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Mr. Ray and Ms. Bader were married on July 23, 1988. They
had three children from the marriage. They separated on July 17,
2001, after which the children resided with Ms. Bader.
During their separation, Mr. Ray paid to Ms. Bader
approximately $6,000 to $7,000 per month with the understanding
that the funds would be used for the financial support of Ms.
Bader and the three minor children. Ms. Bader acknowledged that
Mr. Ray paid “what he felt was fair”, and the amount of the
monthly payments varied accordingly. Mr. Ray conceded that any
support payments made prior to March 13, 2002, were voluntary and
do not constitute alimony for Federal income tax purposes.
State Court Proceedings
On July 25, 2001, Ms. Bader filed an Original Petition for
Divorce in the District Court of Harris County, Texas (State
court).
The State court, pursuant to an agreed order submitted by the
parties’ divorce counsel, appointed an arbitrator to resolve all
pending issues relating to the dissolution of the marriage and the
children. An arbitration was scheduled for March 13, 2002 (March
13 arbitration). A week prior to arbitration, Mr. Ray’s divorce
counsel submitted to the arbitrator a Mediation Memorandum to
brief her on the background and the issues to be resolved.
On the arbitration date, Mr. Ray and Ms. Bader reached an
agreement on all outstanding issues, and the terms of the divorce
were recited into the record by their respective divorce counsel.
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