MT. VERNON – The Fifth District Appellate Court granted half of a tax refund in a martial settlement agreement, reversing a Madison County Associate Judge Thomas Chapman's ruling that denied the spouse's claim.
In the March 7 ruling, Justices Judy Cates, James R. Moore and John B. Barberis reversed and remanded for entry of a new judgment in favor of Carol Thompson. The justices concluded that the trial court erred when it denied Thompson's motion to enforce a marital settlement agreement involving a refund of taxes covering the year 2010 with then husband Patrick Notestine.
Thompson argued on appeal that Notestine should not have been granted the entire $43,958 in a 2010 joint tax refund that was received after their marriage had dissolved. According to court papers, Thompson argued that the tax refund was marital property and their settlement agreement states that refunds were to be split on an even basis.
Cates held that under the terms of the agreement, Thompson "therefore is entitled to a total of $21,979 from Notestine as her share of the refund."
According to the ruling, Thompson filed a motion to enforce the settlement agreement in 2016 after she discovered that the couple was scheduled to receive tax refunds for the years 2007, 2009, and 2010 after filing amended joint returns. As part of the divorce settlement agreement, martial assets, including a business the couple owned called Custom Steel Processing was covered.
Notestine argued that he was entitled to the full refund "because Custom Steel caused the refund and he alone paid the tax liabilities associated with Custom Steel."
Additionally, Notestine argued that "because Custom Steel is an S corporation, Custom Steel does not pay taxes itself. All income and deductions pass through to its shareholders, who report the income and deductions on their own income tax returns."