Maria Antoinette Walton Mitchell and Larry G. Mitchell - Page 11

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          petitioner’s allotment is calculated based on Mr. Walton’s                  
          military retired pay after income taxes are withheld (not on his            
          gross military retired pay).  This calculation, however, does not           
          mean that petitioner’s allotment is not taxable, nor does it mean           
          that petitioner’s allotment is exempt from tax liability because            
          taxes were already withheld on Mr. Walton’s allotment.12                    
          Moreover, there is nothing in the QDRO stating that petitioner’s            
          interest in Mr. Walton’s military retired pay is not taxable.  As           
          a matter of law, we are aware of no provisions in either the                
          Internal Revenue Code or the USFSPA in effect at the time of the            
          final judgment and the QDRO excluding petitioner’s allotment from           
          gross income.                                                               
               Petitioners also contend that the superior court judge                 
          purportedly stated that petitioner’s portion would not be                   
          taxable.  In this regard, petitioner testified at trial that the            
          superior court judge stated that “their code was all wives were             
          paid and they did not have to pay taxes on the money.”13                    
          Although petitioners did not introduce into evidence a transcript           
          of the divorce proceedings to corroborate such purported                    

               12  Taxes withheld on Mr. Walton’s allotment would                     
          presumably have been credited to Mr. Walton’s account.                      
               13  At trial, petitioner repeatedly referred to a purported            
          “penal code” that made her interest nontaxable.  Although it is             
          unclear what purported penal code petitioner relies upon, we are            
          not aware of any such penal code.  Rather, it is the Internal               
          Revenue Code that governs the taxation of the payments at issue.            
          See sec. 61(a)(11).                                                         





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