New York Advisory Opinion TSB-A-86 (8)I: Do support payments a divorced woman receives from her ex-husband - calculated as a portion of his pension under their separation agreement - qualify for the $20,000 pension and annuity exclusion under Tax Law § 612(c)(3-a)?

Plain-English summary

Dorothea M. Petersen and her husband divorced around 1971, and their judgment of divorce incorporated a written separation agreement under which her husband would pay her, in equal monthly installments, an amount equal to a specified portion of his own pension. Petersen argued these support payments should qualify for the Tax Law § 612(c)(3-a) pension and annuity exclusion (which lets a person 59½ or older exclude up to $20,000 of certain pension/annuity income), reasoning that they were periodic payments attributable to her personal services as a wife and mother.

The Department rejected this on two independent grounds. First, characterization: IRC § 71 includes alimony or separate maintenance payments in federal gross income, and Petersen's support payments squarely fit that definition - for both federal and New York tax purposes (since Tax Law § 607 ties New York's terminology to federal law), these are alimony payments, not pension or annuity payments, regardless of how they happen to be calculated (as a share of her ex-husband's pension). Second, even setting characterization aside, the payments couldn't qualify for the exclusion on the merits: section 612(c)(3-a) requires the payments to arise from an employer-employee relationship or from the recipient's own contributions to a retirement plan, and neither was true here - Petersen was her husband's SPOUSE, not his employee, and the payments didn't arise from her own retirement plan contributions.

The Department also addressed - and rejected - a related argument Petersen raised about New York's Equitable Distribution Law. Her divorce judgment predated that law's effective date, so it didn't directly apply to her situation, but the Department noted that even if it DID apply, the outcome would be the same: the payments would still be alimony, not a pension or annuity exclusion-eligible payment, regardless of the property-distribution framework used.

What this means for you

Divorced individuals receiving support payments calculated as a share of an ex-spouse's pension

Don't assume that a support payment calculated by reference to your ex-spouse's pension - even one that closely tracks a percentage of the pension amount - is itself a "pension or annuity" eligible for the age-59½ exclusion. This opinion confirms such payments are characterized as ordinary alimony/support, not pension income, regardless of how the payment amount is computed.

Divorcing spouses and matrimonial attorneys structuring pension-based support agreements

Be aware that framing support payments as tied to a pension formula doesn't change their fundamental tax character. For the recipient spouse, these remain alimony/support payments under IRC § 71 and Tax Law § 607, not retirement income eligible for retirement-specific tax breaks like section 612(c)(3-a).

Accountants advising clients receiving support payments post-divorce

When a client argues that support payments should get pension-exclusion treatment because they're computed as a portion of an ex-spouse's pension, check whether the payments arise from the CLIENT'S OWN employer-employee relationship or retirement plan contributions - as this opinion shows, being a former spouse (rather than a former employee) of the pension holder is fatal to the exclusion regardless of how the payment is calculated.

Common questions

Q: My divorce settlement gives me a share of my ex-spouse's pension paid as monthly support - does that qualify for the $20,000 pension exclusion?
A: No. The Department held these payments are alimony/support payments (taxable as such under IRC § 71 and Tax Law § 607), not pension or annuity payments to you, regardless of how the payment amount is calculated by reference to the pension.

Q: Why doesn't the pension and annuity exclusion apply even setting aside the alimony characterization?
A: Because section 612(c)(3-a) requires the payments to arise from an employer-employee relationship or from the recipient's own retirement plan contributions. Petersen was her husband's spouse, not his employee, and the payments didn't arise from her own retirement contributions - so the exclusion couldn't apply on the merits either way.

Q: Does it matter that my divorce predates (or postdates) New York's Equitable Distribution Law?
A: Not for this analysis. The Department noted that even if the Equitable Distribution Law applied to Petersen's situation, the payments would still be characterized as alimony rather than pension/annuity income, so the exclusion would remain unavailable either way.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/income_ao_1986.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/income/a86_8i.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-86 (8) I
Income Tax
June 2, 1986

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. I860311B

On March 11, 1986, a Petition for Advisory Opinion was received from Dorothea M.
Petersen, 41 St. Stephens Lane, Scotia, New York 12302.
The issue raised is whether support payments received by Petitioner from her ex-spouse
qualify for the personal income tax pension and annuity exclusion provided pursuant to the
provisions of section 612(c)(3-a) of the Tax Law.
Petitioner and her husband were divorced in or about 1971. Petitioner's judgement of divorce
incorporated the terms and conditions of a written separation agreement between Petitioner and her
husband which agreement provided that an amount equal to a specified portion of Petitioner's
husband's pension is to be paid in equal monthly installments by Petitioner's husband to Petitioner
as support payments.
Section 71 of the Internal Revenue Code provides that federal gross income includes amounts
received as alimony or separate maintenance payments. The payments received by Petitioner fall
with the definition of alimony or separate maintenance payments.
New York's personal income tax is based upon the federal personal income tax. Section 607
of the Tax Law provides that terms used in New York's personal income tax law shall have the same
meaning as when used in a comparable context in the Internal Revenue Code. Section 612 of the Tax
Law provides that the New York adjusted gross income of a resident individual equals his or her
federal adjusted gross income with certain modifications.
Among those modifications is the modification provided by section 612(c)(3-a) which
excludes from New York adjusted gross income "Pensions and annuities received by an individual
who has attained the age of fifty-nine and one-half.., to the extent includible in gross income for
federal income tax purposes, but not in excess of twenty thousand dollars, which are periodic
payments attributable to personal services performed by such individual prior to his retirement from
employment, which arise (i) from an employer-employee relationship or (ii) from contributions to
a retirement plan which are deductible for federal income tax purposes."
Petitioner argues that her support payments should qualify for the pension and annuity
exclusion since they are periodic payments attributable to personal services by Petitioner as a wife
and mother. However, the support payments received by Petitioner are characterized for New York
and federal tax purposes as alimony payments rather than pension or annuity payments. As such, they
do not qualify for the pension and annuity exclusion. In any event, the support payments cannot
qualify for the pension and annuity exclusion because they do not arise from an employer-employee

RODERICK G. W. CHU, COMMISSIONER
TP-8 (3/83)

GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

-2­
TSB-A-86 (8) I
Income Tax
June 2, 1986

relationship (since Petitioner was her husband's spouse and not his employee) and do not arise from
contributions to a retirement plan.
Accordingly, the support payments received by Petitioner must be included in Petitioner's
federal and New York adjusted gross income but do not qualify for the pension and annuity
exclusion provided by section 612(c)(3-a) of the Tax Law.
In her petition, Petitioner makes reference to New York's Equitable Distribution Law. It is
noted that Petitioner's judgement of divorce predates the effective date of the Equitable Distribution
Law. However, the conclusion reached in this Advisory Opinion would not be different if the
Equitable Distribution Law were to apply to Petitioner.

DATED: June 2, 1986

s/FRANK J. PUCCIA
Director,
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.