CIR v. DUNKIN
The Ninth Circuit Court of Appeals today released an opinion in CIR v. DUNKIN, No. 05-76004, a tax appeal. The panel consisted of Dorothy W. Nelson, Stephen Reinhardt, and Pamela Ann Rymer, Circuit Judges.
D.W. NELSON, Senior Circuit Judge:
The Commissioner of Internal Revenue (”Commissioner”) appeals from a decision of the United States Tax Court allowing John Michael Dunkin (”John” or “appellant”) to reduce his taxable income for the 2000 tax year by $25,511–the amount he paid his former spouse Julie Green (”Julie”) incident to a division of community property assets upon marital dissolution. In 1997, a California Superior Court (”divorce court”) awarded Julie one half of the marital community’s interest in pension benefits provided by John’s employer. However, because John chose to continue working and did not terminate his participation in the plan following divorce, the pension administrator did not begin making distributions . . .
REINHARDT, Circuit Judge, dissenting:
The majority passes over the existence of a significant ambiguity regarding an issue of California state law that has not been addressed by the state’s highest court. The question is whether a portion of a divorced employee’s wages should be treated as community property when it is used solely for the payment of an ex-spouse’s court ordered pension benefits that are community property; in such cases, the former spouse would have received the amount in question as pension benefits (i.e. community property) if her ex-husband had retired at the time he became eligible to do so. Alternatively, the amount of wages that is paid over to the ex-wife as pension benefits could be considered to be exclusively the husband’s wages and he would have to pay full taxes on that income even though he neither uses nor benefits from it. The majority chooses the latter option. I respectfully dissent. I would certify the question of how to treat the money involved under California law to the California Supreme Court. The majority opinion imposes negative tax consequences on a police officer who chooses to work past retirement eligibility age and thus to defer collection of his pension. It requires him to pay full income taxes on the part of his salary that he pays over to his former wife as her community interest in his pension benefits — a result that defies reason, not to mention fairness. If the payment were considered to be what it actually is, a distribution of the ex-wife’s interest in the pension benefits, the husband would not have to pay any taxes on the amount in question. If the question were certified, I think . . .