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Divorce

  • 789. Do transfers of property between spouses, or between former spouses incident to a divorce, result in taxable gains and losses?

    • Property transferred between spouses or former spouses incident to a divorce generally will not result in recognition of gain or loss (unless the transfer is by trust, under certain circumstances, or pursuant to an instrument in effect on or before July 18, 1984, and the spouses or former spouses have not elected otherwise).1 The property transferred will be treated as if it were acquired by gift, and the transferor’s basis in the property will be carried over to the transferee, whether the fair market value of the property is more or less than the transferor’s basis.2 Ordinarily, if the fair market value of property transferred as a gift is less than the donor’s basis, the fair market value is the donee’s basis for determining loss (see Q 692).

      This nonrecognition rule means that the transfer of property between divorcing spouses in exchange for the release of marital claims generally will not result in a gain or loss to the transferor spouse. A transfer is considered made “incident to a divorce” if it is made within one year after the date the marriage ceases, or if the transfer is related to the cessation of the marriage.3 A transfer is related to the cessation of a marriage if: (1) the transfer is pursuant to a divorce or separation instrument; and (2) the transfer occurs not more than six years after the date on which the marriage ceases.

      Transfers not meeting the above two requirements are presumed not to be related to the cessation of a marriage, but taxpayers may overcome this presumption by showing that the transfer was made to effect the division of property owned by the former spouses at the time of the cessation of the marriage. Taxpayers may show this by establishing that certain factors, such as legal impediments, hampered an earlier transfer of the property, provided that the transfer occurs promptly after any cause for the delay is resolved.4 For example, a transfer of a business interest between former spouses that did not occur within six years of their divorce was considered incident to divorce since there existed a legal dispute between the former spouses concerning the value of the property and the terms of payment.5 See also Young v. Commissioner,6 in which a transfer within four years of the divorce was considered to have been made “incident to divorce,” thus making all gain on the transaction taxable to the transferee spouse.7

      While the nonrecognition rule shields from recognition gain that would ordinarily be recognized on a sale or exchange of property, it does not shield from recognition interest income that is ordinarily recognized upon the assignment of that property to another taxpayer. Where a taxpayer transferred Series E and EE bonds to his spouse pursuant to a divorce settlement, the IRS determined that he must include as income the unrecognized interest accrued from the date of original issuance to the date of transfer. This income does not constitute gain, for purposes of the nonrecognition rule, but rather is interest income subject to the general rule that deferred, accrued interest on United States savings bonds be included as income in the year of transfer. The spouse’s basis in the bonds became the amount of the taxpayer’s basis plus the amount of deferred, accrued interest recognized by him upon transfer.8

      The Tax Court held that the nonrecognition provided in IRC Section 1041 does not apply to interest income received by a spouse through monthly installment payments made on a promissory note executed to effect a division of marital property. The court reasoned that the principal and interest portions of an installment payment constitute two distinct items that give rise to separate federal income tax consequences. Thus, the portions of the monthly installment payments that were allocated to principal under the terms of the separation agreement were not taxable to the payee spouse, but the portions allocated to interest were taxable to her.9

      Where property is transferred by trust, either between spouses, or between former spouses incident to divorce, gain will be recognized by the transferor to the extent that the sum of the liabilities assumed by the transferee plus the amount of liabilities to which the property is subject exceeds the total of the adjusted basis of all the property transferred. The transferee’s basis will be adjusted to reflect the amount of gain recognized by the transferor.10

      In addition, the transfer of an installment obligation generally will not trigger gain, and transfer of investment credit property will not result in recapture if the property continues to be used in a trade or business.11 However, where installment obligations are transferred in trust, gain will be recognized by the transferor to the extent that the obligation’s fair market value at the time of transfer exceeds its basis.12

      The transfer of an interest in an individual retirement account or an individual retirement annuity to a spouse pursuant to a divorce or separation instrument will not be considered a taxable event. The individual retirement account will be treated as owned by the transferee at the time of transfer, and the transfer does not result in taxable gain or loss.13 However, the statutory requirements for this nonrecognition treatment must be strictly observed.14 The Service privately ruled that a husband’s payment of a lump-sum in exchange for his ex-wife’s community property interest in a nonqualified deferred compensation plan payable to the husband by his employer constituted nontaxable transfers between former spouses related to the cessation of their marriage. Furthermore, the assignment of income doctrine did not cause the wife to be taxed when her former husband received payment of that deferred compensation from his employer.15

      The IRS has determined that the division of one charitable remainder unitrust (CRUT – see Q 8089) into two CRUTs to effectuate a property settlement in a divorce proceeding does not cause the original or resultant trusts to fail to qualify under IRC Section 664.16

      The Service has ruled that when nonstatutory stock options and nonqualified deferred compensation are transferred incident to divorce, the nonstatutory stock options will be taxed at the time that the receiving spouse exercises the options, and the deferred compensation will be taxed when paid (or made available) to the receiving spouse.17 In addition, the Service has ruled that the transfer of interests in nonstatutory stock options and nonqualified deferred compensation from the employee spouse to the nonemployee spouse incident to divorce does not result in a payment of wages for FICA and FUTA tax purposes. The nonstatutory stock options are subject to FICA and FUTA taxes at the time of exercise by the nonemployee spouse to the same extent as if the options had been retained and exercised by the employee spouse. The nonqualified deferred compensation also remains subject to FICA and FUTA taxes to the same extent as if the rights to the compensation had been retained by the employee spouse. To the extent FICA and FUTA taxation apply, the wages are those of the employee spouse. The employee portion of the FICA taxes is deducted from the wages as, and when, the wages are taken into account for FICA tax purposes. The employee portion of the FICA taxes is deducted from the payment to the nonemployee spouse. The revenue ruling also contains reporting requirements with respect to such transferred interests.18

      Where a husband transferred his 25 percent interest in real property to his former wife, in consideration for a settlement agreement that provided to her a credit against the $500,000 equalizing money judgment that he owed to her, and the former wife then sold her undivided 50 percent interest in the same property to an unrelated third party, the Tax Court held as follows: (1) the first transaction, which occurred within one year after the date of the divorce, took place incident to divorce and, therefore, qualified for nonrecognition treatment under IRC Section 1041(a)(2); and (2) the second transaction did not fall within IRC Section 1041(a)(2) because it was not a transfer to, or on behalf of, the taxpayer’s former husband and incident to divorce. The Tax Court reasoned that the wife’s sale of the property to the unrelated third party did not satisfy any legal obligation or liability that the taxpayer’s former husband owed to her (or anyone else). Accordingly, the Tax Court concluded that the wife would have to recognize gain resulting from the sale in her interest in the property.19

      Transfers occurring before July 19, 1984 were subject to substantially different rules, which sometimes resulted in a taxable gain to the transferor spouse. For application of the gift tax to property settlements, see Q 892.


      1 .IRC Sec. 1041. See IRS Pub. 504, Tax Information for Divorced or Separated Individuals.

      2 .IRC Sec. 1041(b).

      3 .IRC Sec. 1041(c).

      4 .Temp. Treas. Reg. §1.1041-1T(b).

      5 .Let. Rul. 9235026.

      6 .113 TC 152 (1999), aff’d, 240 F.3d 369 (4th Cir. 2001).

      7 .Let. Rul. 200233022.

      8 .Rev. Rul. 87-112, 1987-2 CB 207, as clarified by Rev. Rul. 2002-22, 2002-1 CB 849.

      9 .Yankwich v. Comm., TC Memo 2002-37.

      10 .IRC Sec. 1041(e).

      11 .IRC Secs. 50(a)(5)(B), 453(h); Temp. Treas. Reg. §1.1041-1T(d), A-13. See IRS Pub. 537.

      12 .IRC Secs. 50(a)(5)(B), 453B(g).

      13 .IRC Sec. 408(d)(6).

      14 .See, e.g., Jones v. Comm., TC Memo 2000-219.

      15 .Let. Rul. 200442003.

      16 .See, e.g., Let. Ruls. 200301020, 200221042, 200143028, 200120016, 200109006, 200045038, 200035014, 9851007, 9851006, 9403030.

      17 .Rev. Rul. 2002-22, 2002-1 CB 849.

      18 .Rev. Rul. 2004-60, 2004-24 IRB 1051, modifying, Notice 2002-31, 2002-1 CB 908. See also Let. Rul. 200646003.

      19 .Walker v. Comm., TC Memo 2003-335; compare Read, Craven, above.

  • 790. What are the tax results of corporate stock redemptions where a spouse or former spouse is treated as receiving or constructively receiving the proceeds, or where the redemption is incident to divorce?

    • Stock redemptions. If a corporation redeems stock owned by a taxpayer, and that taxpayer’s receipt of property with respect to the stock is treated, under applicable tax law, as a constructive distribution to his or her spouse (i.e., where the non-redeeming shareholder has a primary and unconditional obligation to purchase the redeeming shareholder’s stock), the final regulations treat the redemption as (1) a transfer of the stock by the taxpayer to the spouse, followed by (2) a transfer of the stock by the spouse to the redeeming corporation.1 Nonrecognition treatment would apply to the deemed transfer of stock by the taxpayer to his or her spouse (assuming IRC Section 1041 requirements are otherwise satisfied), so that no gain or loss would be included on account of that portion of the transaction. However, nonrecognition treatment would not apply to the deemed transfer of stock from the spouse to the redeeming corporation.2

      The receipt of any property by the taxpayer from the redeeming corporation with respect to the stock would be recharacterized as (1) a transfer of such property to the spouse by the redeeming corporation in exchange for the stock, in a transaction to which nonrecognition treatment would not apply, followed by (2) a transfer by the spouse to the taxpayer in a transaction, to which nonrecognition treatment would apply (assuming the requirements of IRC Section 1041 are otherwise satisfied).3 For details of the rules applicable to constructive transfers between spouses and former spouses, see Treasury Regulation Section 1.1041-2.4

      A divided Tax Court held that a stock redemption incident to divorce qualified for nonrecognition treatment where the ex-wife was considered to have transferred property to a third party on behalf of her ex-husband. The court further held that the primary and unconditional obligation standard is not an appropriate standard to apply in a case involving a corporate redemption in a divorce setting.5 See also Craven v. U.S.6 (stock redemption incident to divorce qualified for nonrecognition treatment). But see FSA 200222008 (where the Service ruled that based on the language in the settlement agreement, the redemption should be treated as a complete termination of the wife’s interest; thus, the wife was taxable on the stock redemption. The Service reasoned that the intent of IRC Section 1041 and the parties involved was best served by respecting the form of the redemption transaction). For the tax treatment of stock options transferred incident to a divorce, generally, see FSA 200005006.


      1 .Treas. Reg. §1.1041-2(a)(2).

      2 .Treas. Reg. §1.1041-2(b)(2).

      3 .Treas. Reg. §§1.1041-2(a)(2), 1.1041-2(b)(2).

      4 .TD 903567 Fed. Reg. §1534 (1-13-2003).

      5 .Read v. Comm., 114 TC 14 (2000), aff’d per curiam, Mulberry Motor Parts, Inc. v. Comm., 273 F.3d 1120 (11th Cir. 2001).

      6 .215 F.3d 1201 (11th Cir. 2000).

  • 791. Are alimony payments included in the gross income of the recipient? May the payor spouse take a deduction for these payments?

    • Editor’s Note: The 2017 Tax Act eliminated the deduction for alimony for tax years beginning after 2018, and provides that alimony and separate maintenance payments are no longer included in the income of the recipient.  This provision is effective after December 31, 2018, but also applies to divorce or separation agreements executed before that date that are subsequently modified and specify that the new provision will apply. The rules discussed below apply to tax years beginning before 2019.

      Prior to 2019, alimony and separate maintenance payments generally were taxable to the recipient and deductible from gross income by the payor (even if the payor does not itemize).1 Payments of arrearages from prior years were taxed to a cash basis taxpayer in the year of receipt.2 Furthermore, the Tenth Circuit Court of Appeals held that an alimony arrearage paid to the estate of a former spouse was taxable as income in respect of a decedent (see Q 747).3

      The deduction for alimony paid is limited to the amount required under the divorce or separation instrument.4 Payments made voluntarily by a husband to his spouse, which were not mandated by a qualifying divorce decree or separation instrument, were not deductible to the husband.5 Where the husband made his initial payment too early because he wanted to “get it over with,” and because it was convenient for him to schedule his alimony payments on or immediately after his paydays, the Tax Court concluded that the husband’s premature payment was voluntary because it fell outside the scope of the qualified divorce instrument. Accordingly, the payment was not deductible by the husband as alimony.6

      According to the General Explanation of TRA ’84, where, prior to 2019, a beneficial interest in a trust was transferred or created incident to a divorce or separation, the payments by the trust were to be treated the same as payments to a trust beneficiary under IRC Section 682, disregarding that the payments may have qualified as alimony. Thus, instead of including payments entirely as ordinary income, the transferee, as beneficiary, would be entitled to the flow-through of tax-exempt income. It seems that this treatment would remain the same after the repeal of the alimony deduction rules.

      The Tax Court held that interest income paid prior to 2019, which arose from annual payments made to the taxpayer by her former husband under their divorce settlement, was taxable to the taxpayer. The court further held that because the taxpayer was not able to differentiate between the costs incurred in connection with the divorce, and the amounts paid to obtain the interest income, the taxpayer was therefore not entitled to deduct the interest income under IRC Section 212 (i.e., as an ordinary and necessary expense paid or incurred for the production or collection of income).7

       


      1. IRC Secs. 71(a), 215(a), prior to repeal by Pub. Law No. 115-97 (the 2017 Tax Act).

      2Coleman v. Comm., TC Memo 1988-442.

      3Kitch v. Comm., 103 F. 3d 104, 97-1 USTC ¶50,124 (10th Cir. 1996).

      4. Ritchie v. Comm., TC Memo 1989-426.

      5. Meyer v. Comm., TC Memo 2003-12. See also Ali v. Comm., TC Memo 2004-284.

      6. See Ray v. Comm., TC Summary Opinion 2006-110.

      7Cipriano v. Comm., 55 Fed. Appx. 104, 2003-1 USTC ¶50,203 (3rd Cir. 2003), aff’g, TC Memo 2001-157.

       

  • 792. What is alimony? What types of payments between former spouses do not qualify as alimony payments?

    • A payment received by (or on behalf of) a recipient spouse pursuant to a divorce or separation instrument executed after 1984 is an alimony or separate maintenance payment if: (1) the payment is made in cash; (2) the divorce or separation instrument does not designate the payment as not includable or deductible as alimony;[1] (3) there is no liability to make the payments after the death of the recipient,[2] where the Tax Court held that “substitute” payments – i.e., post-death payments that would begin as a result of the death of the taxpayer’s ex-wife, and would substitute for a continuation of the payments that terminated on her death, and that otherwise qualified as alimony – were not deductible alimony payments); and (4) if the individuals are legally separated under a decree of divorce or separate maintenance, the spouses are not members of the same household at the time the payment is made.[3]

      A divorce or separation instrument includes any decree of divorce or separate maintenance or a written instrument incident to such, a written separation agreement, or other decree requiring spousal support or maintenance payments.[4] The failure of the divorce or separation instrument to provide for termination of payments at the death of the recipient will not disqualify payments from alimony treatment.[5] However, if both the divorce or separation instrument and state law fail to unambiguously provide for the termination of payments upon death, such payments may be disqualified from receiving alimony treatment.[6]

      It has been held that an attorney’s letter detailing a settlement agreement constituted a separation instrument for purposes of determining whether payments made thereunder were alimony.[7] However, a list of expenses by the former wife, negotiation letters between attorneys, notations on the husband’s check to his former wife indicating support, and the fact that the husband actually provided support did not constitute a written separation agreement for purposes of IRC Sections 71(b)(2) and 215.[8] A husband’s payments to his wife during the couple’s separation under a later invalidated separation agreement and subsequent payments made pursuant to a circuit court’s orders were held to be alimony or separate maintenance payments.[9]

      The Tax Court held that a contract for deed is a third-party debt instrument; consequently, the taxpayer could not deduct the value of the contract for deed transferred to his former spouse as alimony because it did not constitute a cash payment.[10]

      In deciding whether the transfer of ownership of an annuity contract itself constituted alimony, the Service determined that, because IRC Section 71 and the treasury regulations make it clear that in order to constitute alimony a payment must be in cash, the transfer of ownership of the annuity contract to the taxpayer in this instance did not constitute alimony includable in the taxpayer’s gross income.[11]

      For the types of payments that can constitute alimony payments for tax years prior to 2019, see Mozley v. Commissioner,[12] (military retirement payments); Zinsmeister v. Commissioner,[13] (payments on first mortgage, real estate taxes, and miscellaneous expenses); Marten v. Commissioner,[14] (life insurance premiums paid on former wife’s life insurance policy insuring the couple’s paraplegic child); but also see Berry v. Commissioner,[15] (former wife’s attorney’s fees not deductible). Alimony can include rental payments paid to a former spouse. See Israel v. Commissioner.[16] However, lump sum payments made by a husband to his former spouse under a consent judgment were not deductible under IRC Section 215(a) except to the extent the lump sum constituted past due alimony.[17]

      __________________

      [1].    See Richardson v. Comm., 125 F.3d 551 (7th Cir. 1997), aff’g T.C. Memo 1995-554; see also Let. Rul. 200141036.

      [2].    See, e.g., Okerson v. Comm., 123 TC 258 (2004).

      [3].    IRC Sec. 71(b), prior to repeal by Pub. Law No. 115-97 (the 2017 Tax Act).

      [4].    IRC Sec. 71(b)(2), prior to repeal by Pub. Law No. 115-97 (the 2017 Tax Act).

      [5].    See IRC Sec. 71(b)(1)(D), prior to repeal by Pub. Law No. 115-97 (the 2017 Tax Act); TRA ’86 Conf. Rept. at page 849.

      [6].    Hoover v. Comm., 102 F. 3d 842, 97-1 USTC ¶50,111 (6th Cir. 1996); Ribera v. Comm., TC Memo 1997-38.  See Mukherjee v. Comm., TC Memo 2004-98; Lovejoy v. Comm, 293 F.3d 1208 (10th Cir. 2002), aff’g, Miller v. Comm., TC Memo 1999-273; Thomas D. Berry v. Comm, 36 Fed. Appx. 400, 2002 U.S. App. LEXIS 10785 (10th Cir. 2002), aff’g, TC Memo 2000-373; Fithian v. United States, 45 Fed. Appx. 700, 2002-2 USTC ¶50,629 (9th Cir. 2002). But see Kean v. Comm., 407 F. 3d 186, 2005-1 USTC ¶50,397 (3rd Cir. 2005), aff’g, TC Memo 2003-163; Michael K. Berry v. Comm., TC Memo 2005-91.

      [7].    Azenaro v. Comm., TC Memo 1989-224.

      [8].    Ewell v. Comm., TC Memo 1996-253.

      [9].    Richardson v. Comm., 125 F.3d 551 (7th Cir. 1997), aff’g, TC Memo 1995-554.

      [10].  Lofstrom v. Comm., 125 TC 271 (2005).

      [11].  Let. Rul. 200536014.

      [12].  TC Memo 2001-125.

      [13].  TC Memo 2000-364, aff’d per curiam, 21 Fed. Appx. 529 (8th Cir. 2001).

      [14].  TC Memo 1999-340, on motion for reconsideration, holding reaffirmed in TC Memo 2000-185; aff’d per curiam, Comm. v. Lane, 2002 U.S. App. LEXIS 8367 (9th Cir. 2002).

      [15].  36 Fed. Appx. 400, 2002 U.S. App. LEXIS 10785 (10th Cir. 2002), aff’g, TC Memo 2000-373.

      [16].  TC Memo 1995-500. See Temp. Treas. Reg. §1.71-1T(b), A-6.

      [17].  Barrett v. U.S., 74 F. 3d 661, 96-1 USTC ¶50,084 (5th Cir. 1996).

  • 793. What are the recapture rules that apply with respect to alimony payments made during the first three years of divorce?

    • Editor’s Note: The 2017 Tax Act eliminated the deduction for alimony for tax years beginning after 2018, and provides that alimony and separate maintenance payments are no longer included in the income of the recipient.  This provision is effective after December 31, 2018, but also applies to divorce or separation agreements executed before that date that are subsequently modified and specify that the new provision will apply.  The discussion below continues to apply for tax years beginning prior to 2019.

      Recapture. For tax years beginning prior to January 1, 2019, alimony recapture rules generally require recapture in the third post-separation year of “excess” payments (i.e., disproportionately large payments made in either the first or second years – or both – that are deemed to represent nondeductible property settlements previously deducted as alimony). The first post-separation year is the first calendar year in which alimony or separate maintenance payments are made; the second and third years are the next two calendar years thereafter.

      The amount recaptured is included in the income of the payor spouse and deducted from the gross income of the recipient. The amount recaptured is determined by first comparing the alimony payments made for the second and third post-separation years. If payments during the second year exceed the payments during the third year by more than $15,000, the excess is “recaptured.” Next, the payments during the first year are compared with the average of the payments made during the second year (as reduced by any recaptured excess) and the payments made during the third year. If the payments made during the first year exceed the average of the amounts paid during the second (as reduced) and third years by more than $15,000, the excess is also recaptured.1

      There are limited exceptions to the recapture rule: if payments cease because of the marriage of the recipient or the death of either spouse before the close of the third separation year, or to the extent payments required over at least a three-year period are tied to a fixed portion of income from a business or property or compensation, the payments will not come within these rules. Furthermore, payments under temporary support orders do not come within the recapture rules.2

      Payments made under instruments executed before 1985 are taxed under different rules (i.e., IRC Section 71 prior to TRA ’84, unless the instrument is modified after 1984). Depending on the date of modification after 1984, either the TRA ’84 rules or a three year recapture period will apply, or the recapture rules for instruments executed after 1986 (described above) will apply.

      When a payor spouse claims alimony payments as a deduction, he is required to furnish the recipient spouse’s Social Security number on his tax return for each taxable year the payments are made.3 Alimony paid by a U.S. citizen spouse to a foreign spouse is deductible by the payor spouse even though the recipient is not taxable on the income under a treaty; however, the penalty for failing to include the recipient’s Taxpayer Identification Number (TIN) on the payor’s tax return may still apply.4


      1 .IRC Sec. 71(f), prior to repeal by Pub. Law No. 115-97 (the 2017 Tax Act).

      2 .IRC Sec. 71(f)(5), prior to repeal by Pub. Law No. 115-97 (the 2017 Tax Act); Temp. Treas. Reg. §1.71-1T(d), A-25.

      3 .Temp. Treas. Reg. §1.215-1T, A-1.

      4 .CCA 200251004.

  • 794. Is child support taxed in the same manner as alimony payments?

    • Editor’s Note: The 2017 Tax Act eliminated the deduction for alimony for tax years beginning after 2018, and provides that alimony and separate maintenance payments are no longer included in income of the recipient.  This provision is effective after December 31, 2018, but also applies to divorce or separation agreements executed before that date that are subsequently modified and specify that the new provision will apply.  The new tax law did not change the tax treatment of child support.  The discussion below that applies to alimony continues to apply for tax years beginning prior to 2019.

      Child support. Any portion of an alimony payment specified in the divorce or separation instrument as payable for child support is not treated as alimony (Q 792).1 In Freyre v. U.S.,2 the appeals court held that because the divorce court order did not specifically designate or fix the disputed monthly payments as child support, as required in the statute3 and the treasury regulations,4 the payments had to be considered as alimony and, thus, were deductible by the taxpayer (prior to 2019).5

      Even portions not specified as child support may be treated as child support to the extent that the amount of the alimony payment provided for in the divorce or separation instrument is to be reduced on the occurrence of a contingency relating to a child or at a time clearly associated with such a contingency (e.g., the year a child would turn eighteen years old).6 If the divorce or separation instrument provides for alimony and child support payments, any payment of less than the amount specified in the instrument will be applied first as child support, to the extent of the amount specified in the instrument.7 The Tax Court determined that an agreement between former spouses, absent a court modification of their divorce decree, would not alter the tax consequences of this provision.8 A parent was required to include in his gross income the portion of a distribution from his pension plan that was used to satisfy a back child support obligation.9

      The Service has privately ruled that interest paid on past due child support is taxable income to the recipient parent. According to the Service, interest income is not excludable income in the same manner as amounts designated for child support are excludible. The Service reasoned that for child support to be excludable from gross income, the decree, instrument or agreement must specifically designate the sum as child support; interest that is assessed later does not come under an amount specifically designated as child support.10


      1. IRC Sec. 71(c)(1), prior to repeal by Pub. Law No. 115-97 (the 2017 Tax Act).

      2. 135 Fed. Appx. 863 (6th Cir. 2005).

      3. IRC Sec. 71(c)(1), prior to repeal by Pub. Law No. 115-97 (the 2017 Tax Act).

      4. Treas. Reg. §1.71-1(e).

      5. See also Preston v. Comm., 209 F.3d 1281 (11th Cir. 2000).

      6. IRC Sec. 71(c)(2), prior to repeal by Pub. Law No. 115-97 (the 2017 Tax Act). See Let. Rul. 9251033.

      7. IRC Sec. 71(c)(3), prior to repeal by Pub. Law No. 115-97 (the 2017 Tax Act).

      8Blair v. Comm., TC Memo 1988-581.

      9Stahl v. Comm., TC Memo 2001-22.

      10. IRS CCA 200444026.