ROBERT MACCORMACK, Plaintiff–Appellant, v. EILEEN J. MACCORMACK, Defendant–Respondent.
Plaintiff Robert MacCormack appeals from part of a January 20, 2012, post-judgment order pertaining to the allocation of the dependent tax exemption for the parties' daughter; responsibility for her unreimbursed medical expenses; and the award of attorney's fees. Plaintiff advised his daughter to claim the personal exemption herself on her 2010 tax return. The court found that plaintiff's “affirmative actions denied” defendant the ability, granted under their property settlement agreement (PSA), to claim a dependent exemption for their daughter. As a “corollary” to its finding regarding the exemption, the court relieved defendant of the responsibility to defray half of the daughter's unreimbursed medical expenses. The court also awarded defendant attorney's fees, apparently based in part on its determination regarding the tax exemption and unreimbursed medical expenses.
As the trial court did not make sufficient findings of fact and conclusions of law, we reverse and remand. The court did not address whether either parent was entitled to a dependent exemption for the daughter. The child largely supported herself in 2010 and lived more than half the year separately from her parents. If neither party was authorized by federal tax law to claim the exemption, then plaintiff's advice to his daughter to claim a personal exemption was not wrongful. We also reverse the court's order regarding the medical expenses and attorney's fees, which was apparently predicated in part on its finding regarding the dependent exemption.
After almost twenty-four years of marriage, the parties were divorced on November 29, 2010. Their daughter Irene 1 was born in 1989, and son Thomas was born in 1993. The PSA incorporated in the dual final judgment of divorce granted the parties joint legal and physical custody. The parties waived child support and alimony, but plaintiff was responsible for providing health insurance for the children while available to him through the military or his employer. Plaintiff had retired from the military, and was employed in a civilian position with the Coast Guard. The parties agreed to split unreimbursed medical expenses (so long as child support was waived).
As for equitable distribution, the parties divided plaintiff's pension payments. They also agreed to jointly occupy, temporarily, the marital home post-divorce. In addition to personal property distribution, plaintiff agreed to pay defendant $192,500 within thirty days of the divorce. Once he did so, defendant was required to vacate the home within thirty days. That period could be extended for another thirty days if she documented a good faith effort to find her own residence. In case of a breach of the PSA, the prevailing party was entitled to reimbursement of reasonable attorney's fees and costs.
The PSA provided that starting with the 2010 tax year, defendant would claim Irene as a dependent, and plaintiff would claim Thomas, consistent with section 152 of the Internal Revenue Code (IRC), 26 U.S.C.A. § 152. The parties would switch the exemptions in 2011 and thereafter. Once one child was emancipated, the parties would alternate the exemption for the remaining child.
At the time of the divorce, Irene was already enrolled as a full-time student at Rowan University and was financing her education with scholarships, grants, and student loans (for which plaintiff was guarantor). She had permanently moved out of her parent's home in April 2010. She first moved into an apartment. During the summer, she lived in the family recreational vehicle (RV) somewhere away from the family home. The record does not expressly state that Irene paid the rent for her apartment, or the land on which the RV was located. But, she asserted without dispute that she was employed and supported herself. As she stated, “My dad acknowledged that I was on my own for practically the whole year and he had no issue with me claiming myself. I pay my rent, my bills, buy my own food and anything that I need.” Defendant also acknowledged that by early 2011, Irene lived separately in her own “year-round apartment.”
Although both parents asserted that they assisted their daughter, neither specified the amounts in detail, nor claimed that their total assistance exceeded Irene's own earnings. Plaintiff presumably continued to pay for Irene's health insurance, as required by the PSA. He stated that he paid $1850 for unreimbursed medical expenses. In 2011, he bought $800 in auto parts, and supplied his own labor, to repair Irene's car. He also helped Irene pay her cell phone bills. In September 2011, defendant asserted that she had paid between $800 and $1200 for unreimbursed medical expenses and “incidentals” for both children since the November 2010 divorce. But, she did not allocate that amount between the children, or between 2010 and 2011.
Sometime in 2011, plaintiff admittedly advised his daughter that she should claim the personal exemption herself on her tax return. He stated he did so because Irene had previously complained about the size of her tax refund for the 2009 tax year, and that she was unable to claim the earned income tax credit. If Irene claimed the personal exemption, even if her mother were otherwise eligible, defendant would not be able to claim a dependent exemption for Irene. See 26 U.S.C.A. § 151(c).
Defendant filed a motion in July 2011 seeking an order disallowing plaintiff from claiming any of the children for tax purposes for the 2011 tax year; relieving defendant of responsibility for Irene's unreimbursed medical expenses; and attorney's fees. She sought other forms of relief that are relevant to this appeal only because they relate to the court's ultimate award of fees. Defendant sought an order compelling plaintiff to pay her allocated share of his pension, retroactive to February 2010. She also claimed plaintiff violated various provisions of the PSA related to the disposition of certain marital property, including boats, an RV, and a commercial sewing machine. She sought proof that plaintiff had maintained life insurance for the benefit of the children. Also, she requested sanctions for plaintiff's alleged violation of a February 2011 consent order granting the parties mutual civil restraints that, among other things, barred them from bullying or verbally abusing each other; and barred plaintiff from interfering with defendant's ability to remove property to which she was entitled, including her flowers and plants.
In addition to fees related to her July 2011 application, she also claimed she was entitled to attorney's fees related to her successful effort earlier in 2011 to obtain an order restoring her to the marital home for thirty days. She obtained that order after plaintiff locked her out of the home once the first thirty-day period expired following his payment of $192,500. He disputed her right to the second thirty-day period. However, the court disagreed, concluding that defendant had a good faith basis for the extension, as she had entered into a binding contract to close on the purchase of another home.
In competing certifications, the parties disputed the facts relating to the boats and RV, and compliance with the February 2011 consent order. They ultimately resolved among themselves defendant's claim to pension payments post-judgment, but disputed defendant's claim to a share of plaintiff's pension payments received before the divorce.
Plaintiff filed a cross-motion seeking child support for Thomas, and the right to claim a dependent exemption for him. Plaintiff claimed his son was living with him full-time. Plaintiff apparently did not include a case information statement with his cross-motion. See R. 5:5–4(a). He also sought an order permitting him to name his children as direct beneficiaries of the life insurance he was required to maintain, although the PSA provided that benefits would be held in trust by defendant until the children's emancipation.
Without conducting oral argument, although the parties requested it, the court found that plaintiff's “affirmative actions” denied defendant the benefit of the dependent exemption for Irene as provided by the PSA. It entered an order authorizing her to claim both children on her 2011 tax return “assuming appropriate for tax purposes.” As a “corollary” to that relief, the court ordered that defendant was not responsible for a share of Irene's unreimbursed medical expenses.
The court found plaintiff in breach of the February 2011 consent order, and “plaintiff has done his utmost to inhibit defendant's ability to show and sell” the RV and boats. However, the court did not include any specific findings, nor did the court award sanctions or relief. The court denied relief regarding the sewing machine. The court also rejected defendant's request for pre-divorce pension payments. The court ordered plaintiff to provide proof of life insurance within thirty days.
The court denied all other requests for relief, which presumably included defendant's cross-motion. No explanation was provided.
The court ordered plaintiff to reimburse defendant's fees incurred in connection with her February 2011 application to regain occupancy of the house, finding defendant acted “in bad faith and contrary to the spirit and letter of the court's orders.” The court also awarded to defendant seventy-five percent of the fees she incurred in connection with the July 2011 motion. The court explained it had reduced the fee by twenty-five percent “because much of the discussion in my view centered on the military pension retroactivity issue which I have determined in plaintiff's favor.”
Defendant's counsel submitted a certification of fees, apparently after the court's order.2 The court then entered an order on April 26, 2012, awarding defendant fees in the amount of $8512.50. The court did not provide a statement of reasons for its calculation, nor allocate the award between the February and July 2011 applications.
Plaintiff filed his notice of appeal on March 5, 2012, before entry of the April 26, 2012, order. In his case information statement, he asserted the trial court erred in permitting defendant to claim the dependent exemption for Irene, but relieving her of the obligation to contribute medical expenses. He also challenged the court's award of counsel fees.
In his brief, he argues the trial court failed to provide sufficient findings of fact and conclusions of law in support of its order. Also, the court failed to consider the parties' financial circumstances and ability to pay in awarding fees. Plaintiff generally asks the court to “reverse the trial court's ruling on the July 19, 2011 motion in its entirety.” However, plaintiff is bound to the issues identified in his case information statement, which limited his appeal to the issues of the tax exemption, unreimbursed medical expenses, and attorney's fees. See R. 2:5–1(f)(2); Fusco v. Bd. of Educ. of Newark, 349 N.J.Super. 455, 460–62 (App.Div.), certif. denied, 174 N.J. 544 (2002); United Hosp. Med. Ctr. v. State, 349 N.J.Super. 1, 7–8 (App.Div.2002).
Before turning to those issues, we briefly review our standard of review. An appellate court is required to defer to the Family Court's fact-finding because of the court's “special expertise” in family matters and the court's “superior ability to gauge the credibility of the witnesses who testify before it [.]” N.J. Div. of Youth & Family Servs. v. F.M., 211 N.J. 420, 448 (2012); see also Cesare v. Cesare, 154 N.J. 394, 413 (1998). However, we may exercise more extensive review of trial court findings that do not involve a testimonial hearing or assessments of witness credibility. Cf. N.J. Div. of Youth & Family Servs. v. G.M., 198 N.J. 382, 396 (2009) (stating that deference to Family Court conclusions is not required where “no hearing takes place, no evidence is admitted, and no findings of fact are made”). A judge may not make credibility determinations or resolve genuine factual issues based on conflicting affidavits. Conforti v. Guliadis, 245 N.J.Super. 561, 565–66 (App.Div.1991), aff'd in part and modified in part on other grounds, 128 N.J. 318 (1992). Also, no special deference is owed to the trial judge's “interpretation of the law and the legal consequences that flow from established facts[.]” Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995). If the “court ignores applicable standards, we are compelled to reverse and remand for further proceedings.” Gotlib v. Gotlib, 399 N.J.Super. 295, 309 (App.Div.2008).
A trial court must also provide findings of fact and conclusions of law in support of its order. R. 1:7–4. An articulation of reasons is essential to the fair resolution of a case, and the failure to perform this duty “ ‘constitutes a disservice to the litigants, the attorneys and the appellate court.’ ” O'Brien v. O'Brien, 259 N.J.Super. 402, 407 (App.Div.1992) (quoting Curtis v. Finneran, 83 N.J. 563, 569–70 (1980)). See also Italiano v. Rudkin, 294 N.J.Super. 502, 505–07 (App.Div.1996) (reversing and remanding where trial court failed to articulate reasons for denying post-judgment motion to modify child support and for fees).
In this case, the court failed to justify its finding that plaintiff's actions denied defendant the benefit of the provision in the PSA authorizing her to claim a dependent exemption for Irene for the 2010 tax year. Given the fact that Irene moved out of the family home in April 2010, and supported herself, it was incumbent upon the court, as a threshold matter, to determine whether either party was entitled to claim the exemption.
It is well-settled in New Jersey that divorced parents, or the court, may decide which parent may claim the dependent exemption, 26 U.S.C.A. § 151(c), notwithstanding that the IRC grants the exemption to the custodial parent, 26 U.S.C.A. § 152(c)(4)(B)(i). See Gwodz v. Gwodz, 234 N.J.Super. 56, 62 (App.Div.1989); see generally, Gavin L. Phillips, Annotation, State court's authority, in marital or child custody proceeding, to allocate federal income tax dependency exemption for child to noncustodial parent under § 152(e) of the Internal Revenue Code (26 U.S.C.A. § 152(e)), 77 A.L.R.4th 786 (2014). The IRC requires the custodial parent to complete an appropriate waiver of the exemption, known as a Form 8332. See 26 U.S.C.A. § 152(e)(2).
However, the allocation is of no force if neither parent is entitled by the IRC to claim the exemption. The IRC provides that only a “qualifying child” may be claimed as a dependent. 26 U.S.C.A. 152(a)(1). The law imposes various tests for determining whether a son or daughter is a “qualifying child.” Among them, the child must live at least half the year with the parent-taxpayer claiming the exemption, and the child must receive at least half of his or her support from that parent-taxpayer. See 26 U.S.C.A. § 152(c)(1)(B) (stating that a qualifying child must have “the same principal place of abode as the taxpayer for more than one-half of such taxable year”); and 26 U.S.C.A. § 152(c)(1)(D) (stating that a qualifying child is “an individual ․ who has not provided over one-half of such individual's own support for the calendar year in which the taxable year of the taxpayer begins”).
The same general definition applies to divorced parents, so long as the parents provide more than half of the child's support, and the child is in the custody of one or both the parents for more than half the calendar year. See 26 U.S.C.A. § 152(e)(1). A parent who cannot meet the abode or support test is not entitled to claim the dependent exemption for a child. Felix v. Comm'r of Internal Revenue, 95 T.C.M. (CCH) 1374 (T.C.2008) (regarding abode test); Schmidt v. Comm'r of Internal Revenue, 62 T.C.M. (CCH) 1330 (T.C.1991) (regarding support test), aff'd without opinion, 968 F.2d 21 (10th Cir.1992). See generally 1–12 Lexis Guide to Family Tax Matters § 12.03 (2013).
In this case, it is undisputed that Irene lived independently of her parents beginning in April 2010. She first lived in an apartment. Although plaintiff stated Irene occupied the family's RV during the summer, the record does not state precisely how long she did so, and whether she paid rent for the RV, or the land it sat on. At the very least, there is a significant issue regarding whether she had “the same principal place of abode as the taxpayer for more than one-half of such taxable year.”
Moreover, plaintiff asserted without dispute that Irene generally supported herself. Although the record does not reflect precisely what her earnings were, and the parties' total contribution to her support, there is serious question whether either party could meet the support test.3 They bear the burden to show that they have met the requirements of the IRC. See Smith v. Comm'r of Internal Revenue, 800 F.2d 930, 933 (9th Cir.1986).
If neither defendant nor plaintiff were entitled to claim a dependent exemption for Irene, then plaintiff did not breach the PSA. However, the court apparently predicated its order regarding unreimbursed medical expenses, and attorney's fees, on its finding that plaintiff denied defendant the benefit of the PSA provisions on dependent exemptions.
The court said simply that the relief from the obligation to share unreimbursed medical expenses was a “corollary” to its order that plaintiff was prohibited from claiming either child on his 2011 return, and defendant would be entitled to claim both “assuming appropriate for tax purposes.” Contrary to the command of Rule 1:7–4, the court did not explain the basis for its relief. If the court relieved defendant of the medical expenses to compensate her for the loss of the exemption for Irene, then the order must be reconsidered if the exemption did not belong to either parent. We note that the trial court did not emancipate Irene, nor did either parent request an order emancipating her.4
The court also did not clearly state its reasons for awarding fees in connection with defendant's July 2011 motion. We disagree with plaintiff that the court was required to apply the factors in Rule 5:3–5(c), as the PSA provided a right to fees by the aggrieved party in case of a breach. We also discern no error in the court's award of fees incurred to secure an order in February 2011 to regain occupancy of the marital home after plaintiff's lock out. There was substantial evidence in the record to support the judge's finding that plaintiff violated defendant's right to occupy the home.
However, the court did not adequately explain its decision to award defendant seventy-five percent of the fees she incurred in connection with her July 2011 motion. The court apparently set the recovery in proportion to her relative success in enforcing her rights under the PSA. As we have discussed, if the court erred regarding the issues of the dependent exemption, and the medical expense reimbursement, then the allocation of success-based fees must be revisited as well on that ground alone.
Moreover, the court did not adequately set forth the bases for its conclusions that plaintiff breached other provisions of the PSA. The court found that plaintiff violated the PSA regarding the RV, boats, and the February 2011 consent order. However, the court did not include specific findings, nor did it explain how it reached its conclusion in the face of the parties' competing certifications.
Reversed and remanded. We do not retain jurisdiction.
1. FN1. We use pseudonyms for the children.
2. FN2. The certification of fees is not included in the record before us.
3. FN3. The parties presumably provided substantial support for Irene from January through March 2010, as she lived in the marital home. But, she apparently was also working during that time. She then supported herself after she moved. Plaintiff paid for a major car repair in 2011 and he paid for her health insurance, but the marginal cost is unstated. It is unclear when he incurred the $1800 in unreimbursed medical expenses. Defendant contributed no more than $1200 over a nineteen-month period for both children, without specifying how much she spent to support Irene in 2010.
4. FN4. The standard for determining emancipation is not the same as the standard for determining that a dependent exemption may not be claimed for a child. See Filippone v. Lee, 304 N.J.Super. 301, 308 (App.Div.1997) (stating standard for emancipation). We express no opinion as to whether Irene should be deemed emancipated.