In Uncategorized on 09/27/2019 at 17:34

Sam T. Coleridge, That Is

Judge Mark V Holmes was busy today. But not so busy that, like Sammy Coleridge’s nautical immortal, he could not stop one of three.

Here’s Maria G. Leslie, Docket No. 15277-17, filed 9/27/19. This is the coda to a long-running saga, all parts of which haver been resolved by trial, appeal or stip, save one last issue: what part, if any, of Maria’s legal fees in her ongoing despedida from her loved-once, Byron, may she deduct?

Maria claimed she had not legal capacity when she agreed to a split of Byron’s assets. Turns out Byron had another $50 million Maria wotted not of. Then Byron stashed $1.56 million in a trust fund for Maria that she couldn’t touch, but that she had to sue to get. Finally, Maria sued for breach of fiduciary duty in that Byron diminished her share of the community property estate (this is CA).

Judge Holmes gives Maria deductions for the legal fees in the second. The source of claim was directly alimony, taxable to Maria per Section 71. And Section 212, as then in effect, gave her the expenses-for-production-of-income.

But setting aside the agreed split of assets didn’t necessarily produce income, only a property split. “The origin of the claim for this litigation was an alleged flaw in the formation of the [settlement agreement], not a claim to more alimony under the [settlement agreement] or some other basis. Even if we focused on the consequences of this litigation, Leslie would lose because success wouldn’t directly lead to more… income, but only to the setting aside of the [settlement agreement]. The California Superior Court would have ordered a new division of marital assets. This division of assets — unless a separate agreement was reached — would have split all the community property and debts in half. And an action to divide community property is not an action for alimony.” Order, at p. 5 (unnumbered)(Citations omitted).

And the fiduciary duty impairment litigation falls for the same reason.  This arose from the marriage dissolution and the split of the community estate, not the grant of alimony. While maybe at close of play Maria would have gotten more alimony, it’s the source of the claim, not the downstream result, that determines deductability.

So Judge Holmes did Sammy C proud.


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