she             
          holds an ownership interest in them.  For the reasons explained             
          below, we disagree.                                                         
               Whereas Federal law controls the taxation of the military              
          retirement payments, State law controls in deciding what property           
          interests were created.  See United States v. Mitchell, 403 U.S.            
          190, 196 (1971).  Under applicable Colorado law as existent when            
          petitioner’s divorce decree was entered, future retired pay to be           
          received under a military retirement pension did not constitute             
          “property” subject to division in a divorce proceeding.  Ellis v.           
          Ellis, 552 P.2d 506 (Colo. 1976).3                                          
               Respondent seems to acknowledge that the holding in Ellis v.           
          Ellis, supra, prevented the divorce court from exercising its               
          equitable powers to divide Mr. Jefferies’ future retired military           
          pay.  Respondent suggests, however, that through their separation           
          agreement petitioner and Mr. Jefferies accomplished what the                
          divorce court lacked authority to do on its own; namely, give               

               3 In 1988, the Colorado Supreme Court overturned Ellis v.              
          Ellis, 552 P.2d 506 (Colo. 1976), because of changes in State and           
          Federal law, notably the enactment of the Uniformed Services                
          Former Spouses’ Protection Act (USFSPA), 10 U.S.C. sec. 1408                
          (1982).  In re Marriage of Gallo, 752 P.2d 47 (Colo. 1988).  The            
          holding in Gallo was prospective in nature only, see In re                  
          Marriage of Booker, 833 P.2d 734, 740 (Colo. 1992), and                     
          consequently does not affect our analysis.                                  

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