Month: May 2020

U.S. Tax Court has ruled that Wife must report half of the community property income from partnership that Husband started post-separation with community property funds on her separate federal income tax return. In the case of Carrino v. Commissioner, California residents Husband and Wife were married in April 1990. During their marriage, Husband was a highly successful hedge fund manager, but the stress of his success brought an end to the marriage. In January 2002, Husband and another person started a new hedge fund, CR Traders, LLC (CR LLC), with Husband as the managing member.

In June of 2002, Husband and Wife separated and Husband filed for divorce. Around that same time, Husband, as CR LLC manager, created CR Traders Partners, LP (CR LP), for which CR LLC would act as a general partner. In September of 2002, CR LP began acting as a hedge fund, which Husband managed through CR LLC.

During 2003, CR LP earned about $4 million on initial contribution of $850,000, and CR LLC contributed $9 million in capital to CR LP, bringing its total capital account to over $14 million by years end. When Husband filed tax returns for CR LLC and CR LP, he did not list Wife among their partners and Wife did not report any income from either entity.

Sometime later, Wife found out that Husband had invested in CR LLC and CR LP. In divorce proceedings, Wife claimed that Husband had used community property funds in making those investments (traceable from the hedge fund founded during marriage), but Husband disagreed. In November of 2006, Trial Court approved a settlement agreement providing that 72.5% of Husbands interest in CR LLC was community property and the remaining 27.5% was Husbands separate property. That agreement also required Wifes community property share of that interest to be promptly liquidated, which Husband promptly did, paying Wife almost $6.5 million from CR LP.

On December 26, 2006, Trial Court entered Husband and Wifes status-only divorce judgment, but reserved jurisdiction over remaining issues. Among those was Husbands claim for reimbursement for income tax payments he had made on community property income between 2003 and 2005. In opposition, Wife asked Trial Court to consider the reimbursement issue along with other remaining issues when divorce case concluded.

On April 15, 2007, Husband took matters into his own hands, filing amended 2003 partnership returns for CR LLC and CR LP on which he claimed that Wife was a partner in those entities, and that Wife had received $759,196 in other income from them, plus $355 in interest. Husband also made corresponding deductions to reflect the alleged distributions. When Wife filed her 2003 federal income tax return, she did not include the alleged distributions.

Noting the discrepancy, IRS audited Wifes 2003 return and assessed deficiency accordingly. Wife then petitioned U.S. Tax Court for review, claiming that she was not a partner in CR LP at any time, including 2003. Meanwhile, IRS began investigation of CR LP. When that investigation concluded, IRS sent notice to Wife determining that she was a partner in CR LP. Wife then petitioned U.S. Tax Court for determination that she was not a partner. After consolidating the cases, Tax Court has now ruled that Wife must report community property share of CR LP income.

Tax Court has found that (1) it need not decide whether Wife was partner, but only whether Wife had community property interest in the income generated by CR LP; (2) Husband and Wife were still married during 2003; (3) married persons who file separate returns, as Husband and Wife did here, must each report half of community property income earned during taxable year; (4) Wife had present, existing, and equal community property interest in 72.5% of Husbands interest in CRL LC and CR LP during 2003; and (5) Wife should have reported half of the community property income from CRL LC and CR LP on her 2003 federal income tax return.

On November 20, 2015, a California Court of Appeals ruled that Trial Court was not wrong in making an attorneys fee order pursuant to California Family Code Sections 2030 and 271 without making specific findings as to the sums awarded under each statute, or by including in Mothers income the amounts that her father paid for her attorneys fees. In the case of In re Marriage of Smith, Mother and Father were divorced in 2002, but they continued to litigate child custody and support issues. Mother even brought Fathers new spouse (Wife) into the litigation at one point.

In December of 2008, Father filed for child support modification, attorneys fee order, and sanctions. He later followed up in January 2010, with a motion for child custody modification. In August of 2012, Mother filed a motion for child support modification. Those three proceedings were consolidated into a trial which ended on June 27, 2013.

On July 3, 2013, Trial Court heard arguments regarding attorneys fees and sanctions. On November 4, 2013, Trial Court issued findings of fact in which it noted that Mother and her attorney had engaged in overzealous litigation which made the proceedings unduly complicated and created a morass of litigation, the primary purpose of which was to ruin [Father and Wife] financially. Trial Court further noted that Mother was not concerned with running up big attorneys fee bills because her father was paying her fees, and that her father had testified that the fee payments were loans against Mothers ultimate inheritance of $6 Million. Trial Court also stated that Father and Wife lacked savings or liquid assets to match Mothers fathers financial aid and were financing their attorneys fees with credit cards. Accordingly, Trial Court ordered Mother to pay $124,352 for Wifes attorneys fees and $151,967 for Fathers (minus a specified offset).

Claiming that Trial Court erred by failing to differentiate between fee awards made pursuant to the two statutes and by making fee award under either statute, Mother appealed. The California Court of Appeals has now affirmed Trial Court and has found that (1) Trial Court need not differentiate the amounts awarded under each statute where entire amount of fee order would be appropriate under either statute; (2) California Family Code Section 2030 seeks to ensure that each party has sufficient access to legal representation by making needs-based award where necessary; (3) fee award under California Family Code Section 2030 may be ordered from community property, separate property, principal, or income; (4) pursuant to the case of In re Marriage of Alter (2009) 171 Cal.App.4th 718 [Trial Court may consider recurring gifts of money as income] and In re Marriage of Williamson (2014) 226 Cal.App.4th 1303 [advance against inheritance may be treated as gift], Trial Court did not err in including Mothers fathers payments of Mothers attorneys fees as income to Mother for purposes of determining parties relative circumstances in calculating fee award; and (5) it need not decide whether fee awards were proper under California Family Code Section 271 because the awards were proper under California Family Code Section 2030.

A California Court of Appeals has ruled that Trial Court was wrong when it refused to issue a permanent restraining order on the basis that emotional harm did not constitute domestic violence and a six-month hiatus from physical violence meant that further acts were unlikely to occur. In the case of Rodriguez v. Menjivar, Mother and Father began dating in June of 2013. According to Mother, Father soon began calling her many times each day, accusing her of cheating on him, isolating her from contacting other people, and engaging in other forms of controlling behavior. In November of 2013, the stress and anxiety from Fathers behavior prompted Mother to seek psychological help. Mother broke up with Father in December 2013.

In January of 2014, Mother discovered she was pregnant and resumed her relationship with Father. Father then enrolled in three of the four college classes that Mother was taking, forced her to keep her telephone calls from him open during the fourth class, and threatened her with bodily harm if she failed to keep the line open at home, so he could monitor her activities. When Mothers mother noticed the open line, Mother told her that Father would hit her if she didnt keep it open. Soon thereafter, Father sliced open the neck of Mothers teddy bear, telling her that he wanted to do the same thing to her. When Mother was diagnosed with a medical condition that required her to limit stress and strenuous activities, Father played with a knife close to Mothers face, threatened to beat her with a studded belt, and refused to stop practicing martial arts close to her. Despite Mothers pregnancy, Father pulled her hair, kicked and slapped her, punched her with his fist, and pushed her head into a seatbelt holder while driving. Mother was understandably terrified, but did not contact police because Father told her that he would tell them that she abused him.

In February 2014, Mother asked Father to drive her to the hospital because she was having abdominal pain. On the way, Father drove erratically, grabbed her phone when she tried to call her mother, threatened to send her to jail, and claimed he would drive into an oncoming train. When Mother told the hospital staff about his behavior, they called the police. After that, Mother stopped seeing Father, but he didnt stop harassing her. He threatened her in person and through social media in March and April of 2014, and had his friends threaten her. Mother changed her phone number, closed her social media, and later, stopped attending college classes. In July of 2014, she again sought counseling, after seeing Father in her neighborhood. She then filed for a Domestic Violence Prevention Act restraining order, and Trial Court issued a Temporary Restraining Order on July 24, 2014. Mother subsequently gave birth to a son.

On September 3, 2014, Trial Court held the first of three hearings on issuing a permanent restraining order against Father. Mother attempted to testify about the mental abuse that Father had inflicted on her, but Trial Court found that was irrelevant because (it believed) mental abuse was not domestic violence. Mother and her mother testified about the physical abuse that Father had inflicted on Mother. Father testified that he had moved out of the area and had no contact with Mother during the past six months. When the hearing concluded, Trial Court found that there had been significant violence through February of 2014, but none since. Concluding that the prior violence was too remote in time and that Fathers move made it unlikely that any would occur in the future, Trial Court dissolved the Temporary Restraining Order, but refused to issue a permanent order. Mother appealed, and the California Court of Appeals has now reversed Trial Courts decision.

The Court of Appeals has ruled that (1) mental abuse is relevant evidence in Domestic Violence Prevention Act proceeding, thus, Trial Court was wrong by sustaining Fathers objection to its admission; (2) Fathers acts of mental abuse were sufficient to form a basis for a permanent order; (3) Fathers acts of physical abuse were sufficient to support a permanent restraining order; and (4) Trial Court was wrong by determining that six-month hiatus from abuse and Fathers move to another area were appropriate bases for denying a restraining order. Therefore, the Appellate Court has reversed Trial Courts order denying a permanent restraining order and has sent the case back to Trial Court to issue such an order in accordance with the Appellate Courts opinion.

In the case of People vs. Aguilera, a California Court of Appeals has ruled that one spouse can be convicted of robbing the other spouse of community property on temporary taking theory. The principles of community property and separate property are immaterial in a robbery prosecution.

When Mother and Father went to a baptism party on August 3, 2014, Mother carried a purse which contained her wallet, ID and other documents, the keys to the family car, and a white cell phone. Father always carried a black cell phone. As the party ended, an argument began between Mother and Father, who was apparently angry about a restraining order Mother had obtained after an incident of domestic violence. Mother ran to the family car and Father followed her. He put his hands around Mothers neck and proceeded to strangle her, telling her to give him the phone. Mother was able to break free, get in her car, and roll up the window. When she turned the ignition on, Father broke the car window, reached in, and turned the engine off. Even though the broken glass had already cut Mothers feet and hands, Father tried to pull her through the car window. Mother and Father struggled over Mothers purse, but Father was too strong and took the purse. At that point, a bystander saw Mother and Father struggling and heard Father shouting give me the bag and phone. After the bystander and his friend pulled Father away from the car, Father grabbed Mothers cell phone and wallet from the purse, threw the purse at Mother, and left. When deputies caught up with Father, he was talking on his cell phone and had Mothers cell phone and wallet in his pocket. The officers returned Mothers phone and wallet to her, interviewed her, took pictures of her injuries, and noted minor cuts on Fathers arm and hand.

Father was subsequently charged with violating California Penal Code Section 211 [second-degree robbery] and Penal Code Section 273.5(a) [corporal injury to a spouse]. At trial, the prosecution presented evidence of Fathers history of domestic violence toward both Mother and a former girlfriend, which included his habit of taking Mothers cell phone so that she could not call the police after the incidents. Mother testified about the many and various injuries that Father had inflicted on her during several incidents of domestic violence. Mother also stated that Father had given her the purse and white cell phone as Mothers Day gifts, but he paid the phone bill and was free to use the phone and the purse if he wished to. Mother concluded that she fought with Father over the purse because it was [hers]. In closing, the prosecution argued that Father took Mothers phone to remove it from her possession for such an extended period of time as to deprive her of a major portion of its value and enjoyment, leaving her without the means to make a call to the police to get help. The jury convicted Father of second degree robbery and misdemeanor battery, a lesser included offense to the corporal injury charge.

Father appealed his conviction. Father claimed that pursuant to the case of Llamas (1997) 51 Cal.App.4th 1729, that he could not be guilty of robbery because the phone he took was community property and he intended to deprive Mother of it for only a brief period of time.

California Court of Appeals has now affirmed the jurys conviction of Father. The Appellate Court has found that (1) in Llamas, the court held that (a) a spouse could be convicted of theft of community property if the taking exceeds the spouses interest in the community property and (b) the spouse could not be convicted of violating California Vehicle Code Section 10851(a) [vehicle theft] if he or she took the community property vehicle with the intent to temporarily deprive the other spouse of its use; (2) pursuant to the case of Avery (2002) 27 Cal.4th 49, the requisite intent for robbery is satisfied if the perpetrator has the intent to deprive another of property temporarily, but for an unreasonable time that deprives the person of a major portion of its enjoyment or value; (3) a spouse may be convicted of robbery if he or she takes the community property temporarily, but for an unreasonable period of time that deprives the other spouse of its value or enjoyment; and (4) Father had the requisite intent when he took Mothers cell phone, regardless of whether it was community property or separate property, thus Trial Court need not give jury instruction on separate property and community property.

A California Appellate Court has ruled that a Trial Court was wrong in denying Fathers motion to move to Washington State with the parties minor child because it unduly focused on the effect of the move on Mother, failed to apply the best-interests standard properly, made the finding regarding co-parenting unsupported by the evidence, and failed to consider Mothers prior domestic violence toward the child as required by California Family Code Section 3044. In the case of F.T. v. L.J., Mother gave birth to her and Fathers son in January of 2006. On February 17, 2007, Mother burned the childs arm with curling iron in an apparent effort to deter the Child from touching a hot iron. When Father arrived to pick the Child up, he noticed the Childs burn and took Child to the hospital for treatment. After hospital worker notified Child Protective Serviced and police, those authorities advised Father to keep Child in his care and allow Mother only supervised visits.

On February 28, 2007, Father filed a petition to establish his paternity of the Child and for sole legal and physical custody. Father followed that up with an Order to Show Cause, seeking sole legal and physical custody and supervised visits for Mother. Trial Court ordered parties to mediation and limited Mother to supervised visitation. When mediation produced no agreement, Family Court Services (FCS) counselor recommended that Father be granted legal custody of Child, that Child live primarily with Father, and that Mother have supervised visitation. In response to Fathers paternity petition, Mother admitted Fathers paternity, but sought sole legal and physical custody of Child.

On April 23, 2007, Mother and Father stipulated to Trial Courts adopting FCS recommendation as its order without prejudice to either party, and to Mothers paying $740 per month to Father for child support. Trial Court then adopted their stipulation as its order.

On September 14, 2007, Father filed an Order to Show Cause for an order permitting him to move with the Child to Texas, where his three children from prior marriage lived with their mother, he had extended family, and he expected to find more job opportunities and lower living costs. After Mother filed an opposition, Trial Court held a review hearing, modified visitation to give Mother unsupervised visits, and referred parties back to mediation. Mother and Father met with FCS counselor, but again were unable to agree.

On November 7, 2007, FCS counselor filed a report, stating that on November 6, 2007, Mother had entered a guilty plea to one count of violating California Penal Code Sections 242, 243(a) [simple battery] and had been granted four years probation. Counselors report also mentioned that Mothers other child lived with paternal grandparents. The counselor recommended that Father and Child be allowed to move to Texas, noting that Father had been Childs primary caregiver since Mother had inflicted harm on Child, resulting in battery plea, and that giving custody to Mother was “not an option.” The counselor further recommended that Mother and Father be given joint custody of Child, that Child would live with Father, and that Mother be granted additional unsupervised visitation before and after Childs move to Texas.

In December of 2007, Father took his Order to Show Cause regarding his intended move off of the Trial Courts calendar, but re-filed it on February 5, 2008. After Mother filed her opposition, Trial Court appointed Psychologist to do a psychological evaluation of Mother, Father, and Child, and to issue a report of his findings.

On September 12, 2008, Psychologist filed a report in which he made general findings that Childs bond with Mother would be detrimentally affected by the move, that Mothers actions in burning the Child were impulsive and profoundly insensitive, but not indicative of “broader abusive intent,” and that the move to Texas would not be in Childs best interests. Psychologist recommended that Trial Court increase Mothers custodial time with Child.

On September 18, 2008, Trial Court adopted Psychologists recommendations as temporary order. After several continuances, Trial Court referred Mother and Father for further mediation and ordered Psychologist to prepare supplemental report to be delivered five days before mediation began. When Psychologist did not comply, FCS proceeded with mediation, noting that Father now wished to move with Child to Centralia, Washington, because he intended to marry a woman who lived there. FCS mediator received information regarding Childs improved behavior at school after Father began caring for him, Childs anger issues, and the effect of the move on Childs relationship with Mother. Mediators report expressed doubt that Father would support that relationship, given communication difficulties between Mother and him, and advised postponing the move until Child was older. Mediator recommended that Father remain Childs primary caregiver and suggested possible timeshare if move took place.

On February 22, 2009, Psychologist filed a supplemental report, stating that Mother and Father seemed better able to co-parent Child than before, Childs anger issues seemed improved, Child seemed bonded to both Father and Mother and her husband, and Child needed frequent and continuing contact with Mother, who appeared to be the parent better able to share. However, Psychologist declined to make a recommendation as to whether the move should take place, and would only recommend that joint custody be ordered.

On March 5, 2010, Trial Court denied Fathers move-away request and asked Fathers attorney to prepare written order, subject to approval by Mothers attorney. On May 6, 2010, Trial Court issued a written order, finding that (a) Father was Childs primary caregiver; (b) best-interests standard applies in this case; (c) Psychologists statement that Mother and Father were “co-parenting in a relative[ly] cooperative and stable manner” was “red flag that the parties are not communicating”; (d) the Childs anger was, in Trial Courts opinion, the result of tension between Mother and Father; (e) the Child was working hard to maintain relationships with both parties; (f) counseling for the Child should have started immediately after Mother burned the Child; (g) the Childs relationship with Mother and emotional development could be significantly eroded by the move; and (h) Fathers reasons for the move (new wife and family) are not sufficient to justify the move. Trial Court stated that it had not been told that Father would move if his request was denied; thus, he should notify Trial Court if that is his intention, at which time Trial Court will determine whether custody change is needed. Concluding that the move was not in the Childs best interests, Trial Court denied Fathers request.

Claiming that the Trial Court failed to apply proper standard for a move-away case and for ignoring Mothers criminal conviction, Father appealed, and a California Court of Appeal has now reversed the Trial Courts decision and has remanded the case back to Trial Court. The Appellate Court has ruled that (1) California Family Code Section 7501 does not apply because there was no existing final judicial custody determination and Mother does not have the initial burden of showing that the move would be detrimental to Child; (2) Trial Court misunderstood the proper legal standard to be applied in move-away cases because it (a) declined to consider whether the move was in Childs best interests until it was informed that Father would move even if the Trial Court denied his request (no coercive orders), (b) based its order partly on determination that Fathers reasons for the move were insufficient, and (c) gave undue emphasis to the effect of the move on the Childs relationship with Mother; (3) Trial Courts finding that cooperative and stable co-parenting raised red flag is not supported by evidence; and (4) Trial Court failed to make specific finding regarding the application of California Family Code Section 3044 [rebuttable presumption that custody award to party who has harmed child is detrimental to childs best interests]. Appellate Court holds that Trial Court abused its discretion by failing to apply proper standard and denying Fathers move-away request. Therefore, Appellate Court has reversed and remanded the case back to Trial Court to reconsider Fathers request and to make specific findings regarding the application of California Family Code Section 3044 to these facts.

A California Court of Appeals has ruled that a Trial Court was not wrong by declining to enforce a 25-year-old child support judgment on equitable grounds where Mother had concealed Children for 15 years. In the case of In re Marriage of Boswell, Mother and Father were divorced in October of 1985. Their divorce judgment awarded custody of their two children, ages five and three, to Mother and ordered Father to pay child support of $70 per month per child. Father made his child support payments as required for two months. By that time, Mother had moved from California with Children, changed their names, and failed to tell Father their new addresses. Unable to locate Mother and Children, Father stopped paying child support. He did not see Children for the next 15 years. By then, the first Child had reached the age of majority. In 1998, M gave Father custody of the second Child, then 16 years-old, who lived with Father until he reached majority.

In 2013, when Children were over 30, Mother filed a motion to enforce the child support order, seeking a judgment of $92,734. Trial Court reasoned that enforcing the order on these facts would be inequitable, and that Mothers having concealed Children for 15 years was unjust. Trial Court also determined that Mothers motion was untimely and barred by laches. Accordingly, Trial Court denied Mothers motion. Claiming that Trial Court relied on erroneous reasoning and that laches did not apply, Mother appealed.

California Court of Appeals has now affirmed Trial Courts decision. The Appellate Court has ruled that (1) Trial Court has broad equitable discretion to decline to enforce a child support arrearages judgment on a finding of unclean hands; (2) where Trial Court makes fair and equitable ruling on contested issues of fact, its express or implied factual determinations are binding on appeal. The Appellate Court has further ruled that Trial Court was wrong in basing its denial of Mothers motion, in part, on laches (laches applies only to child support owed to State). The Appellate Court describes this appeal as another frivolous family law appeal, but declines to impose sanctions for filing frivolous appeal because Mother believes, and apparently prosecuted this appeal, because of [Trial Courts] ruling on laches.

On June 26, 2015, the United States Supreme Court ruled, inthe case of Obergefell v. Hodges,that same-sex couples have the fundamental right under the Unites States Constitution to marry In that case, the Supreme Court was asked to decide whether Michigan, Kentucky, Ohio, and Tennessee could deny same-sex couples the right to marry or to have their legal out-of-state marriages recognized. The District Courts in each of those states had previously ruled in favor of plaintiffs who challenged the prohibitions in those states, but after consolidating the cases, the Sixth Circuit reversed the District Courts decision. The Supreme Court granted certiorari and now, a 5-4 majority has reversed the Sixth Circuit Court. The majority based their decision on the due process and equal protection provisions of the Fourteenth Amendment, finding that the right to marry is a fundamental right that is fully protected by the Constitution and is as applicable to same-sex couples as it is to heterosexual couples, and the right to have their marriages recognized by other states is similarly protected.

California Assembly Bill 610 (Ch 629) Suspension of Child Support During Payors Incarceration. As a pilot project that was effective until July 15, 2015, California Family Code Section 4700.5 provided that child support orders being enforced by a local child support agency would be suspended during any period beyond 90 days when the support payor was incarcerated or involuntarily institutionalized, unless he or she (1) had the means to pay support while in custody; or (2) was incarcerated for failure to comply with a child support order or for domestic violence against the support recipient or child.

Effective October 8, 2015, as urgency legislation, Assembly Bill 610 re-enacted California Family Code Section 4700.5 to re-establish, expand, and extend this pilot project. The new version of the statute applies to all child support orders, not just those being enforced by a local agency. And, instead of requiring the child support obligor to petition Trial Courts for adjustment of back child support after his or her release, the new statute specifies that the order will be suspended by operation of law during the relevant incarceration period, unless either of the same exceptions apply.

New California Family Code Section 4700.5(c) provides that a local child support agency may administratively adjust account balances for a suspended child support order if the agency is currently enforcing the order (even if it was not doing so when the obligor was incarcerated) and has verified that neither of the statutes exceptions for automatic suspension applies, but back support and interest accrued during the incarceration. However, the agency must first give written notice to both the child support payor and recipient, along with forms for objecting to the proposed adjustment. If either party objects within 30 days after receiving the notice, the agency may not adjust the arrearages unless it files a motion, serves a copy on the parties (who may again object), and obtains Trial Courts approval of the adjustment.

New California Family Code Section 4700.5(b) provides that the support obligation will resume on the first day of the first full month after the obligors release, in an amount presumed to be appropriate under federal and state law. The new statute specifies that it does not preclude the payor from seeking a modification based on changed circumstances or other appropriate reason, and it does not prohibit a party or child support agency from petitioning Trial Court to set child support or determine the back child support owed.

The new statute applies to all child support orders issued or modified on or before October 8, 2015.

The pilot project under the new statute will sunset on January 1, 2020, unless extended by subsequent legislation. Meanwhile, California Family Code Section 4700.5(h) requires DCSS and Judicial Council to evaluate the effectiveness of the administrative adjustment process provided in the new statute and report the results to the Legislature.