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According to the Uniformed Services Former Spouse Protection Act 1982 (USFSPA) - state courts are allowed to treat disposable military retirement benefits either as property solely of the member, or as property of the member and a spouse in based on the state laws.
If that payment is an alimony or a property settlement - should be clearly identified in the divorce decree.
In case of property settlement - the Department of Defense (DOD) would make direct payments of your retired pay to the ex-spouse and will report payments on her name and SSN.
In order to be treated as deductible alimony, payments made from you to your spouse (or ex-spouse) must meet all of the following requirements:
See for reference the IRS publication 504 - http://www.irs.gov/pub/irs-pdf/p504.pdf
If any of these requirements are not clearly written in the divorce decree - payments are likely be classified as Property Settlement. For instance - in case your spouse dies - do you still have obligations to pay part of your retired pay to her heirs?
If yes - here are some court cases to support your position:
http://www.allbusiness.com/government/government-bodies-offices-government/8916742-1.html http://www.allbusiness.com/government/government-bodies-offices-government/6622472-1.html http://www.allbusiness.com/legal/trial-procedure-decisions-rulings/6622462-1.html
The IRS acceptance has nothing to do with the State of Oregon DOR acceptance.
While you may use the IRS acceptance as an argument in your litigations - the Oregon DOR is not obligated to agree with the IRS.
You need to review your divorce decree to verify if wording in divorce decree met the definition of alimony - if not - you need to go back to your attorney and modify the divorce decree.
This is a very controversal subject and each state has there interpretation. Oregon is trying to recover revenue, there is not a big contengency of military here, so this new ground for them. My divorce decree does not contain any language stating military retirement pay is community property, but comes under personnal property. I am lauching an appeal siting that the language in my divorce degree meets IRC 71 and is classified as alimony. I have information of court cases on this same matter where the courts decided that military retirement is alimony.
If you saw court cases I referenced - you might notice that the key point in the divorce decree for payments to be treated as alimony is
If your divorce decree was written poorly and do not have all required wording - I suggest to go back to your attorney and modify it.