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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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