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obligation of John under the Agreement, which, as previously
stated, was incorporated by reference into the Superior Court’s
Judgment of Dissolution, will terminate under the California
statute if Carol dies during the term of his obligation.
Payments which are a property settlement are not taxable to
the recipient under section 71. Hoover v. Commissioner, T.C.
Memo. 1995-183, affd. 102 F.3d 842 (6th Cir. 1996). Petitioner
seeks to convince us that “this stream of cash payments, totaling
nearly $900,000, payable in 181 monthly installments, was for
* * * [Carol’s] 25 percent ownership interest in * * * Sea
Supreme”.
There is nothing in the Agreement that remotely connects the
$5,250 monthly spousal support payments to Carol to her interest
in Sea Supreme. The Agreement recites that John estimated the
value of Sea Supreme to be “in the vicinity of $1.2 million”, and
that “Carol agrees with this valuation”. Since, previous to the
divorce, Carol owned 25 percent of Sea Supreme, the value of her
interest would be in the neighborhood of $300,000, a far cry from
the total support payments Carol expected to receive under the
Agreement.
The Agreement recites, under “EQUALIZATION PROVISION”, that
“the Parties agree that the terms of this agreement constitute a
fair and equal division of the assets and debts and that neither
party owes an equalization payment to the other”. The Agreement
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Last modified: May 25, 2011