K.M. v. M.M. (2020)

MEMORANDUM AND ORDER PURSUANT TO RULE 1:28

The husband appeals from a judgment of divorce with findings of fact and rationale entered by a judge of the Probate and Family Court. The appeal involves, primarily, the evaluation of several real estate rental properties of which the husband is a partial owner, and the calculation of rental income received by the husband from these properties, his total income being relevant to the calculation of alimony.

The husband first argues that the trial judge failed to account for two factors in determining the current value of the rental properties for purposes of asset division. The judge found that the properties were incorporated in the marital estate: the properties were a part of the “economic fabric” of the marriage, they had all appreciated during the long duration of the marriage, and the equity from these properties was used to buy marital property. The judge then found that an equal division of those assets was fair and equitable.

The husband acknowledges the decision was within the judge's broad discretion under the circumstances. The husband also acknowledges that the judge accepted the husband's appraiser's valuation of the rental properties, both in terms of the current value of the properties, and the value of the husband's partial ownership of the properties, over the valuation by the wife's appraiser. This included accepting the husband's appraiser's reduction in value of the properties of 27.5 percent from fair market value simply because he owned the properties with one or more partners. He argues, however, that the judge erred in concluding there was no information in the record with respect to the value of the properties at the time of the marriage. The husband concedes that no separate appraisal of their value was offered. Although he notes that there were assessed valuations included in the evidence provided to the judge, he acknowledges that these are not the same as an appraisal and that he had “not specifically emphasized” them as evidence.

The husband did not argue before the judge that the change in value between the time of the purchase and the date of the marriage should have been considered separately in calculating the property distribution,² so even if the values were clearly in the record, there was no prejudice. See Baccanti v. Morton, 434 Mass. 787, 803 (2001). In any event, given the state of the record, we see no abuse of discretion in the judge's determination that she could not properly determine the value of the properties as of the date of marriage based on what she was provided, nor do we think any such valuation was necessary given the judge's ultimate determination of the fairness and equitability of the distribution of assets on which she settled. See Wolcott v. Wolcott, 78 Mass. App. Ct. 539, 543 (2011) (“The judge had broad discretion as to the division of property, Kittredge v. Kittredge, 441 Mass. 28, 43-44 [2004], and we will only disturb his rulings if they are plainly wrong and excessive”).

The husband next argues that in valuing these properties the judge was required to impute capital gains taxes, and to deduct them from the value of the properties, as such taxes will be owed if and when the properties are liquidated.

To be sure we have said that it may be “proper” to impute capital gains tax, even in circumstances where there is no necessity for sale of the property. See Williams v. Massa, 431 Mass. 619, 629 (2000). Where the husband was not ordered to sell any of these properties, however, we cannot say that the judge's decision not to adjust her valuation of these assets based on possible tax consequences led to an order that was plainly wrong and excessive. The husband argues that the court's holding in L.J.S. v. J.E.S., 464 Mass. 346 (2013), that “if presented with evidence of potential tax consequences, a judge should consider those consequences when creating or modifying alimony,” id. at 346; see id. at 350-351, requires us to decide this issue in his favor. But in that case, the tax consequences were certain. Nothing compels a court to take account of tax consequences that may or may not ever occur, and that may or may not have any impact on a party's financial situation. Given the speculative nature in this case of whether any property will be liquidated at all, and of what, if any, capital gains taxes will be due when they are -- including the possibility that the properties will be held until death and inherited at a stepped-up basis, thereby eliminating any capital gains tax -- the judge acted within her discretion in declining to adjust the value for the possible future taxes imposed on any capital gains.

The husband next argues that both the payments toward mortgage principal and the costs of necessary ongoing maintenance and repairs should have been deducted from the judge's calculation of the income he will actually receive from the rental properties. Although a payment of mortgage principal may well affect his cash flow, such payments purchase equity in the property that he will retain. Thus, there was no abuse of discretion in declining to deduct those payments from the calculation of rental income. And, as the cost of future maintenance and repairs was speculative and the judge had already credited the husband's separate deductions for the cost of actual repairs made to the property, it also was not an abuse of discretion for the judge not to deduct any amount for such possible future costs in determining rental income.

The husband argues finally that he will be required to sell some rental property to accomplish the property division, and that this will eliminate some of the rental income that formed part of the basis for the alimony award. The husband, however, was not required by the court to sell any rental property in order to obtain the funds necessary for undertaking the property division. It is possible that, although they are jointly owned, the husband will be able to refinance one or more of the properties, or his interest in them, or in some other way obtain the cash necessary. Should he, indeed, sell the rental properties in order to pay for the property division, and concomitantly suffer a reduction in his income, that may form a basis, if the requirements are met for filing a complaint for modification, in which the court could consider the husband's then current income.³ Cf. Ross v. Ross, 50 Mass. App. Ct. 77, 80 (2000) (ordering that alimony be terminated upon payor husband's turning sixty-five based on speculation that he would then retire was improper; if husband were to retire, he could petition for modification of alimony at that time).⁴

Judgment affirmed.

FOOTNOTES

2.   While the husband argues that the record contains testimony from the husband and his partner John Connolly about the improvements that they made to the properties prior to the marriage and that he highlighted this fact in his proposed findings of fact, rationale, and conclusions of law, the husband has not pointed to any citation to the record wherein he requested that the judge value his rental properties at the time of the marriage based on the annual assessments on these properties that were contained within the nearly 400 pages of the husband's appraiser's documents.

3.   Insofar as the husband argues that he will not be able to bring a complaint for modification should he sell any of his income producing rental properties because the judge contemplated his need to sell the properties, we disagree. The judge calculated her alimony award based on the parties' then existing financial circumstances. Although of course a determination of changed circumstance -- something about which we express no opinion -- would have to be made by the court at the time should a petition for modification be brought, should the husband sell these properties in order to satisfy his property division obligations, “the alimony order should not be regarded as immune from modification.” Gordon v. Gordon, 26 Mass. App. Ct. 973, 975 (1988).

4.   We deny the wife's request for an award of her appellate attorney's fees and costs.