Florida Trial Court’s Double Hit of Income Tax Consequences Leads to Reversal of Equitable Distribution

In Florida, equitable distributions are presumed, as a starting point, to be equal distributions between the spouses unless special circumstances exist that warrant an unequal distribution. One of those special circumstances is a spouse’s misconduct with marital funds. Even if a spouse is guilty of misdeeds with marital funds, there are limits to what a trial court can impose. The Fourth District Court of Appeal recently threw out an equitable distribution because the trial court’s decision would have essentially made a husband pay for the income tax consequences of withdrawing money from the wife’s individual retirement account not once but twice.

After S.P. (wife). and D.P. (husband) separated, but before they divorced, the husband allegedly forged the wife’s name on three documents in order to make three withdrawals totaling $58,800 from the wife’s IRA. The proceeds from these three withdrawal requests were placed into a trust controlled by the husband.

At the couple’s divorce trial, when the husband was asked about the three withdrawals, he invoked his Fifth Amendment right against self-incrimination. Based upon the husband’s decision to “plead the Fifth,” along with the wife’s testimony about the withdrawals — namely, that she had seen the documents and that the signatures on them were not hers — the trial court made an inference that the husband had, in fact, forged the wife’s name, taken the money, and placed it into non-marital assets. Based upon this conclusion, the trial court decided to award an unequal distribution of marital assets. Florida Statutes Section 61.075 dictates that a trial court must begin from a premise that an equitable distribution should be equal. The law does, however, allow for unequal distributions in several circumstances, including the “intentional dissipation, waste, depletion, or destruction of marital assets.”

The unequal distribution favored the wife, who received a sum equal to the $58,800 the husband improperly withdrew from the wife’s IRA and the amount of income taxes that were assessed to the wife’s IRA as a result of the withdrawals. The husband challenged this part of the trial court’s order on appeal, and he won. The reason his appeal was successful was that the taxes on the withdrawals were already paid. Of the $58,800 the husband withdrew, he only received $47,000 of that money. In the forged withdrawal forms, he directed that $11,800 was to be withheld from the withdrawals for payment to the Internal Revenue Service. The taxes were paid from these withheld amounts. They were not additional sums taken out of the wife’s account.

In other words, the trial court’s distribution essentially made the husband pay for the income tax consequences twice. On the original withdrawals, he withdrew $58,800. In the trial court’s ruling, it made the marital distribution unequal to a sum of roughly $70,000 or, in other words, the $47,000 the husband personally received plus the income taxes plus the income taxes again. Fashioning the distribution in this manner was improper and required the appeals court to reverse and send the case back to the trial court.

Deciding on an equitable distribution as part of a divorce can be complicated. In order to make sure that you assert your right to your fair share, you need hardworking, capable counsel on your side. The experienced South Florida equitable distribution attorneys at Sandy T. Fox, P.A. have the skills you need to pursue a fair outcome. Contact our attorneys online or by calling (800) 596-0579 to schedule your confidential consultation.

More blog posts:

Intentionally Diminishing Marital Assets and Your Florida Divorce Case, Fort Lauderdale Divorce Lawyer Blog, March 17, 2016

Using Marital Funds to Pay Down a Mortgage on a Non-marital Property and Its Impact on Your Florida Equitable Distribution, Fort Lauderdale Divorce Lawyer Blog, Sept. 22, 2015