Opinion ID: 2216363
Heading Depth: 2
Heading Rank: 2

Heading: Consideration of Tax Consequences

Text: Husband next argues the trial court failed to consider the tax consequences of its decision when it held the property division and tax consequences would be equally shared. Specifically, Husband claims the trial court's decision results in double taxation of the Willow Creek property given to Wife, that the trial court failed to consider tax consequences in valuing certain income assets such as grain which will be taxable upon sale and, finally, that the trial court failed to deduct the federal income tax liability which would accrue if Husband liquidated certain corporate assets to pay Wife the cash amount awarded by the court. Though evidence was presented at trial regarding the tax consequences of a property division, we note Husband attempted to introduce most of this information after the trial court had issued its memorandum decision. We have previously stated `the well-settled rule [is] that theoretical tax consequences on transactions which are not necessary or probable but merely conjectural need not be considered.' Krage v. Krage, 329 N.W.2d 878, 881 (S.D.1983) (quoting Wallahan v. Wallahan, 284 N.W.2d 21, 25 (S.D. 1979)); Lien v. Lien, 278 N.W.2d 436 (S.D. 1979). Tax consequences relating to the disposition of the Willow Creek property were testified to at trial by Husband's accountant. The trial court, in its findings of fact and conclusions of law which are incorporated into the court's final judgment and decree of divorce, stated: If defendant or any of his business entities are required to pay tax reportable on Form 1040 or Form 1120 corporate return as a result of any land transfers to plaintiff pursuant to the court's division of property herein, said tax consequences shall be divided equally between the parties. Husband complains that double taxation will occur in the transfer of certain property belonging to Willow Creek Dairy, i.e., a tax consequence to the corporation and to himself personally. However, the court's equal distribution of the tax consequences between the parties includes defendant or any of his business entities. The trial court obviously considered, and made arrangement for, the very consequence of which Husband now complains. Husband also claims the trial court failed to consider tax consequences on the sale of grain and that tax consequences of the sale should have been figured into the asset's valuation. Both parties presented evidence of valuation and the trial court found values consistent with that evidence. We note the sale of grain would occur even if the parties were not divorcing and cannot, then, be considered a tax consequence of the court's property division. See Kelley v. Kirk, 391 N.W.2d 652, 657 (S.D.1986). Husband further claims he must liquidate assets to pay the cash sum awarded by the court to Wife. We have stated that a trial court must deduct the federal income tax liability on a total liquidation of assets if (a) the property division compelled a total liquidation of assets, and (b) if it were probable that the most disadvantageous method of sale from a tax standpoint would be used. Id. Considering all the evidence of the properties' worth and cash flowing therefrom, as well as the relatively small amount of debt on the properties, we believe Husband is not without options to obtain funds necessary to pay Wife the cash sum awarded and the property division does not compel a liquidation of assets. We also note that all the decree does is to declare a cash payment to Wife to maintain the 50/50 division of the property; it does not compel a liquidation of assets. See Kelley, 391 N.W.2d at 659 (Hertz, Acting Justice, concurring specially); Lien, 278 N.W.2d at 441. We find no error in the trial court's consideration of the tax consequences of its property division and, therefore, affirm the trial court's decision on this issue.