Opinion ID: 2805792
Heading Depth: 3
Heading Rank: 2

Heading: Marriage and Tax Liability

Text: Ira and Susan were married on December 16, 1997, and they subsequently filed their joint tax return for 1997. Ira was responsible for filing and paying the taxes. The parties received a home interest tax deduction in the amount of $40,605 for the residence initially purchased by Susan. The 1997 joint tax return, which was considered by the family court to be the best evidence of the parties’ pre-marital property, listed thirteen rental properties and three businesses. The return included reference to three Texas properties owned by Susan, and several properties that were distributed to Ira in the divorce decree relating to his prior marriage. The parties continued to live in the residence initially purchased by Susan until July 2010. During that time, the parties twice obtained equity lines of credit against the residence. The first line of credit was $150,000, and it was used primarily for the down payment on two investment 3 FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER properties, with the remaining $58,119.67 balance being deposited into a bank account held by Susan. The second line of credit in the amount of $450,000 was obtained in March 2010, and the family court found that the parties obtained it, in part to satisfy the couple’s outstanding tax liability. On March 12, 2010, Ira deposited $280,000 from the second equity line into his personal bank account, and he withdrew $103,000 from that account in the form of a cashier’s check payable to the Internal Revenue Service (IRS), with the memo line stating “various tax returns.” However, this payment did not satisfy the couple’s entire debt owed to the IRS, and by the time of trial, the couple still owed approximately $140,000 to the IRS originating from past tax liability for the principal amount of $116,000, plus penalties and accruals. Susan testified that she believed the $280,000 had been used to pay off the parties’ entire tax debt.