SUMMARY July 3, 2019
2019COA104
No. 18CA0250, In re Marriage of Gibbs
— Family Law
— Post
dissolution
— Modification and Termination of Provisions for Maintenance, Support, and Property Disposition
— Imputed Income This opinion answers the unresolved question of whether a district court can, for the purpose of calculating maintenance, impute to a party rental income from that party’s primary residence when the primary residence has never been used as a rental property. A division of the co urt of appeals concludes that a district court cannot impute rental income to a party when that party has
never used the residence as an income

- producing asset. The summaries of the Colorado Court of Appeals published opinions constitute no part of the opinion of the division but have been prepared by the division for the convenience of the reader. The summaries may not be cited or relied upon as they are not the official language of the division. Any discrepancy between the language in the summary and in the opinion

should be resolved in favor of the language in the opinion.COLORADO COURT OF APPEALS 2019COA104

Court of Appeals No. 18CA0250 Larimer County District Court No. 12DR408 Honorable Devin R. Odell , Judge

In re the Marriage of Carl Joseph Gibbs , Appell ant , and
Joellen Elizabeth Gibbs , Appell ee
.
ORDER AFFIRMED IN PART, REVERSED IN PART,

AND CASE REMANDED WITH DIRECTIONS

Division IV Opinion by JUDGE LIPINSKY J. Jones and Martinez*, JJ., concur
Announced July 3 , 2019

Thomas & Associates Law Firm LLC , Joseph G. Williams , Greenwood Village , Colorado, for Appell ant
Alison Ruttenberg, Louisville, Colorado; Vigil Law Offices, P.C. , Frank G. Vigil , Lakewood , Colorado , for Appell ee

* Sitting by assignment of the Chief Justice under provisions of Colo. Const. art. VI, § 5(3), and § 24

- 51

- 1105, C.R.S. 201 8

.1

¶ 1 Three years after the district court entered permanent orders in his dissolution of marriage case, husband, Carl Joseph Gibbs, sought to modify or terminate his maintenance obligation to wife,
Joellen Elizabeth Gibbs , under section 14

- 10

- 122(1)(a), C.R.S.
2018 . Husband argued that his alleged loss of income r esulting from a shoulder injury he incurred three years following the entry of the permanent orders constituted a substantial and continuing change in his circumstances that warranted a decrease in his maintenance payments.
¶ 2 The district court denied husb and’s motion based on its calculation of husband’s monthly income, including imputed rental
income from husband’s primary residence.
¶ 3 We affirm the portion of the decision addressing husband’s
self

- employment income and reverse the portion imputing rental
income to him because husband never used the residence as an
income

- producing asset. We remand to redetermin e husband’s maintenance obligation without considering imputed rental income

. I. Background
¶ 4 The parties’ marriage ended in 2013. In the permanent

o rders, the district court award ed wife $1 , 850 in monthly2

maintenance until the death of either party, the remarriage or civil
union of wife, or further court order.
¶ 5 In September 2016, husband moved to modify or terminate his
maintenance obligation

. He alleged that , as a result of a severe
shoulder injury , he was no longer able to perform labor

- oriented
work

. He further alleged that he had been diagnosed with stenosis,
which would require surgery and affect his ability to work for the

rest of his life.
¶ 6 Following a hearing at which husband, wife, and a physician testified, the court found that husband had not shown a substantial and continuing change in his circumstances and , therefore , denied husband’s motion.
II. Husband’s Income
¶ 7 Husband contends that the district court abused its discretion
in determining that his income was $ 6 , 500 per month for purposes
of calculating maintenance.
A. Standard of Review
¶ 8 We review a district court’s order continuing or modifying
maintenance for an abuse of discretion. In re Marriage of Kann , 2017 COA 94, ¶ 75 , ___ P.3d ___, ___

. A district court abuses its3

discretion when its decision is manifestly arbitrary, unreasonable,

or unfair. In re Marriage of Gromicko , 2017 CO 1, ¶ 18 , 387 P.3d
58 , 61

. ¶ 9 We defer to the district court’s factual findings unless they are clearly erroneous. In re Marriage of Connerton , 260 P.3d 62, 66 (Colo. App. 2010). The district court must make sufficiently explicit findings of fact to give the appellate court a clear understanding of
the basis of its order. In re Marriage of Rozzi , 190 P.3d 815, 822 (Colo. App. 2008).
B. Self

- Employment Income
¶ 10 Husband argues that the district court miscalculated his self

employment income because it did not accurately calculate the ordinary and necessary business expenses that needed to be
deducted from his gross receipts , as required by section
14

- 10

- 114(8)(c)(III)(A) , C.R.S. 2018

. We disagree.
¶ 11 In applying the maintenance guidelines, an individual’s gross
income from self

- employme nt is calculated by deducting from gross receipts the ordinary and necessary expenses required to produce
income. Id. Ordinary and necessary expenses do not include
business expenses that the district court finds are “ inappropriate4

for determining gross income. ” § 14

- 10

- 114(8)(c)(III)(B). A self

employed party’s gross income includes expense reimbursements

or in

- kind payments received in the course of self

- employment if they are significant and reduce personal living expenses. § 14

- 10

- 114(8)(c)(I)(X).
¶ 12 The record reflects that , when the district court entered the permanent orders , husband performed the manual labor of a
framer for his own construction company. A s a result of husband’s shoulder injury and pain from stenosis, he transitioned to a supervisory position at his girlfriend’s construction company

. ¶ 13 The court found that husband earned a $5,000 monthly salary as a supervisor. The court acknowledged that husband was required to use a portion of his salary to pay for certain business

expens es, including a cell phone, general liability insurance, and
auto insurance. However, the court found that these business expenses were offset by his ability to use a company vehicle and the cell phone for personal purposes.
¶ 14 The record supports the dist rict court’s finding that husband’s business expenses were offset by the value of the vehicle and cell phone . Husband testified that his business expenses for his cell5

phone, general liability insurance, auto insurance, and loan payment totaled $ 1 , 057 per month. He also testified that he was provided the vehicle at no cost to himself and was allowed to use
th e vehicle for personal use. Husband estimated that the monthly loan payment on his vehicle was around $800 and that he spent around $300 per month i n fuel. Husband further said that his construction company paid his cell phone bills. His monthly cell phone bill was $123.
¶ 15 In finding that husband’s business expenses were offset by the
in

- kind payment s he received from his girlfriend’s construction

c ompany , the court essentially added those payment s to his salary,

see § 14

- 10

- 114(8)(c)(I)(X); see also In re Marriage of Long , 921 P.2d 67, 69 (Colo. App. 1996) (noting that in

- kind payments might include a company car, fr ee housing, or reimbursed meals ), and then deducted his business expenses from his salary, see § 14

- 10

- 114(8)(c)(III)(A) . Because his monthly business expenses ($1 , 057) were nearly the same as the monthly in

- kind payments for
the vehicle , fuel , and cell phone ($1 ,223 ), we discern no abuse of
discretion in the district court’s calculation of husband’s self

employment income.6 C. Imputed Rental Income
¶ 16 Husband argues that the district court erred in imputing $1 , 500 per month in rental income to him

. We agree

. ¶ 17 The record reflects that husband continued living in the marital residence following the dissolution of the parties’ mar riage

. His monthly mortgage payment on the five

- bedroom, 2 , 500

- square
foot home was $2 , 552 at the time of the modification hearing.
Husband lived in the home w ith his girlfriend and her three
children. They lived there together as a family. Husband testified
that he paid the mortgage and , although his girlfriend did not pay rent, she paid for the utilities and groceries.
¶ 18 The district court found that this arr angement was not a fair market exchange because husband’s portion of the utilities and groceries was only a small fraction of these costs

. In addition, t he
district court imputed to husband rental income from the house, noting that husband “owns a large h ouse
— the former mar i tal
residence

— that he could use to generate rental income. .

. . [T]he property .

. . is much larger than he needs for himself.”
¶ 19 The district court “estimate[d] that fair rental value would be at least $1,500 per month for a house of that size

. ” It therefore7

concluded t hat husband was “essentially receiving at least $1,500 in income that he is gifting to [his girlfriend] and her children.” The
district court found that “[t]he fact that [husband] chooses to forgo
this income from a n asset should not be used to penalize [wife].”
The district court added the $1 , 500 in imputed rental income to husband’s $5 , 000 monthly salary for a total income of $6 , 500 per
month.
¶ 20 For purposes of calculating maintenance, potential income is properly imputed to a party who is voluntarily unemployed or underemployed. See § 14

- 10

- 114(8)(c)(IV); see also People v.
Martinez , 70 P.3 d 474 , 476

- 81 (Colo. 2003) (discussing imputing income to an unemployed or underemployed parent for purposes of calculating ch ild support)

. U nrealized income from an investment asset that earns interest or distributes dividends is also properly imputed to a party. See In re Marriage of Bregar , 952 P.2d 783 , 786

- 87 (Colo. App. 1997) (interest imputed on portion of capital gain f rom stock sale used to reduce margin account debt); In re Marriage of Laughlin , 932 P.2d 858 , 861

- 62 (Colo. App. 1997) (interest imputed on portion of capital gain from sale of business used to construct addition to home and to pay mortgages); In re8

Marria ge of Tessmer

, 903 P.2d 1194 , 1196 (Colo. App. 1995) (interest and dividends on a retirement account were income, although not withdrawn and subject to penalty if withdrawn); In re Marriage of Armstrong , 831 P.2d 501 , 503

- 04 (Colo. App. 1992) ( income earned on portion of inheritance imputed to the father ).
¶ 21 But no Colorado statute addresses whether potential rental income can be imputed to a party for purposes of calculating maintenance. Nor does any Colorado statute address whether potential rental in come from a party’s primary residence that has
never before earned rental income can be imputed to that party for purposes of calculating maintenance. We answer this second, and

more narrow , question “no

. ”
¶ 22 No evidence in the record show s that the reside nce ever produced income. There is also no evidence indicating that husband was acting in bad faith by staying in the residence to inflate his monthly expenses and avoid paying maintenance to wife.
B y imputing rental income to husband, the court effectiv ely
recharacterized husband’s home from a primary residence to an
income

- producing rental property. This was , in our view, an abuse
of discretion.9

¶ 23 In In re Marriage of Mugge , 66 P.3d 207 (Colo. App. 2003 ) , a division of this court considered a parent’s unrealized income in the
form of an undistributed retirement account

. Mugge h eld that it was improper to “consider unrealized income for child support purposes solely because a parent could liquidate an asset or change
its character into an asset c apable of producing income.” Id. at
212. Like the father’s undistributed retirement account in Mugge , husband’s primary residence in this case would not generate income unless its character were changed. Id. Moreover, w e are unaware of any case holding, in ef fect, that a party in a dissolution of marriage case may be compelled to relocate to a smaller residence or to rent a portion of his or her home.
¶ 24 For these reasons , we conclude that , where a party has not historically earned rental income from his or her primary residence , potential rental income from that asset cannot be imputed to the party for purposes of calculating maintenance. See id. at 213 (noting that several other statutory income categories expressly require payment to the recipient).10

¶ 25 We ther efore remand this case to the district court to redetermine maintenance without imputing to husband potential
rental income from his primary residence.
III. Husband’s Argument that He Is Not Underemployed
¶ 26 We next turn to husband’s contention that the district court erred in finding him underemployed

. ¶ 27 T he district court found that husband “has chosen a position that is comfortable and familiar to him, but there is no evidence that he has attempted to find the highest paying position possible given his experience.” But the district court did not make finding s regarding the amount o f additional income husband could be earning. Thus, the district court did not impute any income to husband on grounds of underemployment , and we need not address husband’s argument on this point

.

IV. Husband’s Other Arguments
¶ 28 Because the district court mu st redetermine maintenance based on the parties’ circumstances at the time of that hearing , we need not address husband’s arguments that he has experienced a
substantial decrease in his income w arrant ing a modification of11

maintenance and that he would be i mpoverished if the district court
does not modify his maintenance obligation

. V. Conclusion
¶ 29 We affirm the portion of the district court’s order calculating
husband’s self

- employment income, reverse the portion imputing rental income to husband, and remand th e case for redetermination
of maintenance , as provided herein.
JUDGE J. JONES and JUSTICE MARTINEZ concur.