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During the fall of 1992, petitioner received a “Notice to
Former Spouse” from DFAS (DFAS notice). That notice stated in
pertinent part:
The Internal Revenue Service has recently ruled
that Defense Finance and Accounting Service must with-
hold federal income tax on amounts received as a divi-
sion of retired pay. A Form 1099R (Distributions From
Pensions, Annuities, Retirement or Profit Sharing
Plans, IRA’s Insurance Contracts, etc.) will be issued.
It will reflect the former spouse’s gross entitlement
and federal income tax withheld for payments received
by former spouses as a division of property for the
calendar year. * * * No change is required in the
computation of the amount due the former spouse, taxes
are still allowed as a deduction before dividing the
retired pay. Amounts reflected on the Form 1099-R
issued to the former spouse will be excluded from the
Form 1099-R issued to the retiree.
Tentative plans call for first issuing Form 1099-R
and withholding federal income taxes on property pay-
ments paid to former spouses in 1993. * * * [Reproduced
Literally.]
Before DFAS implemented the plans that it announced in the
DFAS notice, inter alia, to withhold Federal income tax (tax) on
amounts to which a former spouse is entitled “as a division of
retired pay”, neither DFAS nor AFAC withheld tax from the monthly
payments that each made to petitioner pursuant to petitioner’s
divorce decree and petitioner’s property settlement request.
Around early 1993, DFAS implemented certain of the plans
that it announced in the DFAS notice and, inter alia, began
withholding tax on the monthly amounts of pre-amendment dispos-
able retired pay to which petitioner is entitled under peti-
tioner’s divorce decree and petitioner’s property settlement
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Last modified: November 10, 2007