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petitioner satisfies any such exception. Accordingly, we
conclude that the $12,000 is includable in his gross income.
2. Whether Petitioners Are Entitled to an Alimony Deduction
The Federal tax consequences of a payment made incident to
divorce depend upon the characterization of such payment.
Property settlements, or equitable divisions of marital property,
generally are neither deductible from the income of the paying
spouse nor includable in the income of the receiving spouse.
Sec. 1041; Estate of Goldman v. Commissioner, 112 T.C. 317, 322
(1999), affd. without published opinion sub nom. Schutter v.
Commissioner, 242 F.3d 390 (10th Cir. 2000). On the other hand,
payments made or received as alimony generally are deductible by
the paying spouse under section 215(a) and includable in gross
income by the receiving spouse under sections 61(a)(8) and 71.
Section 215(b) provides that the paying spouse may deduct a
payment as alimony if the payment is “includible in the gross
income of the recipient under section 71.” Section 71(b)(1)
defines an alimony payment as any cash payment meeting each of
the following four criteria:
(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 decree of divorce or of
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