It has been a very long, if not a very good year.  We noted in an earlier post that one of the challenges reserved for 2021 would be to see how the IRS would address the dischargeable loans granted to hundreds of thousands of businesses under the Paycheck Protection Program (PPP).  Recall that those who “borrowed” under that program were eligible to have the loan forgiven if it was shown that the funds were deployed to cover: (a) payroll; (b) mortgage interest; (c) rent; and, (d) utilities.

The CARES Act specified that the discharge of the loan by itself would not be income.  Section 1106(b).  A Notice issued in May (No. 2020-32) signaled that the taxpayer could not take a deduction for expenses that were effectively paid by a loan that had been discharged.

We now have Revenue Ruling 2020-27 confirming much of this.  Even if the PPP loan has not been formally discharged, the expenses paid with that loan are not deductible if the taxpayer expects the loan to be forgiven at the time of filing.  In fact, the deduction is denied even if forgiveness has not yet been requested so long as the money was spent for one of the four qualified purposes specified above as (a-d).

The IRS also issued Revenue Procedure 2020-51.  It covers the back door in the event that the PPP loan is not forgiven.  Where the lender denies PPP loan forgiveness and the taxpayer wishes to claim the deduction because the expense was paid from revenue and not the money disbursed under the PPP loan, the taxpayer has to attach a statement to the return setting forth the history of what occurred, and how/when the indebtedness was not discharged.  The specifics can be ascertained by reference to the IRS documents.  A summary of it is found in an Alert titled, IRS Confirms Non-Deductibility of Expenses Related to PPP Loans, published by the Tax & Wealth Planning attorneys at Fox Rothschild.

When reviewing a tax return for purposes of calculating support obligations or in determining the value of a business, the practitioner should be aware that these rules should affect income/valuations and should beware that some taxpayers will not avoid the temptation to deduct expenses even though they were effectively payed by the IRS.  Every business should have kept a ledger specifying what expenses were allocated to the PPP loan in order to qualify for discharge of the loan.  That ledger needs to be a part of any discovery request you make henceforth.

Imagine being a kid; any age over four.  Unless you are well north of age 100, you have never seen anything like this.  Adults fighting about everything and demonstrating some levels of rudeness not seen since the school bussing controversy in the 1970s where people fought in the streets over whether or how to promote integration.

Kids can’t understand this.  Why are adults so angry?  From a child’s point of view, we just did the Halloween thing.  It’s time now to slip into Thanksgiving and the magic of Christmas or Kwanza or Hanukah, right?

So this week kids are watching television news about illness rates and death rates and seeing video every bit as sad and creepy as last spring.  Then they watch parents of all stripes, from intact and separated families, spar over whether they can cross-township lines, county lines, or state lines to share a single meal with Uncle Sol and Aunt Selma.  Mom and dad are yelling at each other, “It’s not safe.  Our kids could get sick.  Our elderly relatives could die.”  In response, “You’re crazy; we need to get back our way of life.  This is all exaggerated if not entirely fabricated.”

For a child, could there be a worse way to celebrate “the holidays?”  People screaming and swearing on television.  They turn it off and then watch it live.  All so that we can celebrate our families, right?  Nothing like the childhood memories of having mother call father a selfish boor and an idiot while father announces that he could give a damn what mother thinks because his children will celebrate with family this year.  Celebration, indeed.  Nothing signals celebration more than two parents screaming at each other over whether you will eat turkey at home or the turkey in neighboring Ohio.

I write this as I am presiding over some of this warfare and it makes me angry.  Arguably I should be celebrating myself because lawyers charge good money to preside overs fights about where the turkey is consumed.

Then common sense overcomes me.  It’s not often.  But I ask; what’s to celebrate when you are a child and the people you are taught every day to love and cherish spend their days leading up to a national day of prayer and Thanksgiving by shouting, slamming doors and yelling at children who are upset by this?  Now, that’s a holiday, right?  Especially when one parent goes nuclear and yells that even though I’m just a kid, if I do go to Ohio, I could DIE or bring about the demise of Aunt Selma.  No pressure there, right?  Selma and I will be buried as heroes in the wars over freedom to celebrate Thanksgiving.

If you are engaged in this conflict, or about to be, please stop and ask yourself how your kids are supposed to process this.  Whatever the cause, a lot of people are dying this year and kids are hearing that something bad is in the air.  They are scared because they want to be safe and they want you to be safe because they love you.  Respect both their love and their fear even if you think their fear is unwarranted.  They get scared because they think there are critters outside who might eat them.  The risk posed by those critters, as well as lightning, aliens and terrorists is pretty modest in America.  Yet, we do respect those fears.  I happen to think the fear of respiratory illness is a bit more real than critters.  However, my thoughts are unimportant.  Think about your kid’s fear and do the right thing to address it when you plan a day to give thanks.

Family law blogs are usually not fertile grounds to write about criminal law.  Yet even family lawyers are not immune from situations where our specialty crosses paths with the dark side.  We have previously written about Pennsylvania’s tightly wound wiretap law, which requires that both parties consent before sound is electronically recorded.  Failure to get the consent of the person recorded may be a crime.  18 Pa.C.S. 5701.

A recent article in the current issue of The Bencher, a magazine published by the American Inns of Court, reminds us that federal law addressing computer access has its own legal snag that can yield significant legal problems.

Say you are on Match.com. or even the more innocent Facebook.  You are asked to describe yourself and you resort to “tall, dark and handsome,” when your honest answer would be short, pasty and homely.  Or, you indicate that you are writing from your condominium on the Florida intercostal when you are typing from a trailer overlooking the Youghiogheny outside McKeesport.  You are now making false statements on a website where you have promised to write only what is true.  Thus, you are no longer using the site “legally.”  Some Courts are holding this is a crime.

Accessing data under false pretenses or for corrupt purposes can also cause problems under what is termed the “Computer Fraud and Abuse Act.”  If you use someone else’s credentials to gain access to a site, you may be violating federal law.  In Van Buren v. United States, a cop was arrested and charged with violating the CFAA when he used his credentials to help a “friend” outside law enforcement identify whether a “dancer” in a nearby club was an undercover agent.  Sentenced to 18 months in prison, Van Buren has asked the U.S. Supreme Court to evaluate whether this was a valid purpose of the act and the Court has agreed to hear the case.  The question before that court in a formal sense is whether legal access can become a crime when it is used for corrupt purposes.  The defendant had access to the database by reason of his employment, but the 11th Circuit US Court of Appeals was not happy that he was paid several thousand dollars to “investigate” another law enforcement person for private purposes.  The case is due to be argued on November 30, 2020, and a ruling is expected next year.  However, in the meantime, read your access rules and if you are going to claim to be a Size 4, make it a point to drop a few pounds.  At least then, your sentence for violating federal internet laws should be “lighter.”

18 United States Code 1030

We have recently had inquiries about foreclosures.  Given the current economic climate, this is probably going to become more common.  The good news is that home prices are up, particularly in the Philadelphia suburbs.  But for those who have a house that’s underwater (debt exceeds sales price less commission/transfer taxes) there are things worth knowing.

First, what we like to term a “mortgage” is usually two different legal documents.  A mortgage is actually a legal document filed in the Recorder of Deeds telling the public that the owner’s rights come subject to the claims of a lender.  The mortgage is the product of a document, which you won’t find in the Recorder of Deeds called a promissory note or simply a “note.”  The note says essentially, “I have borrowed money in a certain amount (or up to a certain amount), and here is how I agree to pay it back.”  The mortgage itself just references the note and indicates that if someone tries to buy the property the note and the mortgage will have to be paid in full.  The legal name for this is “due on sale.”

Today, people in relationships often have very different credit histories.  Suppose I am married and I own a house with my spouse.  My spouse has a horrible credit history.  I want to borrow money but the lender looks at my spouse’s credit history and says “We will lend to you but we want nothing doing with that spouse.”  I respond “OK, just loan me the money.”  Lender says “We want security for the loan.  We want a mortgage on your house.”  “But I own the house with my spouse and you don’t like her.”  Lender says, “You still need to get her to sign a mortgage because she is on the deed.”

Note well:  In this transaction, spouse is not an obligor on the debt.  But what spouse actually is doing is agreeing that if I default on the debt, the lender can foreclose on the jointly owned house even though my spouse is not actually a borrower.  In other words the spouse signing the mortgage is effectively saying, “Even though I don’t owe the lender any money, I am prepared to see my interest in a house I own lost to foreclosure if the borrower spouse does not pay.”  It doesn’t matter whether the non-borrower ever got a dimes worth of benefit from the transaction.  Also, once the lender forecloses and even before the lender’s only recourse against the the non-borrower spouse is the equity in the house.  In short, if the lender forecloses but the proceeds from the sale are insufficient to pay off the debt, the spouse is not on the debt but pledged the property via a mortgage is off the hook.

So, I borrow the money to start a business and my spouse agrees to pledge whatever interest she has in our house to secure my debt.  Then I default on the note by not paying it on time.  The lender sues me to recover the debt and takes action to foreclose on the jointly titled house.  My spouse typically has no defense.  By signing the mortgage (not the note), she pledged the house as security for what was my debt alone.

The house goes to foreclosure.  That’s a slow process and in many instances, the home sells at a distressed price.  Often, the borrower and the lender will agree to a private sale to a third party even though the proceeds are less than the lender is due.  However, that requires agreement between the borrower and the lender – and in a world of big banks with vast bureaucracies, getting lenders to agree to anything requires hours/weeks of time trying to secure their cooperation.  Let’s assume that the house is worth $200,000.  I owe the lender $205,000.  I have a buyer at $185,000.  In simple terms, the lender is going to come up $20,000 short if they let the transaction go through.  They could force the property to be sold by the sheriff at foreclosure.  Then they risk the possibility that the sheriff’s top bid is $175,000; now we have a $30,000 shortfall. The lender has the right to a deficiency judgment against the spouse who signed the loan (the borrower) for the $30,000, but the lender now wishes it had consented to the private sale, which would have produced more money.

Title insurance issues can complicate the problem.  Almost every homebuyer wants and should have title insurance.  Most lenders on home purchases insist the property have title insurance to protect them as well as the buyer.  No title insurer has to insure a transaction and like most insurance companies, they are risk averse.  Lenders can release liens of mortgage meaning that even though they are entitled to more money than the house will yield at sale; they would rather take a private deal than see the property sold by the sheriff.  However, unless they file a document with the Recorder of Deeds releasing their lien interest, the private sale cannot be concluded.  Understand that if a lender releases as lien to permit a sale, they are not releasing the balance of the debt but retaining its rights against the borrower alone.  A sale by the sheriff can effectively dissolve the lien on the property even where the debt is greater than the value.  Nevertheless, that’s because the sheriff is selling it in an open bid auction.  If the debt is larger than the value of the home, the lender has the right to take the property in lieu of the debt repayment.  Most lenders avoid that because they don’t like having the responsibility to manage property and deal with utilities, taxes and securing the property.

Tax authorities, including the IRS and many municipalities can be another headache.  They have liens for unpaid taxes as well.  You and your husband own a house worth $200,000.  The mortgage you both signed is for $100,000 of which $50,000 is still unpaid.  But your husband owes $200,000 in federal income taxes for which the IRS has recorded a judgment.  That debt could prevent a title company from insuring the sale even though the taxes are not yours and the proceeds would otherwise be $200,000 minus $50,000 to pay off the mortgage or $150,000.  In theory, the husband’s income tax lien in his name alone should not “attach” to a property that is held as tenants in common or some form of joint tenancy.  But title companies don’t have to insure every transaction; only the ones they want and many would rather not risk that the IRS comes after the buyer for buying a property where a tax lien was “of record” when the transaction took place.

Even more alarming is the situation where a divorcing couple agree to sell a property.  One spouse agrees to pay the mortgage and occupy the property until it is sold.  He/she doesn’t do that causing the debt to increase.  Then that same spouse has a $50,000 IRS lien that arises after the agreement to sell the house.  The couple’s divorce severed the tenancy by entities and made them tenants in common (each owning 50%).  But the $50,000 tax lien due from husband is now clouding the title.  In theory, it should come out of husband’s half of the proceeds and if his half of those proceeds can satisfy the $50,000 debt, a title company may insure the transaction.  But they don’t have to.  Effectively, husband’s poor handling of money after divorce is barring wife from getting her half even though that is what was agreed to.  Effectively, wife’s equity has been trapped in the house even though she bargained to get it and its husband’s subsequent bad act (not paying the mortgage or his income taxes) that bar her from getting to what was to be her money.

If the parties are in a divorce, there is a noteworthy legal doctrine called custodia legis.  Under an appellate case called Klebach v. Mellon Bank, NA, the Superior Court said that in Pennsylvania, property subject to court orders is not subject to attachment by judicial liens.  Lappas v. Brown, supra.  See also Weicht v. Automobile Banking Corp., 354 Pa. 433, 47 A.2d 705 (1946) and Buchholz v. Cam, 288 Pa. Super. 33, 430A.2d 1199 (1981) (property in custodia legis is not subject to attachment until purpose for which Commonwealth holds it has been effectuated).  See generally, Ross v. Clarke, 1 Dall. 354, 1 L. Ed. 173 (1788) (inception of rule in Pennsylvania that property in the custody of the law is not subject to attachment); Bulkley v. Eckert, 3 Pa. 368 (1846) (early formulation of Pennsylvania rule that property held by a public official in his authorized capacity is not subject to attachment by creditors).  The exact limits of this doctrine are not clear.  Property settlements are typically orders of court by operation of law (23 Pa.C.S 3105).  They sometimes takes years to effectuate.  Does that mean that property subject to such an agreement is also immune from attachment for years at a time?

The author thanks Ronald Kalyan of the firm’s Real Estate group for his corrections and additions to this post.

Back in March of this year when the first lockdown began, there were news reports of people electing to quarantine together, if for no other reason, than to avoid isolation.  In some instances, it was to give a forming relationship a “test run.”

Living together, what my parents’ generation liked to call, “living in sin,” is the new normal.  The pandemic just caused some timetables to be advanced.  Nevertheless, as we know, cohabitation often breeds other entanglements, both literally and figuratively.

Take the recent example offered by the relationship of two Lackawanna County residents whose relationship toggled between “off” and “on.”  One of the “on” periods produced a child, although they never married.

In February 2018, Jeffrey Jones and Ruthann Colachino were back “on.”  It was tax time and when they reviewed their tax situations, they agreed that it would be advantageous to allow Mr. Jones to claim their child as his dependent and then file as a head of household.  Ms. Colachino was fine with that so long as Mr. Jones agreed to share the $5,500 refund that his head of household status was due to yield.

When the refund check arrived, the momentarily “happy couple” decided to do what every responsible couple does; they drove to a convenience store in Carbondale and “invested” their newfound wealth in “Bingo Squared” lottery tickets.  They returned to their common dwelling and followed the direction of Gus the Groundhog.  Mr. Jones managed to scratch his way to a $100,000 prize.  Elated, the couple told friends and family they would buy a home together.  They drove together to collect the $72,930 that Gus allows when you scratch off $100K.

You know the rest of the tale.  It lasted a week.  Two weeks after that Ms. Colachino filed to get her $36,465.  The trial included the now ubiquitous surveillance footage from the Turkey Hill store where the winning ticket was acquired.  After watching, that riveting video and hearing from the store clerk and some friends and family the Lackawanna Court ruled the proceeds must be shared as the product of a “joint venture.”

The appeal to Superior Court followed, suggesting this was not a joint venture.  So what’s the law?

A joint venture is an association of persons or entities who form an express or implied contract to engage in a common enterprise for mutual benefit.  McRoberts v. Phelps, 138 A.2d 439,443 (Pa. 1958).  It is shown by facts and circumstances illustrating what, if anything, the parties “intended when associating together.”  There are four elements spelled out in McRoberts: (1) each party must contribute something, whether cash, services, skill, knowledge or material; (2) there must be an intention to share the profit; (3) there is mutual control over the subject matter of the enterprise; and (4) an identifiable transaction rather than a general and continuous transaction.

The video showed they purchased the tickets together, as they had done in the past at the same store (per the clerk).  They called friends and family once they won and used the first person plural “We won!”  They told these same people of a plan to acquire real estate together.  The Superior Court Opinion then circles back to the common plan to share Mr. Jones’ tax refund premised upon Ms. Colachino’s contribution of a “head of household” filing status.  They went directly from where the refund was cashed to the Turkey Hill and Gus’ burrow where they bought their tix.  The suggestion by Mr. Jones that their visit was coincidental was rejected, as it was a credibility finding.

Facetious moral of the story.  Stand clear of others when buying your lottery tickets and if you do win, never, ever use the first person plural.  If someone is standing nearby do not profess to others any intention to acquire real estate with them.

More mature observation.  Lottery tickets make for amusing stories but the difference between buying a ticket and the founding of Microsoft are simply different increments of the same concept, a common enterprise resulting in an extraordinary result.  Even partnerships can be formed through implied conduct.

Colachino v. Jones, 1845 MDA 2019 Pa Superior Memorandum (10/9/20)

N.B.  I’m indebted to Judge Jason Legg of Susquehanna County for finding and reporting on this case in his regular legal column published in the Montrose Independent.  My wife, an ardent reader of the Independent, and fan of Judge Legg’s column brought it to my attention.  Whether that makes this a joint venture, I leave to the reader.

In February 2017 and again July 31, 2019, we posted an article regarding what returns should be ascribed to investment assets transferred in equitable distribution.  In 2019, with dividends reinvested the S&P 500 returned just over 33%.  This year-to-date, 8.5%, which is still not bad, but it has also been a wild ride.  In 2019, we wrote about a 10-year Treasury yielding a lousy 2.06%.  Today 0.83%.

So last July, we played off an article appearing in Kiplinger’s Magazine that set forth 11 stocks that were described as “Boring but Beautiful” because they had an average dividend yield of 5.3%.

A bit more than a year later, we thought it provident to revisit these stocks, if for no other purpose than to see what happened with the yields. Obviously, a full exploration would look at price but we wanted to test the question of whether the 5.3% yield was sustainable. On the whole the results were encouraging. The same portfolio of stocks is today producing an average of 6.48%.  Only three of the eleven stocks saw a decline in yield while one company, Macquarie (MIC), ballooned from 9.6% to 14.39%.  One company fell of out bed on the yield side.  Albemarle went from 7% to 1.6%, but when we did look at stock price, it rose from $75/share to $97/share, a consolation for the dividend loss.

Meanwhile, the Freddie Mac House Price Index has risen from 194 to 205 in the past year.  A decade ago, it was at 126.  So, while houses really did not get back their Fall 2006 mojo until 2016, they have been back on the rise and now are adding value to investor portfolia.

In a word, if you have investments, people are making money and it’s a lot more than the 1% the Treasury Department is paying or the staggering 0.05% rate my saving bank offers.  At those rates your savings doubles once every millennium.

Here’s the dividend yield chart from last July as updated last week.

July 2019                              October 2020                     Trade Symbol

Crown Castle 3.5 2.92 CCI
ATT 5.9 7.8 T
Altria 6.4 8.89 MO
CVS 3.6 3.4 CVS
Macquarie 9.6 14.39 MIC
Enterprise 5.9 6.42 EPD
3M 3.3 3.45 MMM
Iron Mountain 8.2 9.02 IRM
Realty Inc. 3.9 4.73 O
Vereit 6.0 4.7 VER
Albermarle 7.0 1.6 ALB

This afternoon brought me an email from a fellow from West Virginia. The caption indicated it might involve a new divorce matter.  I opened it to read:

“I found your name online and I wanted to send you a quick email before I called your office. If you are interested in taking on new clients or finding new cases, please take 30 seconds to read this email. You will not be disappointed.

The way our program works is simple. We have your name or firm’s name on the first page of Google within hours. We have a portfolio of high traffic family law keywords that we will optimize in your listing 24/7. You’ll be able to type in high volume search terms like Divorce Lawyer, Child Custody Lawyer, Child Support Lawyer, Family Lawyer, Adoption Lawyer and any many more.”

A few days before, I received a similar invitation to join an exclusive group who would receive referrals of personal injury cases to augment my practice.  I last did a personal injury case 35 years ago.

Would you use a surgeon who hadn’t done surgery in 35 years?  If yes, these referral networks are just for you.  If you are listening to news lately, the US government is trying to rid us of a Chinese company called Tik-Tok, which entices you with catchy videos and then sucks the data out of your computer while you are entertained.  Then they sell your information to others who bombard you with content based upon your search history.  A couple of years ago my water heater croaked, so when the plumber said $1,000, I went online to see what the actual price was for this device.  For the next two months, I could not open my computer without being given the chance to acquire a new water heater.  It was easy to turn down these invitations as I had already bought the replacement and I have found that one water heater is enough, thank you.

If you are looking up the law online, you will be given many opportunities to find lawyers who have operators standing by to take your call 24/7.  This may be a convenience, but those names are there because someone is paying for it.  The more the lawyer pays the more exposure to potential clients he or she gets.  If you experienced sciatic pain, would you choose your surgeon based on the advertisement?  Is the lawyer on the back cover of the phone book or the back of the bus always the best lawyer?  I have represented some back of the bus lawyers.  Some are excellent, but the bus is not really an indicator.

If you need a lawyer, ask around.  Yes, you are to some degree buying a pig in a poke, but realize that online research often yields a very bad fit because the fellow who contacted me from West Virginia has only one need.  To get me to pay him to post ads somewhere in exchange for money I am supposed to pay him.  He’s the modern day matchmaker (Yenta in Yiddish).  His job is to marry you to the lawyer who pays him.  Your happiness is not on his radar.  The matchmaker’s fee is coming out of someone’s pocket.  Either the lawyer if the client doesn’t take the bait or the client if the client does take the bait.  Understand, lawyers are not stupid.  If you are a client coming from a referral service you are going to pay a higher rate than the average bear so that the lawyer can recover the cost of having someone fish for clients on the internet.

If you were home last week or this week, the television screen has lit up with some of the most rancorous debate I have seen in my lifetime.  This is saying something because I was around for the summer of 1968 when the world watched assassins, protesters and rioters really start to take America apart.  At that time, 300 young Americans were dying each week in Vietnam.  The Chicago police were dragging delegates off the floor of the Democratic Convention.

These are also challenging times.  We are afflicted with a pandemic and it has inflicted some serious economic damage.  We can have political views; we should have political views, but we are still a long way from America run by fascists or anarchists.  The anger and invective I have heard in the last 10 days seems extreme on both ends.  But to me, it masks a far deeper set of problems, which I have heard nothing about.  This goes to the issue of family life in 21st century America.  Permit me to offer some data about issues our political leaders are not discussing.

The drug overdose data is harrowing enough.  In family law, we are seeing substance dependence cut with equal vigor into families at all economic levels, rich and poor.  As is always the case, wealthier people have more tools to fight addiction.  Nevertheless, addiction, like the coronavirus, is a tricky thing.  You think it is under control and find it is not.

The drug problem can be explained.  Science has made medication extremely effective at mitigating pain.  Unfortunately, those same medications are also highly addictive.  Science has also made illegal narcotics more effective at bringing the high, but also accelerating the crash.

Another statistic is far more challenging to explain.  It is what has happened with suicide rates.  The top bar of the chart is the total number of deaths.  The second bar is male suicide rates.  The bottom is for women.  Before the health catastrophe of this spring, we already passed 47,000 for 2019, half-involving firearms.  We are told that 2020 is going to be far worse as we have many people depressed by both the pandemic and the economic consequence.

As if this is not sad enough, a big part of the increase is actually death among children.  The number of self-inflicted child deaths has risen 56% since 2000.  I am hearing lots of lofty language from both political parties about preserving and improving America for our kids.  The truth is that suicide is the second leading cause of death among that age group.  That speaks volumes about their optimism.  We are hearing many speeches about how horrid life will be if one party controls the Congress or the White House. But look at the chart above from 1999 to 2016.  Eight years of Republican leadership, eight years of Democratic leadership, and now four years of resumed Republican dominance.  The trend of death is the same, and it is relentless.

Perhaps this could be explained by life events. I think not.  Here are some demographic data to prove the point.

1999 2019
S&P 500 Index 1350-1400 3500 2.5 times greater
Life Expectancy 77 79 +2 years
Unemployment 4.0% 3.5% -12%

We are living longer, our financial markets are far healthier and unemployment declined steadily from 2009 until this March.  Yet, the suicide trend shows no real response to that happy news.

In 1968, the battlefield was in Southeast Asia and in the streets of our cities and college campuses.  We are seeing some of that today as well.  I suggest this data demonstrate that the real battle of 2020 is going on inside our homes.  That is where addiction takes root and that is where adults and children decide that life in not worth living.  There are many great discussions to be had about racism, the economy and the climate.  However, the data presented suggests that we need to find out what is wrong inside our homes that makes us unhappy enough to decide that life is not worth living under either political party’s leadership.

While writing this I learned that during a protest over a police shooting in Wisconsin last evening, a 17 year old decided he would shoot at protestors; killing two.

I have strong views about this election.  Yet, what concerns me more is that partisan rancor and hatred are filling our minds and depressing our kids.  I join with people in both parties in wanting to create a better world.  I suggest that a better world is one that begins with less invective and hyperbole and more civility and understanding.  If our people are addicted to drugs or worse yet, dead from self-inflicted wounds, it matters little what party or ideology is in charge.

Long ago Samuel Johnson wrote, “To be happy at home is the ultimate result of all ambition, the end to which every enterprise and labor tends, and of which every desire prompts the prosecution.”  If we are to enjoy our time on this planet, it would seem that we need to focus a bit more on what is really bothering us and a bit less on whether we need to cancel student debt or defund the police.

N.B.     A couple of additions since this was published.  On the evening of August 27, the topic of drug deaths was mentioned at the Republican Convention.  It was discussed in the context of resolution when drug related deaths grew 4.6% in 2019 to 71,000.  There were 47,000 suicides in 2018 the most recent data available.  The data in the charts stops with 2016.

When the CARES Act passed last spring we wrote about the provisions, which allowed IRA & 401(K) holders to access their accounts while avoiding tax consequences.  We also noted that the devil is often found in the details.  Nevertheless, in late June, the IRS issued Notices 2020-50 and 2020-51.  You should review these publications and/or confer with your retirement consultant/administrator before taking any distribution or loan.

First and most important from a temporal viewpoint.  If you took money out of a plan at any time in 2020 as a Required Minimum Distribution (RMD), you can roll it back and thereby reverse the tax consequence if you do so before August 31, 2020.  See Notice 2020-51.

We now have some definition as to who is qualified to either distribute or borrow money from an IRA or 401(K).  We knew people who were diagnosed with coronavirus and those with a spouse or dependents with the affliction were qualified.  That has been expanded to include any account holder whose spouse or dependents were diagnosed.  In addition to having the coronavirus, if you or a household member had COVID-19 negatively affect:

  • employment hours;
  • work hours to care for children;
  • business hours; and/or,
  • a job offer, through either delayed start or withdrawal of offer.

You are eligible to borrow or distribute up to $100,000 from the IRA or qualified plan (if the plan allows it).  Actual need or quantifiable damage related to COVID-19 are not factors, but you should maintain records of the triggering event.  You report these transactions on Form 8915-E (not yet available), including any funds you repay to the plan within the three year window in which you are permitted to do so.  It appears that you will report the distribution as income and it should follow that you will pay tax on that withdrawal.  However, if you do pay the money back into the plan, you again report that repayment on another Form 8915-E and then amend your tax return to get any tax you paid refunded.  If you distribute and do not repay, the penalty for early withdrawal of 10% is avoided.

Also, a reminder if you are repaying a loan to a qualified plan, you may defer payments due between March 27, 2020 and December 31, 2020, by a year.  That should be confirmed with the plan administrator.

So there is now more flesh on the regulatory bones of pandemic relief.

Since 2011, we have had a statute setting forth both a procedure and a judicial standard for the determination of requests to relocate with a child.  We have previously observed that the appellate decisions coming both before and after enactment of 23 Pa.C.S. 5337 have made relocation a rocky road.  However, a panel decision issued on August 17 in J.G. v. K.G clarifies that the professed “duty to mitigate” is one rock too many.

Marriage in Indiana produced two children ages five & seven.  The parties moved to Allegheny County in 2016 so that they could live near mother’s family.  Three months later the parties separated and reached an agreed custody arrangement that was essentially alternate weeks “plus” with mother having primary physical custody.  The case reports father was involved in children’s’ activities.

In February 2019, mother’s employer was sold and she lost her job.  She quickly found alternate work, but that offer would necessitate relocation to San Francisco.  In March, she issued a notice of intent to relocate and father filed opposition.  The case was heard in October and the Court denied the request.  Mother appealed citing six (6) alleged errors.

The Superior Court reversed and remanded on the basis that the trial court imposed an improper standard.  By statute the standard under Section 5337 (i)(1) is whether the relocation promotes the interests of the children.  In so doing, the court is expressly authorized to evaluate the bona fides of the parties in seeking or opposing relocation.

The Trial Court Opinion interpreted the statute as imposing a burden on a relocating parent to demonstrating that she had sought to “prevent relocation” by “exploring every possible avenue for employment even at a lower salary and outside of her specific field.”  In a 2-1 decision, the Court held that the law imposed no such duty.  In short, the burden did not include a requirement that the proposed relocation be unavoidable.

Regardless of which side you favor on this issue, the precedent (or lack thereof) is a vital matter.  In many, if not most relocation cases, this writer has either read or witnessed the availability of “local alternatives” that avoid relocation is often a central issue in the hearing.  It is typical for the “remaining parent” to devote lots of cross examination to what jobs the relocating parent has explored locally and the failure to do so is often treated as a demonstration of improper motivation (i.e., escape from the non-custodial parent).  Under this ruling, those questions might well become legally irrelevant beyond the simple question:  Did you apply for any jobs locally before accepting or pursuing the Californian job?  A negative answer, “No, I did not look for anything in Southwestern Pennsylvania,” might go to motivation, but once the witness answers that she did explore local possibilities, it would seem that a remaining parent does not have the right to conduct lengthy questioning or produce independent evidence of local employment alternatives.  As this case comes down, the core question is only, “would California be better for the kids?”  Of course, pregnant in that question is what effect relocation would have on the children’s relationship with their father once they move 2,500 miles away. But one of the matters that often slows the progress of any relocation case is the exploration of local alternatives.

The case is non-precedential.  Nevertheless, it is nonetheless highly important and may affect how relocation cases are tried.

N.B.  Not discussed in this case but worthy of mention is the impact of COVID-19 on those cases that are pending.  As a society, we are accustomed to packing kids in crowded planes to spend summers with another parent.  That is going to be an issue.  Moreover, as COVID-19 continues to change the work environment in terms of both overall employment and telecommuting, conventional thinking about those issues is going to change.

J.G. v. K.G, 1900 WDA 2019 (August 17, 2020)