Trial court’s findings on profit-sharing plan upheld

Where the trial court ruled that husband did not disclose his profit-sharing plan to wife, and, that under the parties’ property settlement agreement, wife was entitled to one-half of the plan, there was no error.

Further, the court properly ruled that husband could deduct his tax rate from his payment to wife.

No disclosure

“Husband argues that the circuit court erred in this ruling because wife did not produce evidence that she was actually denied access to information concerning the retirement plan or that she was unable to investigate the nature and extent of husband’s retirement assets.

“Husband asserts that, ‘[t]o the contrary, the record reflects that the information that [wife] complains not to have been provided was readily available to her, even if it was not expressly highlighted by [husband] or his counsel.’

“We … conclude that the circuit court did not err in finding that husband violated Paragraph 16(A) of the PSA by not disclosing the profit-sharing plan portion of his Ernst and Young retirement account.

“The record supports the finding that husband failed to disclose the profit-sharing portion of his Ernst and Young pension, which was partly a defined benefit plan and partly a profit-sharing plan.

“Wife testified that husband had not disclosed to her that part of husband’s pension was in the form of a profit-sharing plan.

“While husband testified that he had conversations with wife about the nature of the profit-sharing plan, on redirect, wife denied having these discussions. The court necessarily credited wife’s testimony on this issue rather than husband’s testimony, and we ‘do[] not retry the facts, reweigh the preponderance of the evidence, or make [our] own determination of the credibility of witnesses.’ …

“Husband also contends that wife was aware of the existence of the profit-sharing plan due to the parties’ joint tax returns, which included two separate line items for the Ernst & Young pension. However, husband acknowledged that he prepared the tax forms and noted that while wife signed the parties’ tax forms, she was not an accountant.

“Further, when asked if husband had ever pointed out to wife that the $16,850 deposited into the parties’ joint account correlated to the Schedule K-1 that was filed with the parties’ tax return, husband stated that he ‘never connected those dots for her.’

“In addition, husband testified that while there was no reference to the profit-sharing portion of his Ernst & Young pension in the PSA, he did not ‘think it was [his] responsibility to put in there the specific references to the various components of the plan.’

“Based on these circumstances, we conclude that the circuit court’s factual finding that husband failed to disclose his Ernst & Young profit-sharing plan is supported by the record.”

Equitable distribution hearing

“Husband argues that the circuit court erred in not conducting an equitable distribution hearing regarding the profit-sharing plan because Paragraph 29 of the PSA does not direct a specific division of a non-disclosed asset.

“Husband asserts that at the time the PSA was executed, the parties were husband and wife, and prior to execution of the PSA, the only jurisdiction that the circuit court otherwise would have possessed to divide a marital asset would have been equitable distribution of marital property under Code § 20-107.3.

“However, husband’s argument ignores the plain language of the PSA. …

“Paragraph 29 of the PSA states that ‘any court having competent jurisdiction … shall retain full jurisdiction to divide … additional [non-disclosed] asset(s).’ The parties simply agreed to allow a court to ‘divide’ any non-disclosed asset.

“There is no language in Paragraph 29 mandating that the court dividing the asset conduct an equitable distribution hearing. In the absence of such language, the court was permitted to divide the profit-sharing plan without holding an equitable distribution hearing.

“To hold, as husband urges, that the PSA required the circuit court to conduct equitable distribution prior to dividing a non-disclosed asset would require this Court to impermissibly write words into the PSA.”

Tax rate deduction

“Husband contends that the circuit court erred in deducting from wife’s share of the profit-sharing plan taxes calculated using his effective tax rate rather than his marginal tax rate. …

“The court ruled that husband could deduct taxes from the profit-sharing plan payments made to wife ‘calculated using [husband’s] effective state and federal tax rates for the preceding year, as reflected on his state and federal income tax returns for the preceding year.’ …

“[H]usband asserts on appeal that when he receives the profit-sharing plan funds, prior to paying half to wife, he incurs taxes on those funds at his highest marginal tax rate. Thus, he contends, he pays a greater amount in taxes than he is permitted to deduct from wife’s share. …

“A review of the record indicates that the court’s determination that husband’s effective tax rate should be applied was not in error.

“Husband argues that wife’s share of the profit-sharing plan funds, which come directly to him, will impact his marginal tax rate. However, he testified that in 2021, he paid taxes on the profit-sharing plan funds at his effective tax rate.

“Here, the court did not err in determining that he was entitled to deduct taxes at his effective tax rate, reflecting the amount of taxes he actually will pay in relation to the profit-sharing plan.”

Retroactivity of tax deductions

“Husband argues that the circuit court erred in failing to make the deductions for taxes from wife’s share of the profit-sharing plan retroactive to the date of the PSA or the date of divorce. …

“[H]usband argues that there is nothing in the plain language of the PSA to support the court’s ruling that the tax deductions from wife’s share would start on December 1, 2021, instead of the date of the execution of the PSA or the entry of the final decree of divorce.

“Instead, he notes that Paragraph 48 of the PSA states that ‘[t]his [a]greement shall become effective upon the date by which both parties have affixed their signatures hereto,’ in this case, December 1, 2020. …

“[W]e conclude that husband’s right to deduct taxes from wife’s share of the profit-sharing plan did not vest at the time of the execution of the PSA or entry of the final decree of divorce. …

“[T]he PSA contemplated that wife would receive half of husband’s profit-sharing plan directly from Ernst & Young via a QDRO. As such, there is no language in the PSA regarding husband’s tax deductions from wife’s share of the profit-sharing plan, as the parties did not anticipate that husband would have to receive the funds from Ernst & Young and then distribute half to wife.

“Accordingly, husband’s right to deduct taxes from wife’s share of the profit-sharing plan did not vest at either the execution of the PSA or the entry of the final decree of divorce as it was clearly not a provision of the agreement itself.

“Further, in light of the absence of any guidance from the PSA, we hold that the circuit court did not abuse its discretion in not applying the tax deduction retroactively.”

Tax deduction

“Wife contends that the circuit court erred in ordering that husband deduct state and federal taxes at his rate, rather than at the tax rate of wife, from the profit-sharing payments he was ordered to pay to wife. …

“Because the PSA did not contemplate that husband would receive all of the profit-sharing funds, and because husband now has tax liability on the entirety of the profit-sharing funds distributed directly to him, we conclude that the circuit court was not plainly wrong in ordering husband to deduct his tax rate from his payment to wife because he is the party directly receiving the funds.”

Affirmed in part, reversed in part and remanded for attorney fee calculations.

Dance v. Dance, Record Nos. 0315-22-4, 0314-22-4, May 23, 2023. CAV (unpublished opinion) (Malveaux). From the Circuit Court of Fairfax County (Shannon). Adam T. Kronfeld for Glenn Dance. Joseph A. Condo for LeeAnn S. Dance. VLW 023-7-185, 27 pp.