controlled by a the public or parent who decides to not distribute some of the earnings of the corporation constitute income within the meaning of section five zero five of illinois marriage and dissolution of marriage marriage act that as a practical matter what this case presents is the question whether the father gets to decide for himself what his child support obligation will be in this case the father is the sole shareholder solver rector and the ninety i'm sure he's the sole officer sole director and ninety one percent shareholder of the corporation he decides how much of the earnings of the corporation will be paid to himself as salary how much will be distributed as earnings and how much will remain undisputed so he's the one who's in control all the way through and the legislation is clear and the cases are clear that his control of the corporations the deciding factor in whether in determining do we define controlled or up well the laws of a court of corporations say that the majority shareholder gets to decide whether or not income is distributor he certainly has a duty to inform the minority shareholder of what he's going to do with the distributions and he can't make a distribution to himself as a shareholder without polluting the minority shareholders proportion that is if he's going to declare a dividend he can't declare a hundred percent to itself he has to do it according to the amount of stock and all saw the minority shareholder has to get his nine percent interest of whatever well first he's entitled to is protected by business judgment but secondly i think it's important to note that what we're asking for here is not a requirement that he make distributions from the corporation to pay the child support here were that that's not what's at issue here what's an issue is whether or not the earnings of the corporation are going to calculate what his income is for the basis of child support just as the court he has to pay taxes he as an individual is responsible for the taxes on the earnings of the corporation he has to pay corporation doesn't he causes the corporation to make those payments but in the same way he individually would be responsible to make corporation since two thousand and seven when he became the majority shareholder no it was not and i think that's an important point to make here which is the  legislation and the supreme court rules and the case law of the question of child support is different than it is in most other areas of law that is the legislation states that income is income and the case law as i said states that the control of the shareholder decides whether or not his income is income which case yet as was simply will case lawyer for and i'm referring to in the issue of determining  shareholder control it would be joint and lodgers that most cases refer to determining what's marital property for the purpose of calculating income to the to the spouse but i think the analogy holds here and the statute the child support statute also says in section one zero two of the marriage and dissolution of marriage act that the act is to be liberally construed to to further the purposes of the statute which include making sure children are supported now you will also see from the legislation that all income is income subject to certain specific exclusions such as monies that are paid for taxes money that is withheld by an employer for retirement in every case in every instance of those legislative carve outs for calculation of and are you looking at any of that seed money to be able i think the income up i think there needs to be an objective standard and i think the seed money should be counted as income for purposes of calculating his child support obligation i think it's that's fine he can make reserves he can keep eighty percent as reserves but the reserves of the corporation top come for his responsibility to support his i would charge it i would think that you would have to rule that the money  he this was a consult he had the big salaries and things of that that's right that's right and he didn't gave no testimony as to how much is needed for that the problem is if we're looking at if we're going to have a rule that says that there has to be an evaluation done as to whether the father is keeping earnings that are excessive we're looking at a situation where the single parent who's trying to get food clothing and shelter for her minor child is going to have to hire experts to evaluate the operations of the corporation and second guess the business judgment of the father who controls the corporation it's going to take time it's going to make take money and that's not what the statute says that the father has an obligation to contribute to the support of the child and that obligation exists whether he is an employee of a corporation  working for a salary or whether he's the owner or whether he's chosen to be the owner of a corporation now in this case the father has chosen to take it as corporation election what that means is he's chosen to say to the to the government that this money of the corporation counts as the earnings of the corporation counts as his money for the purposes of paying taxes it counts as his money it's not taxed to the corporation so in the same way his responsibility to take care of his child those earnings should pass through also if you look at the income corp or retained earnings that are necessarily held in a corporation in order to to to keep the corporation solvent in a position  on income that's not available to him well first i disagree that the income isn't available to well you know it if you if you just take my scenario if that if it's reasonable necessary to keep the corporation afloat i would say it's not available to all and you know you know he shouldn't be put to the choice of bankruptcy bankrupting the corporation so it and in frankly the long term viability of corporation is in everybody's interests so i would say th a given in my scenario it's not available to him if it's reasonable necessary and i think the case loss of at least the cases from other jurisdictions that speak to this point not the marital property but the support to speak to that what's the money isn't available to him then the life of that wouldn't be reasonable well then but then i think it follows from that answer that this isn't just he he a bright mind type open else i think the case law from the other the corporation well putting that burden of the single parent to prove what the subjective intention of the public or parent is well is all it takes is an account i mean if you read these that's an interesting point if you read these cases you keep you keep reading about how it comes came in the courtroom and testified about what was reasonable necessary and there wasn't any such a testimony in this case that benefit of having an expert commanded to determine whether or not the retained earnings group being held back or were being not improperly distributed no we didn't have an expert but in drawing a joint decision turned on whether the father had control of the corporation that was the determining rule as there was expert testimony enjoyed that indicated that it retained earnings were used for corporate expenses and that the husband's composition was i mean even the case if your side takes a deal calicos other factors i'd like to make another point which is that in this case there was actual distributions made by the corporation that is the corporation made distributions to pay his taxes the taxes there was he made a distribution to make a trip to india and at the end of every year he made a distribution from the corporation to himself and allowed to have approximately one hundred thousand dollars per year and he then testified that he didn't cash the check when he put it back in the corporation but he did withdraw the money from the corporation so my argument is that he did actually take the money from corporations well what i mean i mean that's their reply to the subject and if that's true then he did take the money out and it money should be attributed way but but the question is the show and you know you know and i don't know how you could do it without expert testimony but maybe you you could hear  know the issue is was this money needed to operate the corporation and they did they base and yes and i think the testimony showed that it was there were no capital expenses that he simply said that he needed to save the money the money in the event of future contingencies that might happen and that has been ruled by the illinois supreme court and rogers that everybody even the sole proprietor needs to save money for rainy day but that doesn't mean that the money isn't income and you still have to pay child support  funds it was mainly for funds that he needed to withdraw for tax purposes for the corporation and then after that need work was no longer on necessary he put the funds back into the corporation so where w that he dried up a personal individual benefit from formal spots were testimony and well with respect to the payment of the taxes he did receive the benefit receive the benefit of having his t corporation or not earnings according to the statute is entitle to deduct from his income the amount of money paid in taxes according to his tax returns the court the returns from two thousand and nine for example he had a tax liability of thirty nine thousand dollars if his salary is his sole income that's fifty thousand dollars income he did that's from that his tax liability living in the ten thousand dollars worth of income or child support obligation of twenty percent of the remaining ten thousand dollars which would be about one hundred sixty seven thousand dollars a month that's what happens when we start treating the his income as income for one purpose and not as income for another case that the problem is if we put the burden on the mother to prove the subjective intent of the father then we have a situation where a single parent who's trying to get food clothing and shelter shelter for a child that she's going to have to hire experts to come in and testify to do analysis the litigation is going to take a very long time and that's not what the legislature intended here the legislatures this if it least stated that all income is income and listed specific exclusions from that and savings for the future for future liabilities that might happen are not listed among those whether it's a sole proprietorship or a corporation the fact that the father  incorporated in this case is giving if if the income is not included in his baseline that means that the father is deciding for his self what his liabilities going to be since he's deciding how much understand that he acquired this company purchased this company two thousand and seven he testified that when he purchased this company his company was in debt for somewhere under two hundred thousand dollars it's clear through that the testimony provided that mr i join a has been working hard at this company to try to make it profitable and should try to make the business grow and when you look through the exhibits which are the tax returns that are included you see that there has been growth of the years until most recently the testimony was that in two thousand and eleven he lost a major contract and then again those retained earnings were nasa serry to pay the employees to pay the rent to pay the bills so i think it's important to consider what mr i just that i'm sorry to what extent were those retainer mystery i think when you look now well when you look historically just as that what the retained earnings were at some point they were one hundred thousand dollars until you get to like two thousand and eleven he started saying those earnings are only down to like twenty three thousand dollars a year so you know that that major contract that he lost was a major hit you also have and the paid himself a salary consistently fifty thousand dollars for the past two or three years and in the other the court didn't get into specifically in her decision in the exhibit you see his actual paycheck and you can see what his month what his  and the net income was so it was based at six forty three was based on a fifty thousand dollars a year salary to the property head and lease up an idea of what the income was right is the increase and what his income was that it was presented during the hearing yes and i think when the judgment was entered i think he testified that he was earning about thirty three thousand somewhat less and that therefore there's the increase that was awarded to  for i think what you'd call contingencies my question is if these contingencies ever happen he talked about you know if if we lost project and as a result we had to stay you know move the family back to where we're where a court should look at this and say well yeah i mean i understand they have to have a rainy day fund to take care of cashflow problems but they need one hundred twenty five thousand dollars move in to prove that that's not necessary i think that when you look at what the monies were i mean when you look at retained earnings retained earnings as i mean as we know it's not a dollar for dollar amount just because the retained earnings reflect you know fifty thousand dollars it doesn't mean there's fifty thousand dollars of cash available at any given time so i mean i think that when you look at this was a hundred thousand reason for not reason why i think in this case this court at the opportunity to review that and she necessary whether there's time to shop or they'd like to have just be looking at control and he points to this trip to india as an example of the fact that the money is really there for him if he if he wants well i think the do look at that is this a reasonable expenses is a reasonable amount of retained earnings to maintain this business and i'm going basis is there enough money for working capital or is there excess of excess is being spent here i think when cases that ease box tickets all those things all those things come into evidence and the judge has the opportunity to evaluate is that reasonable is that necessary is that fair is a legitimate business expense maybe i missed it but the brief you get to my question what standard of review for us and i get taxed on the profits of my company every year and every year i look at that number of us profits and i ask my account where where where it was that money you know where it where is the account that has all this money that this is profits and because it's used ideally basis to pay expenses to pay a payroll to pay all the needs that are required of a corporation would you agree that there would if there could come a point where that number could be too high yes i think  she was and the facts before her were not necessarily a position where she had to determine that the value was too high i think she heard the testimony and determined everything for a legitimate business purpose and that the resident you know that that mr  a very frugal man and that wasn't having excessive retained earnings out back for any reason and i think the fact of losing the contract kind of bears that out at the time of the hearing was a trial for presented with any evidence as to the present day value of the corporation now i don't think there was ever a business evaluation done specifically and well do we know how much the stock is worth he has what ninety one percent of the delineates what those are yes right and i think also you know just being a practitioner in this area you know after getting tax returns you know the next thing you look at you start looking at bank statements and and evaluating and determining do i need to bring in an expert is this a relatively small business that i can just look at and say you know that's what people pay for right that's what people pay for an automobile that's what people pay in taxes i mean every case can afford an expert all the time and i must tell you that there seems to be in my seventeen years of practice a growing proliferation of small businesses a number of my clients now have their own small mom and pop businesses a lot of them have escorts you can't even those have the means to bring in someone to evaluate the value of the business or bring in an accountant but i but in those cases i certainly look at theirs bank statements i look at their tax returns you know some things just have to add up and make sense and i think in this case the court had the opportunity to look at i really am not sure of that justice whether that there was an issue with a quarter or an issue with the parties i just don't know i don't answer the first thank you for your time  staff i'd like to quickly address the question of burden of proof as i've noted i think extensively in my argument the father is the one who's in control of this corporation he's the one who has the who is deciding how much is going to be paid for themself in salary how much is going to be retained therefore the mother is not in a position first off as counsel just stated these these cases where they are involve small businesses there's no money to hire accountants or experts to come in to evaluate the corporation especially a single mother who's trying to provide food clothing and shelter for her child since it's the father who's father's burden so the father got on the witness stand and fix you call and he sat he said this is the number of employees that i have this is how much i have to pay them i have to pay therefore this is this is what i need i need these retainers so he's put evidence into the record that that this is what he needs now what did you do to to rebut that well i mean it seems to me that's when the account comes in and says he's wrong it is a need this much it's not commercially reasonable based on accounting practices he only needs you know  formula that accounts use this let's say the gross revenue is this so in the expenses yearly expenses thus and so retain earnings but reasonably should only be ten percent of twenty percent of  s revenue or twenty percent of expenses some formula that shows that this testimony is not believe will but my question is what did you do to report this testimony that he needed this money in the  on him if we put the burden on him he testified he said i need this money in the corporation so he's going forward with evidence my question is what did what did she do to rip up that right  one but to also look at your other the other side of your argument is should i be asking that question because it comes back to your national argument and that is that it's really just a question of troll no i don't think that's the right question the answer is i did not put on evidence of as to i did not have an expert to come in to refute his testimony as to what an appropriate level of retained earnings ricky i said because if you think that that's really not the right question and that the right question is the business of determining whether excessive earnings are being held or not this kind of thing leads to requires an inquiry that makes it that makes the single parent who's seeking support have to characterize the father as some sort of nefarious character who's in gauging is something wrong or hiding the ball when that's not the case at all the responsibility to pay child support is it's not a question of whether he's good or bad now in this case you have a situation where the retained earnings were piling up it's not just that there was one hundred thousand dollars that was sitting there in this case the testimony show evidence shows that every single year the income the current income of the corporation was sufficient to pay all of the expenses of the corporation so those retained earnings were not being tapped to pay ongoing expenses those retain were piling up heiling up piling up to accumulate to the point of somewhere near six hundred thousand dollars and that was pointed out to the trial court and in response to your question mr justice i believe that that argument made to the court was sufficient to refute his argument that those reserves were necessary