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We must decide whether payments from John to Carol, in 2002,
totaling $63,000, were alimony, a property settlement
installment, or part of a guaranteed stream of payments for a
fixed term to Carol or her estate. In the Agreement, the
payments were specifically denominated “spousal support”.
Alimony or separate maintenance payments are taxable to the
recipient (section 71(a)) and deductible by the payor (section
215(a)), so the proper characterization of the payments is very
significant. The correct tax treatment of any other type of
payments, periodic or otherwise, is not at issue here.
Alimony or separate maintenance payments are defined in
section 71(b), which provides:
SEC. 71. ALIMONY AND SEPARATE MAINTENANCE PAYMENTS.
(a) General Rule. * * *
(b) Alimony or Separate Maintenance Payments
Defined.--For purposes of this section--
(1) In general.--The term ‘alimony or
separate maintenance payment’ means any
payment in cash if--
(A) such payment is received by
(or on behalf of) a spouse under a
divorce or separation instrument,
(B) the divorce or separation
instrument does not designate such
payment as a payment which is not
includible in gross income under this
section and not allowable as a deduction
under section 215,
(C) in the case of an individual
legally separated from his spouse under a
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