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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...)
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