Foundation for Evidence - Rule Against Inconsistent Positions
The same policies and principles underlying classic judicial estoppel have been extended to non-judicial circumstances by New York courts in situations involving tax returns. In Mahoney-Buntzman v. Buntzman, [1] Supreme Court held that husband was estopped from arguing that the funds he received from the sale of his corporate interests to his father were proceeds from the sale of stock and thus, separate property because he had reported the funds as business income on the parties' joint tax returns. The court also noted that in his 1993 judgment of divorce from his first wife, the husband represented that he owned no stock at the time. The Court of Appeals held that the trial court properly exercised its discretion when it classified the money received by husband pursuant to the settlement agreement as marital property, given the fact that husband made representations that the money was business income for tax purposes. It held that a party to litigation may not take a position contrary to a position taken in an income tax return.[2] Here, the husband did not dispute that, in accordance with his settlement agreement, he reported the $1,800,000 in settlement proceeds as business income on his federal income tax return, in which he swore that the representations contained within it were true. The Court of Appeals stated that it could not, as a matter of policy, permit parties to assert positions in legal proceedings that are contrary to declarations made under the penalty of perjury on income tax returns.
[1] Mahoney-Buntzman v. Buntzman, 12 NY3d 415, 422, 881 NYS2d 369 (2009); see Meyer v Insurance Co. of Am., 1998 WL 709854 [SD NY 1998]; Naghavi v New York Life Ins. Co., 260 AD2d 252 [1st Dept 1999]; Zemel v Horowitz, 11 Misc 3d 1058[A], 2006 NY Slip Op 50276[U], *5 [Sup Ct., 2006]).
[2] In Winship v Winship, 115 A.D.3d 1328, 984 N.Y.S.2d 247 (4tj Dept., 2014), the Plaintiff's primary challenge to the equitable distribution award was the court's determination that Pine Top Plantation, a 128-acre Christmas tree farm formerly owned and operated by plaintiff's deceased father, was marital property subject to equitable distribution. In the joint tax returns filed from 2000 through 2008 the parties depreciated Pine Top's equipment and property, and identified plaintiff as its "proprietor”. Plaintiff signed those tax returns. As the Court of Appeals has made clear, "[a] party to litigation may not take a position contrary to a position taken in an income tax return" ( Mahoney-Buntzman v. Buntzman, 12 NY3d 415, 422). Here, plaintiff's tax returns were inconsistent with his position that his father owned Pine Top after 2000, inasmuch as a party cannot depreciate property that he or she does not own.
The same policies and principles underlying classic judicial estoppel have been extended to non-judicial circumstances by New York courts in situations involving tax returns. In Mahoney-Buntzman v. Buntzman, [1] Supreme Court held that husband was estopped from arguing that the funds he received from the sale of his corporate interests to his father were proceeds from the sale of stock and thus, separate property because he had reported the funds as business income on the parties' joint tax returns. The court also noted that in his 1993 judgment of divorce from his first wife, the husband represented that he owned no stock at the time. The Court of Appeals held that the trial court properly exercised its discretion when it classified the money received by husband pursuant to the settlement agreement as marital property, given the fact that husband made representations that the money was business income for tax purposes. It held that a party to litigation may not take a position contrary to a position taken in an income tax return.[2] Here, the husband did not dispute that, in accordance with his settlement agreement, he reported the $1,800,000 in settlement proceeds as business income on his federal income tax return, in which he swore that the representations contained within it were true. The Court of Appeals stated that it could not, as a matter of policy, permit parties to assert positions in legal proceedings that are contrary to declarations made under the penalty of perjury on income tax returns.
[1] Mahoney-Buntzman v. Buntzman, 12 NY3d 415, 422, 881 NYS2d 369 (2009); see Meyer v Insurance Co. of Am., 1998 WL 709854 [SD NY 1998]; Naghavi v New York Life Ins. Co., 260 AD2d 252 [1st Dept 1999]; Zemel v Horowitz, 11 Misc 3d 1058[A], 2006 NY Slip Op 50276[U], *5 [Sup Ct., 2006]).
[2] In Winship v Winship, 115 A.D.3d 1328, 984 N.Y.S.2d 247 (4tj Dept., 2014), the Plaintiff's primary challenge to the equitable distribution award was the court's determination that Pine Top Plantation, a 128-acre Christmas tree farm formerly owned and operated by plaintiff's deceased father, was marital property subject to equitable distribution. In the joint tax returns filed from 2000 through 2008 the parties depreciated Pine Top's equipment and property, and identified plaintiff as its "proprietor”. Plaintiff signed those tax returns. As the Court of Appeals has made clear, "[a] party to litigation may not take a position contrary to a position taken in an income tax return" ( Mahoney-Buntzman v. Buntzman, 12 NY3d 415, 422). Here, plaintiff's tax returns were inconsistent with his position that his father owned Pine Top after 2000, inasmuch as a party cannot depreciate property that he or she does not own.
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