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Conrad v. Conrad6/4/2002
y part of the $42,900 in settlement proceeds were secreted or had been squandered by Wife, necessitating their being charged to her in the court's distribution of marital assets.
III.
In Point III, Wife claims that even if it was proper for the trial court to include in its distribution of marital property the sexual harassment settlement proceeds, the court still erred in including proceeds in the amount of $42,900 because in valuing the proceeds she received, the court was required, but failed, to consider the tax consequences of her receipt of the proceeds. Specifically, she claims that she had received from the Internal Revenue Service a tax statement, which reflected a tax liability of $15,605 as a result of her receiving the settlement proceeds, and that the payment of this tax liability would reduce the actual amount of the proceeds that she received. Although this issue may ultimately be rendered moot should the trial court find, on remand of Point II, that the settlement proceeds were not secreted or squandered by Wife, precluding their inclusion in the court's distribution of marital assets, because it is likely to arise again if the trial court finds otherwise on remand, we choose to address the issue in this appeal.
As Wife contends, in valuing the marital estate, the trial court is to take into consideration any tax consequences that would reduce the effective value of a marital asset. Homfeld v. Homfeld, 954 S.W.2d 617, 621 (Mo. App. 1997). However, Husband argues that it would have been inappropriate for the trial court to consider any tax consequences to Wife as a result of her receipt of the settlement proceeds because Wife did not present sufficient evidence to establish that she would be subject to any such tax consequences, citing Baldwin v. Baldwin, 905 S.W.2d 521, 524 (Mo. App. 1995). We need not decide if there was sufficient evidence for the trial court to consider the tax consequences to Wife of the receipt of the settlement proceeds, inasmuch as we are already reversing and remanding on the issue of the settlement proceeds. Our only purpose in addressing the issue raised here is to insure that the trial court is clear on how to address it if it comes back up on remand.
The trial court addressed the issue presented in this point in its findings in its judgment, stating:
[Wife] argues that the value of the [settlement] proceeds should be discounted by the amount of taxes now owed. [Wife] has not contested the tax assessment on the settlement, but as it was just recently assessed, would have that option. [Husband], however, did not share in the benefit of the settlement; [Wife] received the funds and spent them on her own behalf. As [Husband] has not shared in the benefits, he should not share in the tax consequences. The Court will assess the full value of the proceeds in the amount of $42,900 to the [Wife].
From this, it is clear to us that the trial court was mistaken as to the full implications of the tax consequences of the settlement proceeds. Obviously, a tax obligation triggered by receipt of the settlement proceeds would affect the "net" amount that Wife would ultimately realize in proceeds just as much as attorney's fees and expenses associated with prosecuting the lawsuit, which the trial court recognized were properly deducted in determining the amount of the proceeds chargeable to Wife as marital property. Hence, on remand, should the trial court determine that the settlement proceeds, in whole or part, should be included in its division of marital property, it should consider in valuing the proceeds any tax consequences incurred by Wife resulting from their receipt.
Conclusion
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