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    The Lawletter Blog

    FAMILY LAW: Tax Savings as Marital Property

    Posted by Noel King on Thu, Aug 25, 2011 @ 10:08 AM

    The Lawletter Vol 35 No 12, August 26, 2011

    Brett Turner—Senior Attorney, National Legal Research Group

    In Byers v. Byers, No. 09CA3124, 2010 WL 3641238 (Ohio Ct. App. Sept. 16, 2010), the court ordered a divorcing couple to file a joint federal income tax return.  By filing the joint return, the parties saved $13,375.  The court then treated this amount as a marital asset and ordered the husband to pay half of that amount to the wife.

    On appeal, the trial court's order was reversed.  Filing the joint tax return did not create $13,375 in additional marital property.  Rather, filing the return avoided a loss of $13,375 in marital property.  The mere avoidance of a loss did not add new value to the marital estate.  There was accordingly no asset to divide.

    To see the result more clearly, assume that the parties had $13,375 in a CD that had been acquired during the marriage.  If the parties had filed separate returns, they would have had to cash in the CD and pay the proceeds to the IRS.  By filing a joint tax return, they avoided this potential loss.  The CD was therefore included in the marital estate.  To include both the CD and an additional "tax savings" in the same amount is to divide the $13,375 twice.  The trial court decision was therefore clearly wrong.  Where no tax payment has yet been made, "tax savings" are not a marital asset.

    Topics: legal research, family law, Brett turner, The Lawletter Vol 35 No 12, joint filing as tax savings, division of marital property

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