Local Judge and fed taxes

[reagantrooper]

Soc
I am in NH and this is the state that my case is in.

I was out of the house in 94. My divorce was "final" in 97.

My final divorce stipulation states "the marital home will be forclosed on  the parties will be equaly responsible for any deficencies as a result of this forclosure" The house was sold at auction at a loss of $42K so the deficeny was that, $42K.

Sometime in 97 the bank forgave or wrote off the debt and the $42K became 0. However the IRS counted the $42K as income for my X and my X only. Why they did this I dont know. Needless to say my X had to pay tax on this $42K. With all fees,intrest and pealties about 10K.

My X took me to court for 1/2 of this. My arguemt was, that the  deficencies as a result of this forclosure was $0 since it was "forgave" by the bank and 1/2 of 0 is 0. Well the Judge did not agree and has ordered me to pay her.

Now I had no say in what the IRS did nor could I have said anything as my X and I filed seperate tax returns sinse 95. If the IRS would have attached my income for 1/2 of the  deficencies as a result of this forclosure ($21K) my tax burden would have only increased by $1500.

So in effect what this local superior court judge did was to  make me   responsible for another persons Federal income tax. I filed a motion to reconsider and he denied it with out even a hearing.

1. Given the info above does is sound like this Judge acted out of his juristiction?

2. If so do you have any ideas on how I can fight this court order?

Thanks in advance for your time!

[socrateaser]

>1. Given the info above does is sound like this Judge acted
>out of his juristiction?

When a creditor forgives a debt, that is the equivalent of income, because your debt is paid by the creditor. The IRS treats this income just as any other, i.e., it is subject to Federal Income Tax. Your facts imply that the judge charged you with one half of the tax liability, which is proper, as your stipulated judgment held both of you equally liable for the deficiency on the home. Therefore, the court's action was proper.

>2. If so do you have any ideas on how I can fight this court
>order?

You can declare bankruptcy, as your obligation is in the form of a property settlement, rather than in the form of spousal or child support, it can be discharged by the Federal Bankruptcy Court. Interestingly enough, had your ex not paid the IRS, you could have been held liable for the tax itself, which is not dischargable. But, as she apparently has paid the tax, you may be able to wriggle off the hook.

Your ex may argue that to discharge this debt is inequtiable, as it is your contribution to a tax bill that you would otherwise have owed as nondischargable, but for her payment. I'm not sure how a bankruptcy court would rule. If you're interested, go see a bankruptcy attorney -- they all give free consultations.

[reagantrooper]

Thank you!