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MIRIAM B. DUFF v. STEWART M. DUFF (04/04/86)

decided: April 4, 1986.

MIRIAM B. DUFF, APPELLEE,
v.
STEWART M. DUFF, APPELLANT



Appeal from the Order of the Superior Court of Pennsylvania, at Nos. 03300 and 03410 Philadelphia, 1982, affirming the Order of the Court of Common Pleas of Montgomery County at C.P. Mont. Co. No. 80-11353. Pa. Super. , 484 A.2d 814 (1984)

COUNSEL

Robert I. Whitelaw, Philadelphia, for appellant.

Albert Momjian, Philadelphia, for appellee.

Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ. Hutchinson, J., files a dissenting opinion.

Author: Mcdermott

[ 510 Pa. Page 252]

OPINION

We granted allocatur in this case to review the lower court's treatment of a federal income tax liability in adjudicating appellee's claim for equitable distribution of the parties' marital assets under Section 401 of the Divorce Code of 1980 (Divorce Code), 23 P.S. ยง 401.*fn1

The parties to this action were married in 1960. The marriage lasted until the parties separated in January of 1980. Appellee, Miriam B. Duff, brought an action in divorce under Section 201(c) of the Divorce Code seeking, inter alia, equitable distribution of marital property pursuant to Section 401. The only marital property to be distributed by the court was a block of shares of Rorer Group, Inc.*fn2

[ 510 Pa. Page 253]

At the time of separation, appellant, Stewart M. Duff, held 4,318 shares of the Rorer stock. Between then and the time the trial court's decree nisi was entered, he had sold 2,400 of those shares, leaving 1918 shares in hand. The trial court found that those 1918 shares of Rorer stock were marital property subject to equitable distribution. In addition, the trial court found that 1400 of the 2400 shares sold by appellant after the parties' separation should be added to the marital estate. The trial court reached this conclusion by distinguishing between the uses to which the proceeds from the sale of these 2400 shares were put. Since the proceeds of 1400 of those shares were used for appellant's extraordinary living expenses, the trial court held that those 1400 shares were not excluded from the marital estate pursuant to Section 401(e)(5) of the Divorce Code.*fn3 The other one thousand shares sold after separation were sold in good faith, and thus excluded under Section 401(e)(5). The proceeds of their sale were used to pay a $16,224.00 joint liability for federal and state income taxes reported on their 1979 joint return, arising from the capital gains on earlier sales of Rorer stock made in 1979.

In August of 1980, the Internal Revenue Service assessed an additional $13,517.43 income tax, plus penalty and interest for 1979, caused by the incorrect treatment of the 1979 Rorer stock sales as long term capital gain instead of short term capital gain. Appellant contends that the courts below erred in failing to include this liability in the marital estate. The trial court did not address the issue.

The Superior Court, 335 Pa. Super. 638, 484 A.2d 814, concluded that the $13,517.43 tax assessment was not a joint liability. It arrived at this conclusion through a patent ...


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