Carol A. Johanson and Alfred F. Melzig, Jr. - Page 9

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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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