Saturday, July 31, 2010
A Suffolk County, N.Y., judge has ruled that a contractor's filing of amended tax returns claiming $1.6 million of additional income on the eve of his divorce trial was simply a malicious attempt to prevent his wife from recovering marital assets, and therefore has refused to apportion the couple's approximately $500,000 to $1.2
"It is well settled that expenses (including unpaid taxes) incurred prior to the commencement of a divorce action constitute marital debt which, under normal circumstances, should be equally shared by the parties. However, in those rare instances where a party's conduct in creating a debt is so egregious, shocking, fraudulent or malicious, the Court can exercise its discretion and refuse to apportion the debt," Acting Supreme Court Justice Andrew A. Crecca (See Profile) wrote in Maria C. v. Dominick C., 04775/08.
"Under the facts and circumstances of this case," the judge concluded, "this is one of those rare instances." ...
Shortly before the divorce went to trial in March, the defendant-husband, Dominick C., unilaterally filed marital tax returns for the years 2004 through 2007.
In the amended returns, the husband admitted earning more than $1.6 million in unreported income over those four years.
The husband filed the returns on his own initiative, as the couple was not being audited or under investigation, and without his wife's signature. He included on the cover page a list of assets the government might consider attaching, including the couple's house. The husband stated the house's value ($1.2 million), the size of the mortgage and the name of the bank that held the loan.
After hearing testimony from a variety of fact and expert witnesses, including the husband's accountant and the wife's forensic accountant, the court determined that the husband had a single, illegitimate reason for belatedly reporting his business' income.
"The court sees no legitimate reason for this outrageous and despicable conduct, which the court finds is based solely on malice and revenge, with no other goal than to prevent his wife from any recovery in equitable distribution," the judge concluded.
"Accordingly, as a result of such shocking and egregious conduct on the part of the defendant-husband, the Court declines to apportion any tax liability to the plaintiff-wife in connection with the amended personal returns and directs that the defendant-husband should bear full responsibility for any such additional tax liability."