ROBERSON v. ROBERSON (2007)

Defendant contends in this post-matrimonial matter that, pursuant to CPLR 5234(a) and 5236(g), capital gains tax liability from the sale of his business must be satisfied before the proceeds of his business are distributed to plaintiff as a judgment creditor.   We conclude that CPLR 5234(a) and 5236(g) are inapplicable, and we therefore reject defendant's contention.   Those sections require that any taxes levied upon the sale, delivery, or transfer of personal and real property be paid prior to distribution of the proceeds to judgment creditors (see CPLR 5234[a];  5236 [g] ), and a capital gains tax is not a transfer tax levied upon the sale of defendant's business.   Rather, a capital gain is taxed as a portion of an individual's gross income (see 26 USC § 61[a][3] ).   In any event, the business was sold pursuant to the parties' agreement to satisfy the money judgments entered in favor of plaintiff and, as a judgment creditor, plaintiff is entitled to the benefit of the common-law rule of “ ‘first in time, first in right’ ” (Boris v. Flaherty, 242 A.D.2d 9, 13, 672 N.Y.S.2d 177).   Because plaintiff's rights with respect to those money judgments were established before the sale of the business and the amount of capital gains tax, if any, was unknown at the time of the sale, plaintiff's money judgments take priority over any future capital gains taxes levied against defendant (see generally Lerner v. United States, 637 F.Supp. 679, 680).

It is hereby ORDERED that the order so appealed from be and the same hereby is unanimously affirmed without costs.

MEMORANDUM: