I am positive it is taxable. My first thought was, she shouldn't be reporting this on her tax return, but the previous preparer was reporting it so I did my research. A Tax Court Case in 2000 Baker v. Commissioner involved a military retiree that was ordered in a divorce decree to pay his ex-wife 50% of his military retired pay each month as part of the property division. Without going through the whole court case, The IRS ruled the ex-husband could reduce his income by the amount paid to the ex-wife and the ex-wife had to include it as income on her tax return.

My client's prior accountant put it on line 16b and had been doing so since she started receiving it. So I am trying to put it on line 16 but obviously need the FEIN and the address in order to electronically file the return.