Leslie Abrams v. Richard Abrams (2011)

MEMORANDUM OF DECISION ON DEFENDANT'S AMENDED MOTION FOR ORDER (# 139) DATED JANUARY 5, 2011

The sole issue before the court is whether imputed interest forgiven by the employer is to be included in income for the purposes of calculating alimony payments.   In Cushman v. Cushman, 93 Conn.App. 186, 196 (2006) the court distinguished between loan forgiveness which according to 26 U.S.C. § 61(12) (discharge of indebtedness income) must be included in income by said statute and imputed interest.

The nature of the retention bonus in Abrams is identical to the signing bonus in Cushman.   The retention bonus in Abrams was awarded prior to the divorce, the attorneys specifically addressed the loan forgiveness in Paragraph 6.11 and added the loan forgiveness into the calculation of “gross annual earned income.”   The only outstanding issue is how to treat the interest calculated on the outstanding, as-yet-unforgiven portion of the loan.   This is a question of interpretation of the contract.   Two points are important.

First, the parties could have addressed the interest forgiveness aspect of the award specifically in the agreement, but did not do so.   Paragraph 4.4 says “the term ‘gross annual earned income’ shall include any and all earnings from employment actually received by the husband ․” [Emphasis added].   The $500,000 was actually received;  the interest income is imputed by the IRS and not actually received.   From a practical point of view, the husband shall not pay to his former wife a portion of money never actually in his possession.   The forgiveness of the interest by the employer never put any money into the husband's pocket from which he could pay alimony or any other expenses.

Second, principles of contract interpretation require a consistent reading of all parts of the contract, if possible.  “The judgment should admit of a consistent construction as a whole.”  Sosin v. Sosin, 300 Conn. 205, 217–18 (2011).   If Paragraph 4.4 defines the phrase “gross annual earned income,” then Paragraph 6.11 does not contradict or supersede 4.4.   Rather, 6.11 must be read consistently with 4.4.   Paragraph 4.4 tells us what the income is.   It is earnings “actually received.”   Paragraph 6.11 tells us when the income is to be attributed to the husband for purposes of calculating alimony.   It is to be attributed in the year the IRS includes it as earned income.   This seems to be the only way to read the paragraphs consistently.   Paragraph 6.11 is not a further definition of “gross annual earned income.”   Its purpose is to allocate the $500,000 loan forgiveness into the appropriate years.   It would be an inconsistency to view Paragraph 6.11 as a further definition of “gross annual earned income,” especially since such an approach might cause a clash between the two paragraphs.

The defendants's amended motion for order dated January 5, 2011 is granted.

SCHOFIELD, J.

Schofield, Marylouise, J.