JOAN E. GAY v. THOMAS J. GAY

The plaintiff, Joan E. McNulty,1
appeals, following our grant of certification, from the
judgment of the Appellate Court reversing the judgment
of the trial court. The trial court had ordered a modification
in alimony payments to be made to the plaintiff
by the defendant, Thomas J. Gay, based in part on the
court's determination that capital gains realized by the
plaintiff from the sale of assets constituted income. The
Appellate Court concluded that capital gains could be
considered income for the purposes of alimony modifi-
cation only if those gains were generated from assets
acquired after the dissolution. Gay v. Gay, 70 Conn.
App. 772, 780–81, 800 A.2d 1231 (2002). Accordingly,
the Appellate Court reversed the order of the trial court
and remanded the case to the trial court with instruction
to determine whether the plaintiff had realized capital
gains from assets acquired after the dissolution. Id.,
787. We affirm the Appellate Court's reversal of the trial
court's order on the alternate ground that capital gains
that do not constitute a steady stream of revenue are not
income within the meaning of General Statutes § 46b-82,
regardless of when the assets from which they were
generated were acquired.

The opinion of the Appellate Court sets out the following
relevant facts and procedural history. ‘‘On
December 20, 1996, after a thirty-two year marriage,
the plaintiff brought an action seeking a dissolution of
the marriage based on an irretrievable breakdown of
the marriage. The court incorporated by reference a
stipulation entered into by the parties dated December
20, 1996. The stipulated agreement provided, inter alia,
that the defendant shall pay alimony to the plaintiff in
the amount of $730 per month.

‘‘On September 29, 1999, the defendant moved for a
modification of the alimony payments. In his motion,
the defendant claimed that his retirement, and the
accompanying decrease in income, constituted a substantial
change in circumstances. Furthermore, he
noted that the plaintiff's income and assets had dramatically
increased so that her circumstances had changed
for the better. After hearing arguments on the matter,
the court reduced the defendant's alimony obligation
to $1 per year and ordered the parties to exchange
copies of their respective federal tax returns for the
following three years.

‘‘On October 24, 2000, the court rendered its oral
decision regarding the parties' motions for articulation.
The court first articulated the basis for its conclusion
that there was a bona fide retirement on the part of the
defendant. In addition, the court articulated the basis
for its conclusion that the parties' income was now
in parity and, therefore, the alimony award should be
modified. After making certain adjustments to the net
income reflected on the plaintiff's financial affidavit,
the court found that the defendant had a net income
of $1268 per week and the plaintiff had a net income
of $1323 per week.'' Id., 773–75. In that articulation, the
court indicated that it had included both short-term and
long-term capital gains in determining the plaintiff's
income for purposes of the modification. The court
further indicated that, in assessing the plaintiff's income
for 1999, it disregarded capital losses from a prior year
that the plaintiff had, for the purpose of calculating
income tax, carried over into 1999.

The plaintiff appealed to the Appellate Court, claim-
ing that the trial court improperly had considered as
income capital gains that she had realized from investment
accounts. Id., 775. The Appellate Court concluded
that the plaintiff's capital gains did not constitute
income for the purpose of modification of alimony if
the assets from which the gains were generated were
distributed at the time of the dissolution, but that those
gains did constitute income for that purpose if the assets
from which they were generated were acquired after
the dissolution. Id., 780–81. Because the trial court had
counted all of the plaintiff's capital gains as income
without determining how much, if any, of those gains
were generated from assets that were acquired after
the dissolution, the Appellate Court reversed the order
of the trial court, and remanded the case with instruction
to determine whether the plaintiff had realized
capital gains from assets acquired after the dissolution.
Id., 786–87.

We granted the plaintiff's petition for certification to
appeal, limited to the following issue: ‘‘Did the Appellate
Court properly conclude that capital gains on assets
acquired after the marital dissolution decree constitute
income for purposes of a postdecree modification of
alimony?'' Gay v. Gay, 261 Conn. 930, 806 A.2d 1064
(2002). For reasons that we will discuss more fully,
however, we are persuaded that the Appellate Court's
treatment of capital gains on assets acquired both at
the time of and after marital dissolution requires clarification.
‘‘When the dictates of justice so demand, we
may expand or modify a certified issue.'' White v. Kampner,
229 Conn. 465, 467 n.1, 641 A.2d 1381 (1994).
Accordingly, we reframe the certified question as follows:
‘‘Did the Appellate Court properly conclude that:
(1) capital gains on assets acquired at the time of the
marital dissolution decree may not be considered at all
for purposes of a postdecree modification of alimony;
and (2) capital gains on assets acquired after the marital
dissolution decree constitute income for purposes of a
postdecree modification of alimony?''

The trial court has the authority to modify its alimony
order pursuant to General Statutes § 46b-86, which provides
in relevant part that ‘‘[u]nless and to the extent
that the decree precludes modification . . . any final
order for the periodic payment of permanent alimony
or support or an order for alimony or support pendente
lite may at any time thereafter be continued, set aside,
altered or modified by [the] court upon a showing of
a substantial change in the circumstances of either party
. . . .'' As we have stated, ‘‘[o]nce a trial court determines
that there has been a substantial change in the
financial circumstances of one of the parties, the same
criteria that determine an initial award of alimony . . .
are relevant to the question of modification.'' (Internal
quotation marks omitted.) Borkowski v. Borkowski, 228
Conn. 729, 737, 638 A.2d 1060 (1994). Under § 46b-82,
those criteria include ‘‘the length of the marriage, the
causes for the annulment, dissolution of the marriage
or legal separation, the age, health, station, occupation,
amount and sources of income, vocational skills,
employability, estate and needs of each of the parties
and the award, if any, which the court may make pursuant
to section 46b-81 . . . .'' General Statutes § 46b-81
(a) provides in relevant part that ‘‘[a]t the time of entering
a decree annulling or dissolving a marriage . . .
the Superior Court may assign to either the husband
or wife all or any part of the estate of the other. . . .''
‘‘[T]he trial court has broad discretion in making its
determination of the applicability of the criteria outlined
in § 46b-82. . . . Notwithstanding the great deference
accorded the trial court in dissolution
proceedings, a trial court's ruling on a modification may
be reversed if, in the exercise of its discretion, the trial
court applies the wrong standard of law.'' (Citations
omitted.) Borkowski v. Borkowski, supra, 228 Conn.
739–40. Whether the trial court applied the correct standard
of law in the present case depends on whether
the plaintiff's capital gains constitute income under
§ 46b-82. That presents a question of statutory interpretation,
over which our review is plenary. Munroe v.
Zoning Board of Appeals, 261 Conn. 263, 269, 802 A.2d
55 (2002).

The Appellate Court began its analysis by considering
whether capital gains generated from an asset distributed
in the dissolution decree pursuant to § 46b-81 may
be considered income for the purpose of modification
of alimony. The court concluded that ‘‘capital gains
generated by an asset distributed in the dissolution
decree do not fall within the purview of § 46b-86, and
by implication, § 46b-82. This is so because the capital
gain is merely the appreciation of property previously
distributed pursuant to § 46b-81. The court does not
have continuing jurisdiction over property distributed
at the time of dissolution; General Statutes § 46b-86;
and therefore cannot consider the appreciation of such
property in its inquiry pursuant to §§ 46b-86 and 46b-
82.'' Gay v. Gay, supra, 70 Conn. App. 780. Following
that analysis, the court stated: ‘‘We must now determine
whether capital gains realized on property acquired by
the plaintiff after the dissolution is income for purposes
of § 46b-82. We conclude that if the asset is property
that was acquired by the plaintiff after the dissolution
and, therefore, not distributed as part of the property
assignment, then it is income that must be considered
by the court in an alimony modification.'' Id., 781.
Judge Schaller, however, disagreed with that analysis.
In his dissenting opinion, he expressed the view
that capital gains may never properly be considered
income for purposes of the modification of an alimony
order. Id., 787 (Schaller, J., dissenting). He reasoned
that, ‘‘[a]s [Appellate Court] case law makes clear,2 a
conversion of an asset from one form to another does
not constitute the creation of income. Implicit in this
conclusion is the underlying concept that the growth
in value of the asset distributed at dissolution is not
income when it is converted to another form. Rather,
the growth, and resulting cash value when converted,
simply represents the accrual in value of that asset
itself. In other words, the category the item falls into,
namely, either ‘capital asset' or ‘income,' does not
change because the asset has appreciated in value and
then is converted as a matter of form.'' Id., 788–89
(Schaller, J., dissenting).

Judge Schaller further reasoned that ‘‘this principle
[does not become] any less applicable when considering
assets acquired after a dissolution. I do not believe,
therefore, that the exchange of a capital asset, whenever
acquired, for cash transforms that asset into income.''
Id., 789. We find this reasoning persuasive.
‘‘[T]he purpose of both periodic and lump sum alimony
is to provide continuing support.'' Smith v. Smith,
249 Conn. 265, 275, 752 A.2d 1023 (1999). At least where,
as is generally the case, capital gains do not represent
a steady stream of revenue,3 the fact that a party has
enjoyed such gains in a particular year does not provide
a court with an adequate basis for assessing that party's
long-term financial needs or resources. For this reason,
we conclude that capital gains are not income for purposes
of modification of an order for continuing financial
support if those gains do not constitute a steady
stream of revenue. This is true without regard to
whether the assets from which those gains are derived
were acquired before or after the dissolution. There is
nothing in the record to suggest that the plaintiff can,
through the ongoing sale of capital assets, maintain the
income stream found by the trial court.4 Accordingly,
we conclude that, regardless of when the capital assets
sold by the plaintiff were acquired, the gains on the
assets were not income.

The fact that capital gains on property distributed at
dissolution may not be considered income under § 46b-
82 does not mean, however, that changes in the value
of such property, whether realized or not, may never
be taken into consideration by a court in considering
a modification of alimony. The fact that the trial court
has no authority to modify the assignment of property
made at dissolution; see General Statutes § 46b-86 (a);
does not mean that the court cannot consider a change
in the value of that property in determining whether
there has been a substantial change of circumstances
justifying the modification of an alimony award.5
Accordingly, we answer the first certified question ‘‘no.''
Accordingly, we affirm the Appellate Court's reversal
of the judgment of the trial court on this alternate
ground.Weconclude, however, that the Appellate Court
improperly directed the trial court to determine
whether the plaintiff had realized capital gains from
assets acquired after the dissolution and to treat those
gains as income and, therefore, reverse that portion of
the Appellate Court's rescript.