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KickerFeaturesTopicsLitigationSectionsNewsLJN NewslettersThe Matrimonial Strategist

State Ruling May Have National Impact

BY Laurence J. Cutler
October 30, 2006

On March 27, 2006, the Superior Court of New Jersey, Appellate Division decided a case that may have national implications because it involved federal law. Pryce v. Scharff, 384 N.J. Super. 197, 894 A.2d 668 (2006). Although this opinion went fairly unnoticed in the matrimonial community, its impact upon current and future litigation promises to be profound. To summarize briefly, the Pryce case involved the issue of whether overdue child support judgments should be subject to post-judgment interest. After reviewing the federal and state statutes and the current New Jersey Court Rules, the Appellate Division ruled in the affirmative.

What It's About

The initial issue addressed by the court is whether the post-judgment interest is taxable to the obligee or tax deductible to the obligor. Upon a cursory review of the United States Tax Code, it appears that the post-judgment interest would be taxable to the obligee. Specifically, 26 U.S.C. ' 61(a)(4) mandates that interest is included as gross income for tax purposes. Moreover, many tax courts have previously determined that any interest associated with an award or settlement is taxable. See Aames, 94 T.C. 189 (1990) and Kovacs, 100 T.C. 124 (1993).

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