Posted by: koherston | September 22, 2014

No Relief for Failure to Include Potential Tax Liability in Alimony Request: Salvucci v. Salvucci

Knoxville alimony lawyersFacts: The parties divorced after 27 years of marriage.

Husband, 58, is a cardiologist earning $550,000 a year. Wife, 54, has been a stay-at-home parent and homemaker for 25 years.

Wife sought alimony at trial.

The trial court found Wife “has been forced to abandon her marriage relationship where she enjoyed significant security because Husband breached the marriage vows on a number of occasions and placed her in a position of having to give up her standard of living.” Wife was awarded alimony in futuro in the amount of $10,850 per month. The trial court further ruled the alimony “shall be included in Wife’s gross income for federal income tax purposes.”

After the trial, Wife filed a motion to increase the alimony award, stating “Wife has learned she will owe IRS taxes in the approximate amount of $24,000 annually on the alimony paid by Husband.”

The trial court increased Wife’s alimony in futuro award by $1000 per month, for a total of $11,850 per month.

Husband appealed.

On Appeal: The Court of Appeals reversed the trial court.

A request to modify an alimony award requires a finding that there has been a substantial and material change in circumstances. In order to justify an alimony modification, the change in circumstances must have occurred since the original award, significantly affect either the obligor’s ability to pay or the obligee’s need for support, and was not anticipated or contemplated at the time of the original divorce. A trial court’s decision on a request to modify an alimony obligation is reviewed under an abuse of discretion standard.

After reviewing the record, the Court concluded:

We must conclude that the trial court erred in increasing Husband’s alimony obligation. Wife contends that she could not have “forsee[n] the amount of the tax liability prior to learning the amount of alimony the Trial Court would award.” This is unconvincing. It could not have been a shock to Wife to learn that she would have federal tax liability associated with her receipt of alimony. Indeed, the divorce decree refers to how taxes are to be paid and recites tax allocation as a factor in awarding alimony in futuro. In her request for alimony, Wife sought an award in excess of $15,500 per month in alimony and was awarded $10,850 per month. Nothing in her proof at trial appears to take into account potential tax liability, even for the amount of alimony Wife sought. It is hard, under the circumstances, to view the omission of estimated potential tax liability from Wife’s proof at trial as anything but an oversight….

It cannot be said that Wife’s tax liability on the alimony was a “change” or that it was not anticipated or contemplated at the time of the original divorce. Thus, Wife did not prove a substantial and material change in circumstances.

Accordingly, the trial court’s decision to increase Wife’s alimony award was reversed.

K.O.’s Comment: In a footnote, the Court added this truism: “‘[I]n this world nothing can be said to be certain, except death and taxes.’ Letter from Benjamin Franklin to Jean-Baptiste Leroy (1789) (reprinted in The Works of Benjamin Franklin, 1817).”

This case serves as a reminder to include the obligee’s potential tax liability in the proof establishing the obligee’s need for alimony. The Court goes so far as to suggest the standard of care requires it. Family law attorneys should pay attention.

Salvucci v. Salvucci (Tennessee Court of Appeals, Western Section, August 26, 2014).

Information provided by K.O. Herston: Knoxville, Tennessee Divorce, Matrimonial and Family Law Attorney.


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