May 2016 : Court of Appeals Upholds Equal Division of Federal Tax Refund

Michigan Family Law Journal : TAX TRENDS AND DEVELOPMENTS Feature

by Joseph W. Cunningham, JD, CPA

Excerpt:

Court of Appeals Upholds Equal Division of Federal Tax Refund, Demil v Demil, Mich App No. 323205 (10/20/15), and Tips on Providing for Tax Overpayments and Estimated Taxes

Facts

  • The parties agreed to a settlement in June 2013 which, inter alia, provided that they would split the federal tax refund resulting from their 2012 joint income tax return, as follows:
    • “IT IS FURTHER ORDERED AND ADJUDGED that the parties shall equally divide any refund they receive from the 2012 Federal Tax returns. (sic) The defendant shall provide proof of the refund received directly to the Plaintiff within one week of receipt.”
  • Neither party signed the return which was led electronically by their tax preparer in April 2013.
  • The refund was represented to be “in the approximate amount of $2,372”.
  • In fact, the refund was $34,318, of which H applied $23,000 to his 2013 federal tax liability.
  • During the divorce proceedings, H had represented that $2,300 “was a correct characterization of the refund and that he did not have any other assets to disclose to the court.”
  • W later learned that the refund was substantially more than what had been previously indicated and led a mo- tion to enforce the provision in the judgment for equal division.
  • e trial court rejected H’s claim that a large component of the refund was attributable to his father’s income which was reported on the joint tax return ”for estate planning and income tax purposes” and ruled the $34,318 refund be divided equally.
  • H appealed.

Court of Appeals Decision

  • The Court upheld the trial court’s decision ruling that it did not err in its interpretation of the tax refund provision in the judgment of divorce.

Tips on Providing for Division of Tax Overpayments Joint and Several Liability

  • Joint Tax Refunds

Continued in PDF file below… “Court of Appeals Upholds Equal Division of Federal Tax Refund”
View / Download May 2016 Article – PDF File

Complete Michigan Family Law Journal available at: Michigan Bar website – Family Law Section