John Michael Dunkin - Page 6

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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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