Wife Waived Right to Tax Reimbursement by Failing to Comply with Texas Divorce

does-adultery-affect-alimony-in-idaho-1080x600-1When the parties to a Texas divorce agree on a property division, they may agree that certain obligations or conditions must be met.  If a party fails to meet their obligations as agreed to and set forth in the divorce decree, they may not be entitled to the property they were expecting.  In a recent case, a husband challenged a court order requiring him to reimburse the wife for certain tax liabilities after she failed to provide him the documentation required to calculate the amount he owed in accordance with the decree.

Wife Fails to Comply with Requirements of Divorce Decree

The parties’ mediated settlement agreement was incorporated into their divorce decree. The decree required the wife to withdraw funds from the husband’s pension plan. After paying certain debts, her attorney was to distribute 30% of the remainder to the wife and 70% to the husband. The decree required the husband to reimburse the wife 70% of her income tax liability for those funds. The decree ordered the wife have two draft income tax returns prepared, one showing the pension plan funds as income and the other not including the funds, to allow the husband to calculate that reimbursement. She was to provide the husband with the draft returns by June 1 of the year after the year the funds were liquidated.

The wife hired a tax preparation company.  The first draft return was a joint return with her new husband and included his wages, her wages, her social security disability income, and the liquidated pension plan funds.  The second draft return indicated it was a joint return, but only included her wages.  She sent the drafts to the husband before the deadline. He informed her he needed a draft return that included only her wages and the liquidated pension plan funds.  The wife went back to the tax preparer multiple times, but said they kept getting it wrong.

At the hearing, the wife acknowledged the draft returns were supposed to be the same except for the liquidated pension plan funds.  She also acknowledged she had not provided correct versions of the drafts . She had instead hired a forensic accountant to figure out how much she was owed.

Her expert testified the tax returns were incorrect. He had not prepared correct draft returns, but instead calculated the difference in her tax liability with and without the liquidated pension plan funds. He determined that amount, which was $25,813.85, in September 2019.

The husband testified he received the expert’s report in September 2019, but still had not received correct tax return drafts.  He thought the wife waived her right to reimbursement for the tax liability by failing to give him the correct draft returns.

Trial Court Nonetheless Awards Judgment to Wife

The trial court awarded the wife $18,069.00, which was 70% of the difference in tax liability as calculated by the expert. The husband appealed.

The husband argued the wife was required to use a licensed tax preparer to prepare two draft tax returns showing only her own income, with the only difference being the liquidated pension plan funds.  She was also required to give those drafts to him by June 1, 2017.

The wife argued the decree did not define the term “licensed income tax preparer” and it did not have a common meaning.  She further argued that the decree did not require that the two drafts match other than the inclusion or exclusion of the liquidated pension plan funds. She argued she complied with the decree by sending two draft returns by the deadline, even though one was a joint return including her new husband’s income. She argued the decree did not specifically state the drafts had to be “mirror images” except for the liquidated pension plan funds.

The appeals court pointed out that the purpose of the requirement was to determine the amount the husband was required to reimburse the wife. The only way that could be accomplished with two draft returns was if the only difference in the returns was the liquidated pension plan funds. The appeals court found an interpretation allowing the wife to provide drafts with other differences would render the requirement meaningless. The appeals court further found the wife’s interpretation would result in “an unreasonable, if not absurd, result.” It would not be reasonable for the wife to be able to trigger the husband’s obligation to reimburse her by providing him documents that would not allow him to determine the amount of reimbursement. The appeals court also found the provision was not ambiguous because the interpretation offered by the wife was not reasonable.

Appeals Court Determines Wife Waived Her Right to Judgment

The appeals court also found that the return including the income of the wife’s new husband did not meet the decree’s requirement.

The appeals court concluded that the wife’s failure to comply with the requirement to provide the draft tax returns relieved the husband of the requirement to reimburse her. The decree stated the husband’s obligation to reimburse her would be waived if she failed to provide the two draft tax returns by the deadline. The trial court therefore abused its discretion in finding she was entitled to reimbursement.

The appeals court reversed the trial court’s order and rendered a judgment that the wife take nothing.

Do You Need to Enforce the Terms of Your Divorce Decree? Call McClure Law Group Today

This case illustrates the importance of complying with a decree.  If you are anticipating a divorce or if you have concerns you may not be able to meet the obligations in your divorce decree, you need the advice of a knowledgeable Texas divorce attorney.  Set up a consultation with McClure Law Group by calling 214.692.8200.

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