Opinion
NO. 2014-CA-001172-MR
05-27-2016
JAMES FRANK HAMMONS APPELLANT v. DEBRA C. HAMMONS APPELLEE
BRIEF FOR APPELLANT: Thomas M. Denbow Louisville, Kentucky BRIEF FOR APPELLEE: James K. Murphy Louisville, Kentucky
NOT TO BE PUBLISHED APPEAL FROM OLDHAM FAMILY COURT
HONORABLE TIMOTHY E. FEELEY, JUDGE
ACTION NO. 13-CI-00326 OPINION
AFFIRMING
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BEFORE: J. LAMBERT, TAYLOR AND THOMPSON, JUDGES. THOMPSON, JUDGE: James Frank Hammons appeals from an order of the Oldham Family Court requiring him to assume and pay all interest and penalties that may be levied on the parties for their failure to file federal and state tax returns. James argues the family court abused its discretion. We affirm.
James and Debra were married on August 12, 1994, and divorced by a limited decree of dissolution of marriage on January 6, 2014. The parties entered into a settlement agreement that resolved all issues except for the issue of the parties' respective federal and state tax liability for any period during the parties' eighteen year marriage. A hearing on this remaining issue was held on January 20, 2014.
The family court heard testimony from Debra and James. Prior to and during the marriage, James operated JFH Roofing and Guttering. During the four years prior to the parties' marriage, James did not file tax returns. Debra and James admitted that from the year they married, 1994, until the marriage was dissolved in 2014, they did not file federal or state tax returns and did not pay any income taxes to the state and federal governments. In the year they married, the parties filed an extension for their 1994 taxes but a return was not filed and, in 2004, a tax levy attached based on the filing for an extension.
After their marriage, James did the contracting, estimating and labor for the business. Debra admitted she was involved in the bookkeeping but routinely requested that James seek a tax professional to file tax returns. She claimed that the 2004 tax levy was paid from her household bank account, including significant non-marital funds provided by her father.
The family court found that neither party was blameless in the failure to file federal and state tax returns and Debra and James benefited from the income retained due to the continued lack of filing and payment. Therefore, the family court concluded that all tax liability assessed during the period of the marriage was a marital debt to be evenly divided between the parties. However, the family court found that James was in the best situation to address filing taxes during the marriage and, therefore, all interest and penalties on any tax debt were assigned to James. After the family court denied James's motion to alter, amend or vacate, he appealed.
There is no presumption that debt acquired during a marriage is marital or that marital debts should be divided equally between divorcing spouses. Neidlinger v. Neidlinger, 52 S.W.3d 513, 523 (Ky. 2001). The Court in Neidlinger pointed to several factors appropriate for the trial court to consider in dividing debt including; "receipt of benefits and extent of participation; whether the debt was incurred to purchase assets designated as marital property; and whether the debt was necessary to provide for the maintenance and support of the family." Id. (internal citation omitted). The trial court may also consider the "economic circumstances of the parties bearing on their respective abilities to assume the debt." Id. Ultimately, the division of marital debt is within the trial court's sound discretion and review is limited to whether that discretion was abused. Id. Discretion is abused only when "the decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999).
In Dobson v. Dobson, 159 S.W.3d 335, 337 (Ky.App. 2004), it was noted that it is within the trial court's discretion to assign the interest and penalties imposed for the failure to file taxes to "a dilatory spouse." In this case, the trial court found that regarding the taxes on the income earned from a business he owned before and during the marriage, James was the dilatory spouse in not filing tax returns during the parties' marriage. There was testimony that he operated JFH Roofing and Guttering prior to the marriage and continued to manage the daily operations of the business and that Debra's role in operating and managing the company was significantly less than James's. We cannot say that the family court abused its discretion.
Based on the foregoing, the order of the Oldham Family Court is affirmed.
ALL CONCUR. BRIEF FOR APPELLANT: Thomas M. Denbow
Louisville, Kentucky BRIEF FOR APPELLEE: James K. Murphy
Louisville, Kentucky