In a Decision – Snyder v. Snyder,,, (an "Unreported Decision") >> the Court Held:
The Appellate Division determined that Wife was required to pay income tax on her share of Husband's pension. The pension provisions of the Divorce Agreement did not address tax consequences and further holding that the IRC statute cited by the Divorce Agreement 's tax-free provision did not apply to the tax consequences of pension distributions made pursuant to a QDRO. The Appellate Division held that Wife enjoyed a windfall in collecting from the pension tax-free.
The Judgment of Divorce incorporated their Divorce Agreement, which stated that Wife would be entitled to $2800 per month from Husband's pension with any remaining monthly payout being solely Husband's property; Wife would remain on the bank account where the pension funds were deposited until execution of a QDRO and could withdraw $2800 per month from the account. The Divorce Agreement further stated that these transactions were intended to be tax-free events. For five years following divorce, Wife withdrew $2800 from the account and defendant paid the tax liability for the entire distribution.
Wife does not dispute that a tax liability is incurred on a pension distribution, instead, she argues that since Husband paid the taxes on the full distribution for so many years, she has become reliant on that arrangement. The IRC imposes a tax liability on pension distributions.