- 6 -
Discussion8
It is a well-settled principle that State law determines the
nature of the property interest created while Federal law governs
the Federal taxation of that property interest. United States v.
Mitchell, 403 U.S. 190 (1971). Furthermore, the tax liability
for income from property attaches to the owner of such property.
Eatinger v. Commissioner, T.C. Memo. 1990-310 (citing Helvering
v. Clifford, 309 U.S. 331, 334 (1940); Blair v. Commissioner, 300
U.S. 5, 12 (1937); Poe v. Seaborn, 282 U.S. 101 (1930); Lucas v.
Earl, 281 U.S. 111 (1930)).
In 1982, the Congress enacted the Uniformed Services Former
Spouses’ Protection Act (USFSPA), Pub. L. 97-252, sec. 1002, 96
Stat. 730, which added section 1408 to title 10 of the United
States Code (hereinafter 10 U.S.C. sec. 1408).9 Under 10 U.S.C.
sec. 1408(c)(1) (2000), a State court may treat disposable
military retired pay in a divorce proceeding either as property
solely of the servicemember or as property of the military
retiree and his or her spouse in accordance with the law of the
8 We decide the issue in this case without regard to the
burden of proof under sec. 7491(a) because the issue is
essentially one of law.
9 The USFSPA reversed the decision of the U.S. Supreme
Court, which held that a State court could not order a division
of nondisability military retired pay as part of a distribution
of community property in divorce proceedings. See McCarty v.
McCarty, 453 U.S. 210 (1981).
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