Jankord v. Jankord, 14704

• Decision Date: 22 May 1985
• Docket Number: No. 14704,14704
• Citation: 368 N.W.2d 571
• Parties: Linus A. JANKORD, Plaintiff, Petitioner-Respondent, and Appellant. v. Donna G. JANKORD, Defendant, Respondent-Petitioner, and Appellee.
• Court: South Dakota Supreme Court

Page 571

368 N.W.2d 571

Linus A. JANKORD, Plaintiff, Petitioner-Respondent, and Appellant. v. Donna G. JANKORD, Defendant, Respondent-Petitioner, and Appellee.

No. 14704.

Supreme Court of South Dakota.

Argued April 11, 1985.

Decided May 22, 1985.

Allen J. Eide of Gribbin, Burns & Eide, Watertown, for plaintiff, petitioner-respondent, and appellant.

Paul I. Hinderaker of Austin, Hinderaker & Hackett, Watertown, for defendant, respondent-petitioner, and appellee.

WUEST, Acting Justice.

This appeal is from an order of the trial court dividing federal income tax refund checks received by Linus A. Jankord (appellant) and Donna G. Jankord (appellee) nineteen months after their divorce. Appellant appeals and we reverse, with directions to enter judgment for appellant on the issue of ownership.

On August 9, 1982, appellant was divorced from appellee. Prior to the divorce, a "Marital Settlement Agreement" was executed, after considerable negotiations. This agreement was approved and adopted by the trial court as a part of its judgment and decree of divorce. The agreement provided for alimony, division of property, and a paragraph providing that

Linus shall be responsible for all income tax liability for the year 1982 due to the operation of Jankord Trucking, including all federal income tax liabilities for prior years, including all fees for preparation of tax returns and negotiating with Internal Revenue Service.

The parties had been audited by the Internal Revenue Service for the years 1978, 1979, and 1980. At the time of the divorce, a tax liability for those three years amounted to $73,026.00. Shortly after the divorce, appellant negotiated a loan and paid the tax liability.

On January 10, 1983, appellant delivered his records to a certified public accountant (CPA) and learned he had sustained a net operating loss of $146,843.00 in 1982. As a result of this loss, appellant applied for refunds for 1978, 1979, and 1980. The refunds were premised on Section 172 of the Internal Revenue Code, which provides carryback or carryover on net operating losses under certain conditions. Normally, net operating loss is carried back three years and then forward. IRC Sec. 172(b)(1)(A) and Sec. 172(b)(2). A taxpayer, however, may elect to carry it forward. IRC Sec. 172(b)(3)(C).

Appellant chose to carry back the loss so he could use the refunds to apply on the loan he had obtained to pay the tax liability.

Ultimately, the Internal Revenue Service approved refunds of $3,260.21 for 1978; $7,448.00 for 1979; and $11,801.00 for 1980. The checks were made payable to "Linus A. and Donna Jankord." The check for 1980 arrived first and appellee endorsed it and appellant used the proceeds to apply on the loan. A week or so later, the remaining two checks arrived but appellee refused to endorse them. Appellant brought a contempt proceeding, seeking appellee's endorsement. Appellee countered, by claiming an interest in the refunds. After a hearing, the court found:

The proceeds of subject U.S. Treasury drafts, $22,509.21, is a joint asset of Linus A. Jankord and Donna G. Jankord which did not exist and was not considered by the parties or the Court prior to August 9, 1982.

The court then divided the income tax refunds between the parties, sixty percent to appellant and forty percent to appellee.

This court reviews a trial court's findings of fact under the "clearly erroneous" standard and overturns a trial court's conclusions of law only when the trial court has erred as a matter of law. Temple v. Temple, 365 N.W.2d 561 (S.D.1985); Wefel v. Harold J. Westin & Associates, Inc., 329 N.W.2d...