Posted on November 5, 2012 by Eric S. Solotoff

Read Matt Levitsky's Post Entitled "Who Gets to Claim the Child if there is 50/50 Custody?"

Matt Levitsky, an associate in our Montgomery County, Pennsylvania office wrote a guest blog for our fir's Pennsylvania Family Law Blog entitled "Who Gets to Claim the child if there is 50/50 Custody?"

Matt's post talks about the four prong test and the fact that at the end of the day, all other things being equal, the exemption would normally go to the parent with the higher adjusted gross income (AGI).  The piece also has an interesting discussion on whether a step-parent's income is included in the AGI test.  I note that Sandra Fava has previously addressed the issue of the allocation of the dependency exemptions, in general, on this blog.

While this is an interesting technical discussion, often it does not come into play in post-divorce scenarios in New Jersey because, either the parties agree upon the allocation of exemptions (most often, blindly alternating it if there is an odd number of children or splitting them if there is an even number of children - whether this makes sense or not will be the subject of another blog post in the future) or a judge will simply allocate the exemptions in a similar fashion, regardless of what the IRS code would provide. 

In any event, Matt's post was interesting reading and provides some guidance about what the proper result is when there is no agreement of the parties or decision by a court.

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Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric practices in Fox Rothschild's Roseland, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or esolotoff@foxrothschild.com.

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Posted on January 16, 2012 by Eric S. Solotoff

Court Says Incomplete Records and Inaccurate Tax Filings from the Self Employed Common in Divorce

On Friday, I blogged on the judicial estoppel aspect of the Romano case decided last week by the Appellate Division. While that was the major issue in that case, there was another part of the case that jumped out at me, when I read this line related to the court's valuation of the husband's business and calculation:

John also maintains that Judge Becker should not have accepted Dana's expert testimony with regard to the value of his business and the income it generates. John did not provide sufficient reliable information to allow Dana's expert to use valuation techniques based on tax reporting, so the expert was forced to consider the family expenses as a means to gauge the income generated by the business.

This scenario is not uncommon in divorce matters where a sole proprietor provides neither complete business records nor reliable Internal Revenue Service filings. We defer to Judge Becker’s fact-findings concerning the value of the business and its revenue.  (Emphasis added).

Unfortunately, when dealing in cases with small (and some times not so small) businesses, this is a common occurrence.  Often, it becomes a game of "tell me how much you can find and I tell you how much I have."   In this case, the non-owner has the laboring oar to try to reconstruct the exact income.

Many years ago, I had a case where the husband listed just enough income to pay for the mortgage and utilities on the $2 million marital home. Much of the families expenses were paid for in cash, thus, no documents existed evidencing their purchase.  This included things such as groceries - his explanation for not having grocery expenses were that his wife and daughter were "always on diets."  He had no good explanation for why there was no close expense to explain the 1000 square foot closet filled with designer clothes nor any evidence of the purchase of cigarettes where both parties smoked several packs a day.  I can go on but the point was that the income and lifestyle had to be reconstructed through expenditures.  This is difficult when you have proof of family expenses and even harder when even the expenses have to be reconstructed. 

There was another related line in the case that I also found interesting. The Court noted that, "Judge Becker determined John receives $82,000 in income and, due to his tax reporting methods, does not pay taxes on that income."

That brings up two issues.  First, when a judge makes a finding that someone is not reporting all of their income and not paying taxes on it, pursuant to a case called Sheridan v. Sheridan, the judge is supposed to report the matter to the IRS.  There is no indication in this opinion whether that was done in this case. As I have previously blogged, despite the fact that a judge has this affirmative obligation, it is often honored in the breach. 

The second issue raised, and it is not clear about what exactly happened, is whether the court really took into account the fact that the husband wasn't paying taxes on his income.  Put another way, the self employed person who makes $82,000 and doesn't pay taxes has more available income and an ability to pay more support than a W-2 employee who makes $82,000 and has withholdings/pays taxes on his/her full income.  On one hand, you would expect the person not paying taxes to pay more support.  On the other, can a court actually base it's decision on the fact that a person is perhaps breaking the law. 

In any event, this case evidences some of the issues related to cases where a party is self employed. 

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Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric practices in Fox Rothschild's Roseland, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or esolotoff@foxrothschild.com.
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Posted on October 2, 2011 by Eric S. Solotoff

Read Aaron Weems' Post Entitled "Handling the Holidays"

Keeping with our theme of custody and parenting related blog posts this weekend, I recommend that you read  Aaron Weems', an associate in our Bucks County office and editor of our Pennsylvania Family Law Blog recently post on that blog entitled "Handling the Holidays."

Family lawyers, judges, parent coordinators often don't look forward to holiday seasons because with them come often needless and petty disputes over holiday time.  Aaron's blog provides an interesting perspective on this.  Parents should want their children to remember holidays for the good times, not because their parents put them in the middle of such disputes.  More importantly, the children should not look towards upcoming holidays with dread, wondering if their parents are going to fight about them again.

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Eric Solotoff is the editor of the New Jersey Family Legal Blog and the Co-Chair of the Family Law Practice Group of Fox Rothschild LLP. Certified by the Supreme Court of New Jersey as a Matrimonial Lawyer and a Fellow of the American Academy of Matrimonial Attorneys, Eric practices in Fox Rothschild's Roseland, New Jersey office though he practices throughout New Jersey. You can reach Eric at (973)994-7501, or esolotoff@foxrothschild.com.

 

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Posted on April 16, 2011 by Eric S. Solotoff

Creating "Settlement Anxiety" at Mediation - Is It Fair When One Party is Acting Unreasonably?

Last year, I blogged on this topic after I was at a mediation where the mediator, when telling us his assessment of my client's case, said that he was creating "settlement anxiety." At the time, I had never heard of this term but what I believed was meant was that the mediator wanted the client to have "anxiety" about his/her position in order to be more likely to make compromises and settle. If the goal is getting a settlement at all costs, I guess it makes sense - but is it fair, especially where one party is acting reasonably, and the other is not.  As this has come up in two recent mediations, I thought it made sense to reprise this post.

In most cases, there is a "realm of reasonableness" or a range in which any settlement would be essentially fair. Perhaps, a fair alimony figure could be between $100,000 per year and $125,000 per year. A fair resolution could be either of those numbers and anything in the middle. In most cases, people, with all relevant facts and acting reasonably, negotiate within the realm of reasonableness, but at either end depending on which side of the case they are on. In that case, a mediator trying to create "settlement anxiety" will try to express the flaws in either case to get the parties to meet somewhere in the middle to achieve a result that is fair.

But what about cases where one party is negotiating within the realm of reasonableness and the other is not? Put another way, what about cases where one party has the law and the facts pretty much on their side as to most issues and the other side is taking a position that is absurd? In this case, should the mediator be trying to create similar "settlement anxiety" in both parties? Add another level - what if the mediator knows that the unreasonable party will never settle the matter in a reasonable fashion? Should the mediator pressure/create the same amount of "anxiety" in the more reasonable party just to achieve a settlement even though everyone knows it is unfair? Should the result be settlement at all costs? Does this type of pressure on the righteous party just to get a deal done artificially undermine a party's relationship with her counsel and experts, if just for settlement purposes, they are told that their case is weak when it is not?

In my humble opinion, pointing out the legitimate limitations in someones case in order to help create a settlement is fair and appropriate. On the other hand, creating artificial anxiety just to get a settlement all all costs because one party is acting unreasonably or negotiating in bad faith is not. The system should be fair and equitable and the parties are entitled to justice. It is neither fair nor justice to lessen a party's confidence in their case, artificially, just because the other side will never settle in a fair and reasonable manner.

That does not mean a party cannot give more ore receive less just to get a case done and move on with their life. That is their choice. In fact, in recent cases, the mediators have used the anticipated costs of litigation as the pressure point on the party with the more reasonable position. Perhaps the better tactic would be to tell the unreasonable person of their exposure to pay the reasonable party's legal fees.

That said, the reasonable litigant should not be manipulated just because the other side refuses to be reasonable. And as I have blogged before, sometimes you just have to try a case.

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Posted on January 12, 2011 by Eric S. Solotoff

In Business Valuation, Are Hypothetical Costs of Sale Considered to Reduce Value? Court in NJ vs. PA Disagree

While there are many similarities between the states when it comes to family law, there are also many differences.  That fact was recently highlighted in the context of business valuation, specifically, what things should be considered to arrive at a value for equitable distribution, in a post recently seen on our firm's Pennsylvania Family Law Blog.  Specifically,Aaron Weems is an attorney in our Warrington (Bucks County), Pennsylvania office and editor of the Pennsylvania Family Law Blog wrote an interesting post entitled "Superior Court Changes How Businesses are Valued."

In the Balicki case that Aaron discussed, at issue was the valuation of an insurance agency.  It was understood that the business would not be sold, therefore, in deciding the value of the business, the Master excluded expenses of sale, transfer, or liquidation which could include broker commissions, finders fees, attorney fees and accountant fees. The appellate court reversed finding that this was improper.  Moreover, the appellate court found error in the fact that the Master failed to take into consideration any taxes that may be associated with the sale or liquidation of a business.

 

Aaron noted that the appellate court held that Pennsylvania statutes 23 PACSA § 3502(a)(10.1) and (10.2) required that for the purposes of equitable distribution of marital property, the Court must consider the Federal, state and local tax ramifications even if they are not “immediate and certain”, and similarly, the sale, transfer, or liquidation of an asset need also not be “immediate and certain,” either.

 

The practical effect of this reducing these hypothetical expenses is that it reduces the marital estate, and therefore, the other spouses overall equitable distribution award. Would the same result be reached in New Jersey?

The answer is no.  In 2002, the New Jersey Appellate Division essentially changed the standard of value in divorce cases in the case of Brown v. Brown.  Prior to that time, the standard of value in divorce cases was fair market value. Using the classic definition of fair market value, essentially value was calculated based upon what the business would be sold for in an arms length transaction (not a liquidation as is apparently what Pennsylvania may be doing.)  As such, discounts such as those for lack of marketability (i.e. considering the lack of a ready market for a closely held business) and for lack of control (i.e. if a party owned less than 50% of the business) were considered.  This would have the effect of reducing value and thus, reducing the marital estate for equitable distribution purposes.

Brown changed things by eliminating such discounts based upon the notion that the business was not being sold.  In essence, the court essentially applied the standard of value used in minority oppressed shareholder actions. 

Also, unlike Pennsylvania, hypothetical taxes on sale cannot be considered to reduce value based upon the decision in the Orgler case.  However, that case also requires a court to consider these hypothetical tax consequences when it comes to the percentage distribution of the asset.  Why?  Because the court's in New Jersey are court's of equity and fairness is the goal.  Put another way, if the non-titled spouse gets cash for his/her share of a business interest, they get that equitable distribution tax free.  On the other hand, the business owner will have to pay taxes on the liquidation of the business.  Thus, if the non-titled spouse gets 50% of the value of the business in cash or other assets, they may very well be getting more than the titled owner when taxes are considered.

As to whether broker's commissions and other costs of sale are to be considered, in New Jersey, unlike Pennsylvania, the answer is generally no if they are hypothetical as per the Wadlow case.  However, if an asset will have to be sold to effectuate equitable distribution, fairness would dictate the consideration of costs of sale and taxes.

As you can see from the above, non-titled spouses on different sides of the Delaware River would experience a different equitable distribution of the same business, just because of the difference in state laws.
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Posted on April 7, 2010 by Eric S. Solotoff

NY JUDGE ORDERS RETURN OF ENGAGEMENT RING TO FIANCE' THAT ALLEGEDLY CHEATED

In today's New York Post, there is an article by Kieran Crowley and Lorena Mongelli about a Long Island, New York law suit filed by a man to obtain the return of the engagement ring that he gave to his fiance', who had been his high school sweetheart.  Apparently, she refused to return the engagement ring and broke off the engagement after learning that he allegedly cheated on her.  She counterclaimed that she suffered from emotional distress as a result of his actions.

The judge ruled that state law allows a person to get back property that was given "in contemplation of marriage" if the marriage doesn't occur. The judge wrote that "Consequently,fault in the breakup of an engagement is irrelevant."

As noted by Apple Sulit-Peralejo in a blog post on this blog last October, the law in New Jersey regarding this issue is essentially the same.

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Posted on February 8, 2010 by Eric S. Solotoff

READ THE POST ENTITLED "PARENTAL ALIENATION: PROGRAMS SEEK SOLUTIONS TO PARENT/CHILD DISCORD" FROM OUR PENNSYLVANIA FAMILY LAW BLOG

Aaron Weems, an associate in our Bucks County office and editor Fox Rothschild's Pennsylvania Family Law Blog wrote an interesting entry entitled "Parental Alienation:  Programs Seek Solutions to Parent/Child Discord." 

The post discusses two programs that deal with parental alienation.  One is Overcoming Barriers Family Camp in Natick, Massachusetts,  The other is the Rachel Foundation for Family Reintegration located in Kerrville, Texas.

There is also a psychologist in New Jersey, Dr. Amy Baker, who has written and lectured extensively regarding this issue. 

We have blogged about this topic several times in the past, both on whether Parental Alienation will be added to the DSM, to Appellate cases addressing this issue, to the possibility of a cause of action in tort being considered, as well as several abduction cases.  We will continue to address this important topic whenever we can provide relevant information about it.

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Posted on December 4, 2009 by Sandra C. Fava

SHOULD YOU MAKE A MOTION FOR RECONSIDERATION?

In New Jersey, in a family court matter, if a party’s position is unreasonable or taken in bad faith, the other party can seek reimbursement of attorney’s fees. This was the case in the recent unpublished decision of Ramirez v. Ramirez, New Jersey App. Div., Docket No. A-2035-08T32035-08T3, November 24, 2009. 

 In Ramirez, the parties were divorced by a Dual Final Judgment of Divorce entered on January 29, 2007, which incorporated a settlement agreement. Following the divorce, in three separate motions, plaintiff persisted in seeking a re-calculation of defendant's income based upon allegations and documentation relating to circumstances that existed for several years prior to their 2007 divorce. In his December 21, 2007, decision the judge put plaintiff on notice that she had failed to establish a change in circumstances. Nonetheless, plaintiff filed a cross-motion in August 2008 and a motion for reconsideration on October 6, 2008, both of which continued to seek the same relief based upon the same allegations. As a result, defendant was compelled to incur "unnecessary costs" for which he is entitled to be reimbursed. Under these circumstances, the judge awarded and the Appellate Division affirmed the counsel fees awarded to defendant.

Plaintiff’s position was that the benefits that the defendant received from his employment for his family’s business, including mortgage payments, a bonus, pay raises, payment of property taxes, etc., should be included in determining defendant’s child support obligations. While the plaintiff may have been correct, she failed to dispute his income when they were divorcing and alimony had been determined. As a result, there was no “change of circumstance” in the defendant’s income.

Plaintiff may have had a good faith basis to seek the re-calculation of defendant’s income, however after the judge made his ruling and absent new or additional evidence, plaintiff should not have filed a motion for reconsideration unless new proofs or information substantiating her claims could be provided. A motion for reconsideration must state "the matters or controlling decisions which counsel believes the court has overlooked or as to which it has erred." Reconsideration is within the discretion of the court.

A party should not file an application for reconsideration merely because of their dissatisfaction with the court’s decision. In New Jersey, in matrimonial actions the award of counsel fees rests within the sound discretion of the trial judge.

A motion for reconsideration is a useful tool especially when there is new information or when a judge may have missed a key fact. If filing a motion for reconsideration is something you are considering, you must carefully assess whether there is no information which would change the court’s mind or whether there was key information that the court missed the first time around. If the application is brought in bad faith, it could result in an award of counsel fees to the other party. 
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Posted on November 5, 2009 by Eric S. Solotoff

ANOTHER DAY, ANOTHER CELEBRITY DIVORCE

Connecticut seems to be the hotbed of celebrity divorces these days. 

Yesterday's news reported that model Stephanie Seymour will have to make due on $270,000 per month in temporary support while her case is pending.  The news accounts report that her husband nets $1.5 million per month making this appear to be a veritable drop in the bucket.

Today's new reports that sportscaster Jim Nantz has to pay his wife $72,000 per month in permanent alimony plus $1,000 per week in child support.  This is a substantial amount if his income is $3.2 million as noted in one place but not so much if his income is $7 million as reported in other places. 

Aside from a look into the lives of the rich and famous, this shows another thing - that is, divorce can be a very public airing of very private matters.  While perhaps it may be more noteworthy for celebrities, even much of regular people's divorce can become part of the public record.  While it is not possible to completely avoid this, treating each other in a dignified and fair manner and settling issues is a way to help keep things out of the public record. 

 

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