- 6 - OPINION A. Background and Contentions of the Parties The parties dispute whether petitioner is taxable on the amount he paid to his former spouse because of her community property rights in his pension. 1. Principles of California Community Property Law Relevant to This Case Under California community property law, each spouse has a one-half ownership interest in the community estate, including income earned by both spouses during their marriage. Cal. Fam. Code sec. 2550 (West 2004). A pension is deferred compensation for past employment. In re Marriage of Brown, 544 P.2d 561, 565 (Cal. 1976). Pension rights are community property, and, as part of a divorce settlement or order, those rights can be distributed either through periodic (e.g., monthly) retirement payments or by lump sum based on the present value of the future benefit.5 In re 5 Under California law, parties to a divorce may divide community property rights to pension plan benefits in different ways. First, all pension rights may be awarded to the employee spouse if the nonemployee spouse is compensated with other community property equal in value to the present value of the nonemployee’s share. In re Marriage of Gillmore, supra at 6-7; In re Marriage of Skaden, 566 P.2d 249, 253 (Cal. 1977); In re Marriage of Brown, 544 P.2d 561, 566 (Cal. 1976); Phillipson v. Bd. of Admin., 473 P.2d 765, 774-775 (Cal. 1970). Second, the employee spouse can pay the other spouse the present value of the nonemployee spouse’s share of the pension plan. In re Marriage of Gillmore, supra. Third, the employee spouse can pay the other spouse a share of the retirement payments monthly. Id. (continued...)Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
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