Background
Lory Storm and David Cornutt divorced in March 2020 under a stipulated decree entered by the Scotts Bluff County District Court. The decree required Cornutt, a physician, to pay Storm $7,500 per month in spousal support for 60 months. Storm was awarded two properties — one in Steamboat, Colorado, and a ranch in Crawford, Nebraska — while Cornutt received a property in Scottsbluff. The parties were each ordered to sign and deliver quitclaim deeds within 30 days of the decree, but neither complied promptly.
In spring 2021, Storm discovered that IRS tax liens for unpaid federal income taxes from 2008 through 2017 had attached to the Colorado property after Cornutt signed the quitclaim deed in April 2021 — one month after the liens recorded. The liens, totaling between $1.5 million and $2 million, prevented Storm from selling the Colorado property, which was central to her real estate business model. Storm filed a complaint seeking either to vacate the decree for fraud or to obtain a declaratory judgment that the liens were Cornutt’s debt. Cornutt counterclaimed for credits against his spousal support for payments he had made on Storm’s decree-ordered obligations, and Storm cross-sought an extension of the spousal support period.
After a two-day trial in May and June 2024, the district court found no fraud, declined to order declaratory relief against the IRS (which was not joined as a party), extended Cornutt’s spousal support obligation from 60 to 90 months, allocated the 2008 joint tax liability equally but assigned the 2009–2017 penalties and interest solely to Cornutt, and denied Cornutt credit for voluntary payments he had made toward Storm’s obligations. Cornutt appealed all adverse rulings.
The Court’s Holding
The Nebraska Court of Appeals affirmed on all issues. The court held that the post-decree attachment of IRS tax liens to property awarded to Storm constituted a material and substantial change in circumstances sufficient to support modification of spousal support under Neb. Rev. Stat. § 42-365. Although Storm was generally aware of unresolved tax issues during the marriage, the court distinguished between knowledge of an abstract tax debt and the actual encumbrance of specific awarded property by a lien — the latter representing a new condition not in existence at the time of the decree. The court rejected Cornutt’s argument that the failure to timely execute quitclaim deeds, attributable in part to Storm and her former attorney, negated the finding of changed circumstances.
The court further held that extending spousal support from 60 to 90 months was not an abuse of discretion. Storm’s real estate business remained effectively frozen with no certainty as to when the liens would be resolved, and the original support amount had been premised on Storm’s ability to sell the Colorado property and reinvest the proceeds. The pending malpractice settlement and Storm’s continued ownership of the properties did not render the extension unreasonable.
On the credit issue, the court affirmed the denial of offsets for the approximately $164,000 Cornutt voluntarily paid toward Storm’s decree obligations. Because no agreement existed — and the decree contained no provision — for crediting those payments against spousal support, the payments were deemed gratuitous regardless of Cornutt’s subjective intent. On tax liability division, the court upheld the district court’s refusal to equitably allocate the 2009–2017 tax debts, finding the evidentiary record too sparse to determine whether the income generating those liabilities was used for marital or nonmarital purposes.
Key Takeaways
- Post-decree attachment of IRS tax liens to property awarded in a dissolution decree can constitute a material change in circumstances justifying modification of spousal support, even if the underlying tax debt was generally known during the marriage.
- A party who voluntarily pays obligations assigned to the other spouse under a decree — without any agreement or court order providing for credit — cannot later offset those payments against a spousal support obligation.
- Under Nebraska law, income tax liability incurred during marriage is ordinarily a marital debt, but equitable allocation requires sufficient evidence of how the income was actually used; absent that showing, a court may decline to divide the liability.
- A court cannot issue a declaratory judgment affecting IRS tax liens unless the taxing authority has been joined as a party to the proceeding.
Why It Matters
This decision clarifies that a spouse’s general awareness of tax problems during a marriage does not, by itself, place the risk of future lien attachments “within the contemplation of the parties” so as to bar a post-decree spousal support modification. Practitioners advising clients in dissolutions involving unresolved IRS disputes should treat the timely execution and recording of quitclaim deeds as urgent — not merely procedural — given that a delayed recording can expose awarded property to liens and trigger downstream modification litigation.
The case also offers a practical warning for obligors who make voluntary payments on a former spouse’s decree obligations hoping to obtain credit: without an explicit agreement or court order, Nebraska courts will treat such payments as gratuitous. Parties in that position should seek judicial approval before making payments, or risk having those sums treated as gifts with no offset value against support arrears.