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News and comments about divorce, child support, child custody, alimony, equitable property distribution, father’s rights, mother’s rights, family law, laws on divorce and other legal information in Maryland.

Archive for January, 2015

Loans as Income

Thursday, January 29th, 2015

The IRS does not consider a loan to be income.

But if you own your own business, you can manipulate your income.  So if someone owes you $50,000 for goods and services, you don’t bill them until next year.  You have your business borrow $50,000 from the bank, using your $50,000 accounts receivable as collateral.  Then your business loans $50,000 to you for your living expenses.

Is your income zero or $50,000?

It’s a situation where you will want to have an accountant as an expert witness.  And even then, the accountants for each side will have conflicting opinions.  I’ve had cases where the judge decided to include loans as income.

Inheritance as Income

Wednesday, January 28th, 2015

Leroy and Mynell Gassaway married in 1952.  They separated in 1979.

In their DC divorce, the trial court divided marital property upon consideration of the fact that Leroy’s mother owned a house and that Leroy was the only heir and would inherit the property.  After all, “opportunities for the future acquisition of assets” is one of the factors a judge must consider in dividing martial property.

On appeal, however, the court said this was not an equitable way to divide property.

In Mumma v. Mumma, 280 A.2d 73, 76 (D.C. 1971), this court ruled that gifts to the husband from his parents could not be considered in determining his income for purposes of computing his alimony obligation, presumably, because any expectation of gifts is inherently speculative and thus could not be counted upon as a predictable portion of the husband’s annual financial return.  Accord Scott v. Scott, 645 S.W. 2d 193, 198 (Mo. Ct. App. 1982) (despite history of gifts to wife from parents, court property declined to consider “such an uncertain source of funds as future gifts” in computing her alimony award).  The same reasoning is applicable to anticipated gifts of real property or other assets, e.g., though inheritance.

The court recognized decisions from some courts ruling otherwise, but rejected this approach as “mischievous”.

— Gassaway v. Gassaway, 489 A.2d 1073 (D.C. 1985)

Are Gifts Income?

Tuesday, January 27th, 2015

Albert  Mumma married Jean in 1952 and they had three children together.   Albert supported the family as an architect.  He had an office in Georgetown.  In 1968 the parties had a violent altercation and they decided to divorce.

The judge awarded $200 a month in alimony and $500 a month in child support to Jean, plus attorney fees and costs.  Albert appealed complaining that he was ordered to pay support of $8,400 a year, while his income was only $9,422 in 1968 and $12,726  in 1969.   Jean countered that, among other things, he received gifts from his parents.

The DC Court of Appeals reversed the trial court, holding that “gifts do not constitute income” and suggested that Albert’s income tax returns would be an appropriate guide to his actual income in the absence of affirmative evidence otherwise.

Mumma v. Mumma, 280 A.2d 73 (1971)

 
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