Giannuzzi v. Kearney

• Court: New York Supreme Court — Appellate Division
• Writing for the Court: Rumsey, J.
• Citation: Giannuzzi v. Kearney, 160 A.D.3d 1079, 74 N.Y.S.3d 123 (N.Y. App. Div. 2018)
• Decision Date: 05 April 2018
• Docket Number: 524680
• Parties: Veya GIANNUZZI, Appellant–Respondent, v. Eric KEARNEY, Respondent–Appellant.

160 A.D.3d 1079

74 N.Y.S.3d 123

Veya GIANNUZZI, Appellant–Respondent,

v.Eric KEARNEY, Respondent–Appellant.

524680

Supreme Court, Appellate Division, Third Department, New York.

Calendar Date: February 14, 2018

Decided and Entered: April 5, 2018

Garufi Law PC, Binghamton (Carman M. Garufi of counsel), for appellant-respondent.

Law Office of Ronald R. Benjamin, Binghamton (Ronald R. Benjamin of counsel), for respondent-appellant.

Before: Egan Jr., J.P., Clark, Mulvey, Aarons and Rumsey, JJ.

MEMORANDUM AND ORDER

Rumsey, J.Cross appeal from a judgment of the Supreme Court (Reynolds Fitzgerald, J.), entered May 16, 2016 in Broome County, ordering, among other things, equitable distribution of the parties' marital property, upon a decision of the court.

Plaintiff (hereinafter the wife) and defendant (hereinafter the husband) were married in 1998 and have no children. In 2013, the wife commenced this action for divorce, based on the irretrievable breakdown of the parties' relationship. Prior to the marriage, the wife inherited IBM stock from her grandfather worth in excess of $1 million. Throughout the marriage, the wife was employed as a public school teacher. The husband was initially self-employed as the proprietor of a floor covering business, but, during the marriage, became a certified financial planner and subsequently managed the wife's IBM stock holdings. During the marriage, the parties acquired the former marital residence and a commercial property, both located in the Town of Vestal, Broome County, and seven additional parcels of real property located in Florida.

At the time of trial, the wife continued to reside in the former marital residence in Broome County and the husband resided in one of the Florida properties. After a nonjury trial,

Supreme Court granted the wife a divorce and, in relevant part, determined that the wife's IBM stock was her separate property, awarded the former marital residence to the wife, awarded the commercial property and the property in Florida where he resided to the husband, and awarded the wife a credit of $115,000 as reimbursement for her contribution of separate property to the purchase and improvement of the one Florida property that was awarded to the husband. In addition, the court ordered the sale of the six remaining Florida properties, with the net proceeds thereof to be distributed 60% to the wife and 40% to the husband. Finally, the husband was awarded a 50% share of the wife's pension, in accordance with the Majauskas formula, and the wife was awarded 50% of the balance in the husband's simplified employee pension individual retirement account (hereinafter SEP IRA). The wife now appeals and the husband cross-appeals.

The husband's sole contention on appeal is that Supreme Court erred in determining that the wife's IBM stock was her separate property. "Whether a particular asset is marital or separate property is a question of law that a trial court must initially address to ascertain the marital estate" ( Smith v. Smith, 152 A.D.3d 847, 848, 57 N.Y.S.3d 769 [2017] [citation omitted] ). Property acquired by a spouse prior to the marriage is separate property, unless it is transmuted into marital property during the course of the marriage (see Domestic Relations Law § 236[B][1][d] ; Spera v. Spera, 71 A.D.3d 661, 664, 898 N.Y.S.2d 548 [2010] ; Sherman v. Sherman, 304 A.D.2d 744, 744, 758 N.Y.S.2d 667 [2003] ). The IBM stock, including any reinvestment thereof, remained in accounts maintained exclusively in the wife's name throughout the marriage. Nonetheless, the husband contends that the IBM stock became marital property because the parties filed joint income tax returns reporting income derived from the IBM stock, the parties utilized dividends received from the IBM stock to maintain the marital standard of living, and the IBM stock was pledged as collateral to secure the loan that the parties obtained to finance the purchase of several of the Florida properties. His arguments are unavailing.

A party to litigation is precluded from taking a position contrary to affirmative elections or representations made on an income tax return that are material to the characterization or taxation of any income derived from the separate property (see Mahoney–Buntzman v. Buntzman, 12 N.Y.3d 415, 422, 881 N.Y.S.2d 369, 909 N.E.2d 62 [2009] ; Winship v. Winship, 115 A.D.3d 1328, 1330, 984 N.Y.S.2d 247 [2014] ). For example, income realized from the sale, during the marriage, of corporate stock that was separate property was properly classified as marital property because it had been reported on a federal income tax return as ordinary income, rather than as capital gains realized upon the sale of an asset, and income earned during the marriage is marital property (see Mahoney–Buntzman v. Buntzman, 12 N.Y.3d at 422, 881 N.Y.S.2d 369, 909 N.E.2d 62 ). Similarly, the argument that a farm was separate property because it had been inherited by one spouse in 2010 was inconsistent with the fact that the parties had depreciated property and equipment used to operate the farm on joint returns that they filed from 2000 through 2008, because a party cannot depreciate property that he or she does not own (see Winship v. Winship, 115 A.D.3d at 1329–1330, 984 N.Y.S.2d 247 ). By contrast, the mere reporting of income earned from the separate assets of one spouse on a joint return does not transmute the separate property to marital property because both spouses are required to report all of their income, whatever the source, on a joint return (see Angelo v. Angelo, 74 A.D.2d 327, 333, 428 N.Y.S.2d 14 [1980] ; Johnston v. Nakis, 46 Misc.3d 651, 664–669, 997 N.Y.S.2d 257 [Sup. Ct. Monroe County 2014] ). We agree that a contrary rule "would force married persons to file separate income tax returns, and to pay higher income taxes, simply to protect the non-marital status of their separate property" ( ...