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Cite as 28 Neb. App. 837

Cantrell R. Harrison, appellee, v. 

Dennis R. Harrison, appellant.

___ N.W.2d ___

Filed September 15, 2020. No. A-19-440.

1. Rules of the Supreme Court: Appeal and Error. The cross-appeal 

section of an appellate brief must set forth a separate title page, a table 

of contents, a statement of the case, assigned errors, propositions of law, 

and a statement of the facts.

2. ____: ____. Where a party’s brief fails to comply with the mandate of 

the appellate rule governing the form and content thereof, an appellate 

court may proceed as though the party failed to file a brief or, alternatively, may examine the proceedings for plain error.

3. Divorce: Child Custody: Child Support: Property Division: Alimony: 

Attorney Fees: Appeal and Error. In an action for the dissolution of 

marriage, an appellate court reviews de novo on the record the trial 

court’s determinations of custody, child support, property division, 

alimony, and attorney fees; these determinations, however, are initially 

entrusted to the trial court’s discretion and will normally be affirmed 

absent an abuse of that discretion.

4. Appeal and Error. Plain error is error plainly evident from the record 

and of such a nature that to leave it uncorrected would result in damage 

to the integrity, reputation, or fairness of the judicial process.

5. ____. To be considered by an appellate court, an alleged error must be 

both specifically assigned and specifically argued in the brief of the 

party asserting the error.

6. Judgments: Receivers: Appeal and Error. A trial court’s determination 

of who should bear the expenses associated with the receivership will 

not be disturbed on appeal absent an abuse of discretion.

7. Divorce: Attorney Fees. In awarding attorney fees in a dissolution 

action, a court shall consider the nature of the case, the amount involved 

in the controversy, the services actually performed, the results obtained, 

the length of time required for preparation and presentation of the case, 

Nebraska Supreme Court Online Library

www.nebraska.gov/apps-courts-epub/

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the novelty and difficulty of the questions raised, and the customary 

charges of the bar for similar services.

8. Attorney Fees: Proof: Affidavits: Records: Appeal and Error. The 

filing of an affidavit or presentation of other evidence will always be the 

preferable way to support the award of attorney fees, but if the contents 

of the record show the allowed fee not to be unreasonable, then that fee 

would not be untenable or an abuse of discretion.

9. Child Support: Rules of the Supreme Court: Words and Phrases.

The Nebraska Child Support Guidelines provide that in calculating the 

amount of support to be paid, a court must consider the total monthly 

income, which is defined as the income of both parties derived from 

all sources, except all means-tested public assistance benefits which 

includes any earned income tax credit and payments received for children of prior marriages and includes income that could be acquired by 

the parties through reasonable efforts.

10. Child Support: Rules of the Supreme Court. The Nebraska Supreme 

Court has not set forth a rigid definition of what constitutes income, but 

instead has relied upon a flexible, fact-specific inquiry that recognizes 

the wide variety of circumstances that may be present in child support cases.

11. Child Support: Taxation: Equity: Rules of the Supreme Court.

Income for the purposes of calculating child support is not necessarily 

synonymous with taxable income. A flexible approach is taken in determining a person’s income for purposes of child support, because child 

support proceedings are, despite the child support guidelines, equitable 

in nature.

12. Taxation: Corporations: Words and Phrases. Subchapter S is a tax 

status designed to tax corporate income on a pass-through basis to shareholders of a small business corporation.

13. Corporations. Although a subchapter S corporation may distribute 

income, it is not required to do so.

14. ____. Earnings are owned by the corporation, not by the shareholders.

15. ____. Subchapter S corporations may accumulate profits, referred to as 

“retained earnings.”

16. Taxation: Corporations. Since a subchapter S corporation is not taxed 

on its earnings, the various income, expense, loss, credit, and other tax 

items pass through and are taxable to or deductible by shareholders in a 

manner analogous to that which is applicable to partners.

17. Child Support: Corporations: Taxes: Evidence: Proof. Distributions 

made to a shareholder of a subchapter S corporation, as reported on a 

Schedule K-1, should not be included as income for purposes of calculating child support for those portions of the distribution intended to 
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offset the shareholder’s personal tax liability on his or her proportionate share of the S corporation’s pass-through earnings. However, if the 

evidence establishes that the total distribution exceeds the shareholder’s 

tax liability on his or her proportionate share of the S corporation’s 

pass-through earnings, such excess portions of the distribution may be 

included as income for child support purposes unless the evidence demonstrates that such excess amounts are reasonably expected to be applied 

to future tax liabilities.

18. Child Support: Corporations. A fact-specific inquiry is necessary to 

balance considerations that a well-managed corporation may be required 

to retain a portion of its earnings to maintain corporate operations and 

survive fluctuations in income, but corporate structures should not be 

used to shield available income that could and should serve as available 

sources of child support funds.

19. ____: ____. Relevant factors to weigh in determining what portion of 

undistributed corporate earnings may be available to a shareholder for 

child support purposes should include the following considerations: (1) 

the shareholder’s level of control over the corporation’s distributions—

as measured by the shareholder’s ownership interest, (2) the legitimate 

business interests justifying the retained corporate earnings, and (3) the 

corporation’s history of retained earnings and distributions to determine 

whether there is any affirmative evidence of an attempt to shield income 

by means of retained earnings.

20. Child Support: Corporations: Proof. The key to determining whether 

depreciation deductions should be included as income for child support 

purposes is to show to the court that the deduction does not represent 

artificial treatment of assets for the purpose of avoiding child support obligations.

21. Child Support: Corporations. When a husband and wife hold an equal 

interest and are both active in business entities during the course of their 

marriage, the risk of artificial treatment of assets for the purpose of 

avoiding child support obligations does not exist.

Appeal from the District Court for Fillmore County: Vicky 

L. Johnson, Judge. Affirmed in part, and in part reversed and 

remanded with directions.

Erik C. Klutman, of Sipple, Hansen, Emerson, Schumacher, 

Klutman & Valorz, for appellant.

Steven B. Fillman, of Fillman Law Offices, L.L.C., and 

Joseph H. Murray, of Murray Law, P.C., L.L.O., for appellee.
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HARRISON v. HARRISON

Cite as 28 Neb. App. 837

Pirtle, Bishop, and Arterburn, Judges.

Bishop, Judge.

I. INTRODUCTION

In this marriage dissolution action, Dennis R. Harrison 

appeals the Fillmore County District Court’s calculation of his 

child support obligation. He contends that the net profits and 

depreciation deductions of the parties’ equally owned businesses should not have been added to his income when calculating child support. Dennis also challenges the district court’s 

decision to overrule his motion to reopen the case, as well as 

the court’s order of temporary alimony, receivership fees, and 

temporary attorney fees. Cantrell R. Harrison attempts to crossappeal the district court’s calculation of Dennis’ child support 

obligation. We affirm in part, and in part reverse and remand 

with directions.

II. BACKGROUND

Dennis and Cantrell were married in 2002, and they have 

two children—a daughter born in 2003 and a son born in 2005.

During their marriage, Dennis and Cantrell established 

Custom Pumping Solutions, L.L.C. (CPS), with each of them 

owning 50 percent of the business. CPS pumps lagoon manure 

onto farmland for organic fertilizer. Dennis and Cantrell also 

each owned a 50-percent interest in C & D Leasing, L.L.C. 

(C & D Leasing). C & D Leasing purchases equipment and 

then leases it to CPS. Additionally, Dennis owned 50 percent of 

another business, S&H Bushwackers; Cantrell’s father owned 

the other 50 percent. And Cantrell owns shares of stock in 

Stokebrand Seed, Inc. (Stokebrand Seed), a corporation owned 

by her family.

Cantrell filed for divorce in December 2016, and she filed 

an amended complaint in May 2018. In both pleadings, she 

alleged that she was a fit and proper person to have custody 

of the children and asked that the district court enter a custody 

and parenting time order. She also asked that child support 

be awarded in conformity with the Nebraska Child Support 
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Guidelines. Cantrell sought an equitable division of the parties’ property and debts and an award of attorney fees. Dennis’ 

responsive pleading also asked the court to equitably divide 

the parties’ assets and debts and enter a custody and parenting 

time order.

The parties filed a joint temporary stipulation in January 

2017. Pursuant to the temporary stipulation, the parties were to 

have joint legal custody of their children, with primary physical custody going to Cantrell, subject to Dennis’ specified parenting time. Dennis would also pay child support in the amount 

of $600 per month for the two children until further order of 

the court. The district court filed a temporary order approving 

the parties’ stipulation and ordering the same.

In February 2018, Cantrell filed a motion for temporary 

relief, alleging that Dennis was making purchases on behalf of 

the parties’ companies without her permission or agreement. 

Cantrell alleged that Dennis was “attempting to manipulate 

the net worth of the business assets he expects to receive by 

intentionally buying assets that depreciate almost instantaneously upon purchase.” She was also “concerned” that Dennis 

was “depleting the cash assets of the marital estate that could 

be used to effectuate a property equalization.” She asked the 

district court to enter a temporary order barring the purchase 

of assets over $5,000 without the written consent of both parties, as well as an “anti-hypothecating order” barring the sale 

of assets, disposal of assets, and dissipation of large amounts of 

cash assets of the marital estate without the written consent of 

both parties. In its order filed on February 13, the district court 

ordered, in part, that during the pendency of the action, business purchases over $10,000, with the exception of fuel bills, 

shall be agreed upon in writing by both parties.

In May 2018, Cantrell filed a motion for temporary spousal 

support. Cantrell also filed a motion for appointment of 

receiver, for accounting, for other relief, and for attorney fees. 

In this second motion, Cantrell alleged that Dennis was using 

funds from the parties’ companies for his personal expenses 
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and to make a loan to his uncle, all without her authorization; 

he was fraudulently diverting revenue and earnings from the 

companies; and he was “systematically cutting” her out of CPS 

without authority, including changing passwords and emails, as 

well as firing her from her duties at CPS.

In a journal entry and order filed on July 10, 2018, the district court stated that the parties had reached an agreement on 

several issues. As relevant to this appeal, the order states that 

Cantrell withdrew her application for temporary spousal support or alimony in consideration of Dennis’ agreement that she 

continue to be paid her salary from CPS; the court considered 

the application for temporary spousal support withdrawn and 

ordered the continued payment of Cantrell’s salary.

After a hearing on August 16, 2018, the district court filed a 

journal entry appointing a receiver for CPS and C & D Leasing; 

CPS was to deposit $7,500 with the clerk of the court to 

cover the receiver’s expenses. Additionally, the court awarded 

Cantrell $5,000 in attorney fees.

On October 31, 2018, the parties entered into a mediated 

agreement and reached a settlement on property division issues 

and alimony. As relevant to this appeal, Cantrell received all 

interest in Stokebrand Seed. Dennis received CPS, C & D 

Leasing, and the parties’ marital share of S&H Bushwackers; 

he was to pay any indebtedness to any creditor of CPS and 

C & D Leasing. As an equalization, Dennis was to pay Cantrell 

$100,000 within 60 days of the date of the decree and $456,000 

in annual installments of $38,000 each due March 1 of each 

year beginning in 2020; one half of the $456,000 ($228,000 

total or $19,000 per year) was to be considered alimony, which 

would not terminate on the remarriage of Cantrell, but would 

terminate on the death of either party. Each party was to pay 

the balance of any attorney fees owed to their respective attorneys. The parties submitted the mediated agreement to the district court for approval; it was approved pursuant to the court’s 

journal entry and order dated November 8, 2018, wherein the 

parties were ordered and directed to carry out the terms of the 
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agreement. The parties did not resolve the issues of child custody, child support, and related matters. Those issues remained 

scheduled for trial at the end of November.

Trial took place on November 30, 2018. The court was 

informed that the parties had agreed to joint legal custody of 

their children, with physical custody going to Cantrell. The 

parties also agreed that Dennis’ parenting time would include 

alternating weekends. Additional parenting time issues, including summer and holiday parenting time, were still at issue. 

Child support and related matters were also at issue. We will 

discuss the trial evidence relevant to the errors assigned in our 

analysis below.

A partial journal entry and decree of dissolution of marriage was filed on December 21, 2018; some matters remained 

under advisement. As relevant to this appeal, the district court 

awarded the parties joint legal custody of their children, with 

physical custody awarded to Cantrell; parenting time and child 

support were taken under advisement, as was any determination related to the parties’ obligations to provide health insurance for the children. The court ordered that Cantrell was 

entitled to claim the parties’ daughter, and Dennis was entitled 

to claim the parties’ son, as an exemption on income tax 

returns each calendar year; when there was only one exemption 

remaining, the parties were to alternate years. A copy of the 

parties’ mediated agreement, which was approved by the court 

on November 8, was attached and incorporated into the decree, 

and the parties were ordered and directed to carry out the terms 

of the agreement. Additionally, the court ordered that “[a]ll 

unsatisfied temporary orders of this Court entered during the 

pendency of this action shall survive the entry of this decree 

. . . ,” specifically the obligation for payment of attorney fees 

entered on August 16, continuation of Cantrell’s salary entered 

on July 10, and payment of the expenses of the receiver entered 

on August 16 “shall remain in full force and effect until satisfied”; “[i]n the case of the order providing for continuation of 
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[Cantrell’s] salary, that shall terminate upon entry of a final 

decree herein.”

On January 14, 2019, Dennis filed a motion to reopen the 

case “and present evidence as to the sole issue of [straight-line] 

depreciation of the equipment” of CPS and C & D Leasing for 

purposes of calculating child support. Cantrell filed an objection to the motion. After a hearing, the district court denied 

Dennis’ motion to reopen evidence.

A final journal entry and decree of dissolution of marriage 

was filed on April 11, 2019. The district court noted that on 

November 5, 2018, it had approved the parties’ mediated agreement resolving all pending issues with respect to property distribution, debt allocation, equalization, alimony, and attorney 

fees and that the terms of such agreement were to be included 

in the final decree of dissolution entered herein. The court reiterated its award of joint legal custody, with physical custody 

awarded to Cantrell. This time, however, the court attached and 

incorporated a parenting plan that specified Dennis’ parenting 

time and established holiday and summer parenting time.

Additionally, as relevant to this appeal, the district court 

ordered Dennis to pay Cantrell child support in the amount 

of $2,553 per month for the two children. When determining Dennis’ income for child support purposes, the district 

court included Dennis’ W-2 wages from CPS, CPS’ ordinary 

business income with depreciation added back in, and the net 

rental income of C & D Leasing with depreciation added back 

in. Dennis’ income from the foregoing sources was calculated 

for each year from 2015, 2016, and 2017, and the 3-year average was used to determine Dennis’ total monthly income of 

$21,120 per month. The court determined Cantrell’s earning 

capacity was $2,080 per month, based on a 40-hour workweek 

and a $12 hourly wage. Dennis was ordered to maintain health 

insurance for the parties’ children and was given a $300 credit 

on the child support calculation worksheet for the health insurance premiums for the children.

Dennis appeals and Cantrell attempts to cross-appeal the 

district court’s decree.
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III. ASSIGNMENTS OF ERROR

Dennis assigns, summarized and reordered, that the district 

court erred in (1) ordering temporary alimony to continue until 

the entry of the April 2019 decree, (2) ordering CPS to deposit 

and pay the receivership fees, and (3) ordering Dennis to pay 

temporary attorney fees, as well as erred in (4) its calculation 

of child support.

[1,2] Although Cantrell assigns error to the district court’s 

decree, she failed to comply with the rules regarding crossappeals. See Neb. Ct. R. App. P. § 2-109(D)(4) (rev. 2014). 

Cantrell designated herself as an appellee and noted the crossappeal on the cover of her brief. However, she did not set forth 

the cross-appeal in a separate division of the brief as required. 

See id. See, also, In re Estate of Graham, 301 Neb. 594, 919 

N.W.2d 714 (2018) (cross-appeal section of appellate brief 

must set forth separate title page, table of contents, statement 

of case, assigned errors, propositions of law, and statement of 

facts). Where a party’s brief fails to comply with § 2-109(D), 

an appellate court may proceed as though the party failed to 

file a brief or, alternatively, may examine the proceedings for 

plain error. Estate of Schluntz v. Lower Republican NRD, 300 

Neb. 582, 915 N.W.2d 427 (2018).

IV. STANDARD OF REVIEW

[3] In an action for the dissolution of marriage, an appellate 

court reviews de novo on the record the trial court’s determinations of custody, child support, property division, alimony, 

and attorney fees; these determinations, however, are initially 

entrusted to the trial court’s discretion and will normally be 

affirmed absent an abuse of that discretion. Donald v. Donald, 

296 Neb. 123, 892 N.W.2d 100 (2017).

A trial court’s determination of who should bear the expenses 

associated with the receivership will not be disturbed on appeal 

absent an abuse of discretion. See Sayer v. Bowley, 243 Neb. 

801, 503 N.W.2d 166 (1993), disapproved on other grounds, 

Weyh v. Gottsch, 303 Neb. 280, 929 N.W.2d 40 (2019).
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[4] Plain error is error plainly evident from the record and 

of such a nature that to leave it uncorrected would result in 

damage to the integrity, reputation, or fairness of the judicial 

process. Estate of Schluntz, supra.

V. ANALYSIS

1. Temporary Alimony

[5] Dennis claims the district court erred in ordering him 

to pay temporary alimony to Cantrell until the entry of the 

April 2019 decree. However, as noted by Cantrell, the district 

court did not order temporary alimony in this case because 

Cantrell’s motion for temporary alimony had been withdrawn 

in exchange for the parties’ agreement that she would continue to receive her salary from CPS. To the extent Dennis 

takes issue with the continuation of Cantrell’s salary beyond 

a certain point in time, he has not specifically assigned or 

argued that issue, and we will therefore not consider it. To be 

considered by an appellate court, an alleged error must be both 

specifically assigned and specifically argued in the brief of the 

party asserting the error. Fetherkile v. Fetherkile, 299 Neb. 76, 

907 N.W.2d 275 (2018).

2. Receivership Fees

Dennis contends the district court erred in ordering CPS to 

deposit and pay $7,500 for receivership fees. He argues that 

Cantrell should have been responsible for the receivership fees 

because she was the one who requested the receivership and no 

evidence of the expected receivership costs was presented.

In May 2018, Cantrell filed a motion for appointment of 

receiver and for accounting, alleging that Dennis was using 

funds from the parties’ companies for his personal expenses 

and to make a loan to his uncle, all without her authorization; 

he was fraudulently diverting revenue and earnings from the 

companies; and he was “systematically cutting” her out of CPS 

without authority, including changing passwords and emails, 

and firing her from her duties at CPS.
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After a hearing in June 2018, the district court entered an 

order on August 16 appointing a specified person as receiver 

of CPS and C & D Leasing:

His primary duties are to supervise the bookkeeper . . . ; 

to reconstruct the business expenses for 2017 and 2018 

(if not already accomplished through the tax preparation 

process), to approve of all expenses, and to assure equal 

access to both parties to all business records of the two 

[companies]. His authority is not limited to these duties. 

[CPS] is ordered to deposit the sum of $7,500.00 . . . with 

the clerk of the district court of Fillmore County to cover 

[the named receiver’s] expenses. Such will be paid on 

application and order.

In an order filed on October 16, 2018, the district court stated 

a hearing was held on October 9 that, in part, took up Dennis’ 

motion to reconsider the receivership and the appointed receiver’s application to require and set bond. The court noted that 

affidavits were offered and received into evidence, although 

neither the affidavits nor a bill of exceptions from the hearing appears in our record on appeal. The court denied Dennis’ 

motion to reconsider. It further found that “bond should be 

required in the amount of $750,000.00, the premium therefor 

taxed to [CPS] as part of the cost herein.”

In its order dated November 8, 2018, the district court 

approved the parties’ mediated agreement from October 31 and 

discharged the receiver.

[6] Given the reasons Cantrell sought a receivership, the 

duties given to the receiver, and the need for bond premiums, 

we cannot say that the $7,500 receivership fee was untenable 

or unreasonable. And contrary to Dennis’ argument, we cannot 

say that the district court abused its discretion by not ordering 

Cantrell to be solely responsible for paying the fee. The effect 

of the court’s order was to make both parties responsible for 

the fee through their company, in which they were equal owners at the time. We cannot say that the district court’s order 

was an abuse of discretion. See Sayer v. Bowley, 243 Neb. 

801, 503 N.W.2d 166 (1993), disapproved on other grounds, 
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Weyh v. Gottsch, 303 Neb. 280, 929 N.W.2d 40 (2019) (trial 

court’s determination of who should bear expenses associated 

with receivership will not be disturbed on appeal absent abuse 

of discretion). Additionally, pursuant to the parties’ mediated agreement, Dennis was awarded CPS and was to pay all 

indebtedness due and owing to any creditor of CPS.

3. Temporary Attorney Fees

Dennis claims the district court erred in awarding temporary 

attorney fees to Cantrell because she failed to present evidence 

as to the services actually performed or the length of time 

required for preparation or presentation of the case.

[7] It has been held that in awarding attorney fees in a dissolution action, a court shall consider the nature of the case, 

the amount involved in the controversy, the services actually 

performed, the results obtained, the length of time required for 

preparation and presentation of the case, the novelty and difficulty of the questions raised, and the customary charges of 

the bar for similar services. Garza v. Garza, 288 Neb. 213, 846 

N.W.2d 626 (2014).

[8] The filing of an affidavit or presentation of other evidence will always be the preferable way to support the award 

of attorney fees, but if the contents of the record show the 

allowed fee not to be unreasonable, then that fee would not be 

untenable or an abuse of discretion. See id. See, also, BoamahWiafe v. Rashleigh, 9 Neb. App. 503, 614 N.W.2d 778 (2000) 

(if contents of record, i.e., pleadings, introduced discovery 

documents, time spent in court as shown by court record, and 

other items that support award, show allowed fee not unreasonable, then fee not untenable or abuse of discretion).

When the district court awarded Cantrell temporary attorney 

fees of $5,000 in August 2018, the original complaint for dissolution had been on file more than 11

⁄2 years. During that time, 

numerous documents had been filed, including pleadings, pretrial conference memorandums, and stipulations; agreements 

between the parties were reached; there had been issues involving the parties’ companies that led Cantrell to file a motion 
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to have a receiver appointed; and the parties had appeared in 

court. We cannot conclude that the $5,000 temporary award 

of attorney fees in this case was unreasonable or an abuse 

of discretion.

4. Child Support

Dennis claims the district court erred in its calculation of 

child support. When determining Dennis’ income for child support purposes, the district court included Dennis’ W-2 wages 

from CPS, CPS’ ordinary business income with depreciation 

added back in, and the net rental income of C & D Leasing 

with depreciation added back in. Dennis’ income from the 

foregoing sources was calculated for each year from 2015, 

2016, and 2017, and the 3-year average was used to determine 

Dennis’ total monthly income of $21,120 per month.

Underlying Dennis’ claim are his assertions that the district court erred in using the ordinary business income or 

retained earnings of the parties’ companies in its determination 

of Dennis’ income for child support purposes, in sustaining 

Cantrell’s relevance objection as to what the retained earnings 

or income would be used for in the following years, and in 

overruling his motion to reopen the evidence.

(a) Evidence at Trial

The only two witnesses to testify at trial were Dennis 

and Cantrell. Numerous exhibits, including tax returns, were 

received into evidence.

According to the evidence, Dennis and Cantrell each owned 

50 percent of CPS and received wages and distributions from 

CPS. CPS elected to file as an S corporation for the tax years 

relevant to this case, and we therefore treat it as an S corporation in our analysis. Dennis and Cantrell also each owned 50 

percent of C & D Leasing. C & D Leasing was a partnership 

from which the parties received no wages or distributions.

Dennis was the president of CPS, and Cantrell was its vice 

president, secretary, and treasurer. Dennis did the work in the 

field for CPS, and Cantrell did the office work. The parties 
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received wages, tips, and other compensation directly from 

CPS as follows: in 2015, Dennis received $15,450 and Cantrell 

received $40,530; in 2016, Dennis received $31,673 and 

Cantrell received $52,390; and in 2017, Dennis and Cantrell 

each received $59,600. Dennis agreed that he gave himself 

a raise and that his salary for 2018 would be “[s]omewhere 

around” $67,000. Schedule K-1’s for Dennis reflect the following amounts for his proportionate share of the S corporation’s 

pass-through ordinary business income and distributions: 2015 

income of $39,442, distribution of $19,874; 2016 income of 

$72,588, distribution of $43,007; and 2017 income of $23,904, 

distribution of $43,803. Schedule K-1’s for Cantrell for those 

years were nearly identical (within $1). Cantrell agreed that 

the company’s profits left in the business were for upcoming 

expenses and to buy equipment. She also testified that “[i]t 

varie[d] year to year why we [took] distributions.” She agreed 

that some of the money went to pay taxes. She also testified 

that during 1 year some distribution money was used to buy 

equipment the parties owned personally. Both parties agreed 

that Cantrell would propose the parties’ salaries and distributions each year, and that Dennis then would agree to the proposal. Dennis was awarded CPS in the divorce as part of the 

parties’ mediated agreement.

Cantrell testified that C & D Leasing was set up for accounting and tax purposes; it purchases equipment and leases it to 

CPS. All of the money in C & D Leasing went to bank loans or 

additional purchases of equipment. As noted above, the parties 

did not receive wages or distributions from C & D Leasing. 

But Dennis’ K-1’s reflect the following amounts for his proportionate share of the partnership’s “other net rental income 

(loss)”: $502 in 2015, $107,302 in 2016, and a loss of $6,790 

in 2017. Cantrell’s K-1’s for those years were nearly identical 

(within $1). Dennis was awarded C & D Leasing in the divorce 

as part of the parties’ mediated agreement.

Stokebrand Seed is an S corporation owned by Cantrell’s 

family. Cantrell testified that Dennis was paid by Stokebrand 
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Seed for farming. And his 2017 tax return reports $26,141 in 

wages from Stokebrand Seed. At trial, Dennis testified he had 

not received a payment from Stokebrand Seed since the parties’ mediation. Dennis said he did not know if he would be 

farming in 2019 because he had not talked to Cantrell’s father 

about doing so. Cantrell testified that she owns shares of stock 

in Stokebrand Seed that were gifted to her. She was awarded 

“all interest” in Stokebrand Seed in the divorce as part of the 

parties’ mediated agreement. Cantrell testified that she never 

received any actual income or cash from Stokebrand Seed, but 

she has to claim “any earnings” “on taxes.”

Additionally, Dennis and Cantrell’s father each owned 50 

percent of another business, S&H Bushwackers, a partnership. Dennis was awarded the parties’ marital share of S&H 

Bushwackers in the divorce as part of the parties’ mediated agreement.

Cantrell testified that she last attended school in 2001 and 

2002 and was one class short of earning an associate’s degree 

in business administration. She had been looking for office 

work during the pendency of the case and had two interviews, 

but had not received job offers at the time of trial. Both of the 

jobs she interviewed for paid $10 to $12 per hour.

Dennis and Cantrell testified that they did not have health 

insurance. Dennis agreed that he would like to try to find 

health insurance for the children.

(b) District Court’s Ruling

The district court ordered Dennis to pay Cantrell child 

support in the amount of $2,553 per month for the two 

children. When determining Dennis’ income for child support purposes, the district court included Dennis’ W-2 wages 

from CPS, CPS’ ordinary business income with depreciation 

added back in, and net rental income of C & D Leasing with 

depreciation added back in. In 2017, the last year for which 

tax returns were available in the record, the district court 

included the following amounts when determining Dennis’ 

income for child support purposes: Dennis’ CPS wages of 
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$59,600, CPS ordinary business income of $23,804, “[a]dd 

back CPS [d]epreciation” of $50,463.50, C & D Leasing net 

rental income of $6,790.50, and “[a]dd back C & D Leasing 

[d]epreciation” of $31,158.50. Thus, the district court determined that Dennis’ 2017 income was $171,816.50 for the year, 

or $14,318.04 per month. However, because there were substantial fluctuations in Dennis’ annual earnings, income from 

the foregoing sources was calculated for each year from 2015 

($204,598.50), 2016 ($383,915), and 2017 ($171,816.50), 

and the 3-year average was used to determine Dennis’ total 

monthly income of $21,120 per month for purposes of child 

support. The court noted that Dennis argued that child support should be based on his actual earnings received from CPS 

and C & D Leasing, “namely his W2 income and distributions 

from the companies.” Although the district court did include 

Dennis’ wages, the court did not include any distributions 

Dennis received from CPS. We note here that the court likely 

disregarded actual distributions received by Dennis, since the 

district court attributed all of the companies’ net profits to 

Dennis for the purpose of calculating child support, thus making the actual distributions irrelevant.

The district court determined Cantrell’s earning capacity to 

be $2,080 per month, based on a 40-hour workweek and a $12 

hourly wage; Cantrell’s monthly income for child support purposes is not challenged on appeal.

Dennis was ordered to maintain health insurance for the parties’ children and was given a $300 credit on the child support 

calculation worksheet for the health insurance premiums for 

the children.

(c) Recent Case Law Addressing Distributions, 

Net Profits, and Retained Earnings

[9] The Nebraska Child Support Guidelines provide that 

in calculating the amount of support to be paid, a court must 

consider the total monthly income. Gangwish v. Gangwish, 267 

Neb. 901, 678 N.W.2d 503 (2004). See Neb. Ct. R. § 4-204 

(rev. 2020). Total monthly income is defined as the
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income of both parties derived from all sources, except 

all means-tested public assistance benefits which includes 

any earned income tax credit and payments received for 

children of prior marriages. This would include income 

that could be acquired by the parties through reasonable 

efforts. For instance, a court may consider as income the 

retained earnings in a closely-held corporation of which a 

party is a shareholder if the earnings appear excessive or 

inappropriate.

§ 4-204.

[10,11] The Nebraska Supreme Court has not set forth a 

rigid definition of what constitutes income, but instead has 

relied upon a flexible, fact-specific inquiry that recognizes 

the wide variety of circumstances that may be present in child 

support cases. Marshall v. Marshall, 298 Neb. 1, 902 N.W.2d 

223 (2017). Thus, income for the purposes of calculating child 

support is not necessarily synonymous with taxable income. 

Id. We take this flexible approach in determining a person’s 

income for purposes of child support, because child support 

proceedings are, despite the child support guidelines, equitable 

in nature. Marshall, supra.

This court recently released two opinions wherein the undistributed or retained earnings of and distributions from S corporations were at issue in the context of a parties’ income for 

purposes of child support. See, Bornhorst v. Bornhorst, ante

p. 182, 941 N.W.2d 769 (2020); Guthard v. Guthard, ante p. 

156, 942 N.W.2d 792 (2020). Our holdings in both cases more 

fully developed Nebraska case law in this area. Both opinions 

discussed the nature of S corporations in general, which we set 

forth briefly below.

[12-16] Subchapter S is a tax status designed to tax corporate income on a pass-through basis to shareholders of a small 

business corporation. Guthard, supra. Although a subchapter S corporation may distribute income, it is not required to 

do so. Id. Earnings are owned by the corporation, not by the 

shareholders. Id. Subchapter S corporations may accumulate 

profits, referred to as “retained earnings.” Id. In a subchapter S 
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corporation, the income tax is paid by the shareholders rather 

than by the corporation itself. Id. The subchapter S corporation 

allocates various items of income to shareholders based upon 

the shareholders’ proportionate ownership of stock, and the 

allocations are itemized on an individual shareholder’s K-1. 

See id. Since a subchapter S corporation is not taxed on its 

earnings, the various income, expense, loss, credit, and other 

tax items pass through and are taxable to or deductible by 

shareholders in a manner analogous to that which is applicable 

to partners. Id.

In Guthard, supra, we addressed the extent to which undistributed or retained earnings could be deemed available income 

to a parent-shareholder for child support purposes. Because 

pass-through earnings are owned by the corporation and are 

merely allocated to the shareholder for tax purposes, the 

pass-through income is essentially phantom income (income 

not actually received by the shareholder) that should not be 

included as income in child support calculations. However, a 

court may consider as income the retained earnings in a closely 

held corporation of which a party is a shareholder if the earnings appear excessive or inappropriate. See, id; § 4-204. In 

other words, if the S corporation is not distributing the entirety 

of its ordinary business income (net profit), then it is retaining 

those earnings within the corporation. Such retained earnings 

may be reasonable and for legitimate business purposes, and 

a significant amount of retained earnings does not by itself 

establish an attempt to shield income. See Guthard, supra. A 

determination of the amount of net profit being retained by the 

corporation can be gleaned from the K-1 by subtracting the 

amount of income actually distributed to the shareholder from 

the amount of ordinary business income. In this case, for example, in 2015, Dennis was required to report and pay taxes on his 

50-percent share of CPS’ ordinary business income of $39,442 

(plus or minus certain additional earnings or deductions), yet 

Dennis received a distribution of only $19,874. What the corporation did not distribute to Dennis was arguably retained 

by the corporation, and the question becomes whether such 
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retained earnings were excessive or inappropriate and should 

be included as income for child support purposes. See § 4-204. 

We will address this question as applied here in our discussion 

later in this opinion.

Also, in both Bornhorst, supra, and Guthard, supra, we 

addressed the extent to which distributions from S corporations 

could be deemed available income to a parent-shareholder 

for child support purposes. We held that distributions made 

to shareholders to cover corporate tax liability should not be 

included as income for purposes of calculating child support; 

however, the amount of a shareholder’s distribution which 

exceeds the correlated tax liability for an S corporation’s passthrough income may be subject to inclusion as income for child 

support purposes. Id.

(i) Wages and Distributions

In determining Dennis’ income for the purpose of calculating child support, the district court included Dennis’ wage 

income, but did not include his K-1 distributions.

a. Wages

It is undisputed that Dennis’ wages constitute income for 

child support purposes. In determining Dennis’ total monthly 

income, the district court’s 3-year average included Dennis’ 

CPS wages of $15,450 in 2015, $31,673 in 2016, and $59,600 

in 2017 ($35,574 per year average). See, Gress v. Gress, 274 

Neb. 686, 743 N.W.2d 67 (2007) (3-year average to be used 

when averaging income); Neb. Ct. R. ch. 4, art. 2, worksheet 1, 

n.5 (rev. 2016) (income may be averaged in the event of substantial fluctuations of annual earnings). Given the manner in 

which the district court approached Dennis’ income overall, it 

is understandable why the court used a 3-year average of these 

wages in its determination of Dennis’ total monthly income 

for child support purposes. However, as we discuss next, the 

court’s use of certain income and depreciation amounts from 

the parties’ businesses was in error. This will require a recalculation of Dennis’ income for child support purposes, with 
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the focus now being placed on wages and distributions paid to 

Dennis. In that regard, we address an issue Cantrell attempted 

to raise in a cross-appeal.

Cantrell argues that “it was an error for the trial court not 

to include all of the salaries, income, and depreciation of 

the companies assumed by [Dennis] less the cost of hiring a 

replacement bookkeeper rather than only including [Dennis’] 

salary and one-half of the business income and depreciation.” 

Brief for appellee at 25. Her argument generally suggests 

that since Dennis now owns 100 percent of the businesses, a 

3-year average should have included all “of the owner salaries, 

business income, and added depreciation back in,” subtracting only the $36,000 “market rate for a bookkeeper each year 

for the companies.” Id. at 28. By doing this, Cantrell contends the 3-year average to calculate Dennis’ income would 

be $477,098 per year or $39,758 per month. She also takes 

issue with the district court’s exclusion of Dennis’ income 

from Stokebrand Seed farming, which in 2017 amounted to 

$26,141 in wages paid to Dennis. As noted earlier, Stokebrand 

Seed is an S corporation owned by Cantrell’s family; Dennis 

testified that he had not received a payment from Stokebrand 

Seed since the parties’ mediation and that he had not talked to 

Cantrell’s father about whether he would continue farming for 

Stokebrand Seed. We find no plain error in the district court’s 

exclusion of Dennis’ 2017 Stokebrand Seed wages under the 

circumstances.

When considering the balance of Cantrell’s argument on 

this issue under a plain error review, we note that many of 

the sources of income Cantrell suggests should be attributed 

to Dennis would not be properly included as income for child 

support purposes as we discuss in subsequent portions of our 

analysis. However, we do find as a matter of plain error the 

failure to consider Dennis’ testimony that he had given himself 

a raise and that his salary for 2018 would be “[s]omewhere 

around” $67,000. In accepting Cantrell’s present income when 

calculating child support, consideration should have also been 

given to Dennis’ present income. Dennis’ present income of 
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$67,000 was a more accurate reflection of wages he could reasonably earn going forward; his prior 3-year income average 

for 2015 through 2017 was only $35,574. When recalculating 

child support on remand, the district court should attribute a 

salary of $67,000 per year to Dennis.

b. Distributions

In determining Dennis’ total monthly income for child support purposes, the district court did not include any of the 

distributions Dennis received from CPS. As mentioned earlier, 

the court likely disregarded actual distributions received by 

Dennis, since it attributed all of Dennis’ share of the companies’ net profits to Dennis for the purpose of calculating 

child support, thus making the actual distributions irrelevant. 

Distributions, however, should be addressed separately from 

retained earnings, since distributions represent what the shareholder actually received from the S corporation (as indicated 

on a K-1), in addition to any wages received (as indicated on 

a W-2).

[17] Although distributions represent cash actually received 

by the shareholder, the distribution is also the shareholder’s 

source of funds to pay the personal tax liability on his or 

her proportionate share of the S corporation’s pass-through 

income. Distributions made to shareholders to cover corporate 

tax liability should not be included as income for purposes of 

calculating child support. See, Bornhorst v. Bornhorst, ante p. 

182, 941 N.W.2d 769 (2020); Guthard v. Guthard, ante p. 156, 

942 N.W.2d 792 (2020). In Bornhorst, supra, and Guthard, 

supra, we held that distributions made to a shareholder of a 

subchapter S corporation, as reported on a K-1, should not be 

included as income for purposes of calculating child support 

for those portions of the distribution intended to offset the 

shareholder’s personal tax liability on his or her proportionate 

share of the S corporation’s pass-through earnings. However, 

if the evidence establishes that the total distribution exceeds 

the shareholder’s tax liability on his or her proportionate 

share of the S corporation’s pass-through earnings, such excess 
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portions of the distribution may be included as income for 

child support purposes unless the evidence demonstrates that 

such excess amounts are reasonably expected to be applied to 

future tax liabilities. Id. We noted that an analysis correlating 

a shareholder’s distributions to his or her tax liabilities over a 

longer period of time may reveal a regular pattern of excess 

distributions which cannot be solely tied to the tax liabilities 

associated with the S corporation’s pass-through income. Id. 

In such cases, the amount of a shareholder’s distribution which 

exceeds the correlated tax liability for an S corporation’s passthrough income may be subject to inclusion as income for child 

support purposes. Id.

The evidence at trial was that Dennis received distributions 

from CPS in the amount of $19,874 in 2015, $43,007 in 2016, 

and $43,803 in 2017. And Cantrell testified that “[i]t varie[d] 

year to year why we [took] distributions.” She agreed that 

some of the money went to pay taxes, although she also testified that during 1 year some distribution money was used to 

buy equipment the parties owned personally.

Whether and to what extent any distributions Dennis 

received from CPS exceeded the correlated tax liability for 

CPS’ pass-through income—and were thus subject to inclusion as income for child support purposes—was a matter to 

be considered by the district court. However, neither the district court nor the parties had the benefit of our opinions in 

Bornhorst, supra, and Guthard, supra, during the trial court 

proceedings below, and the parties did not have the benefit of 

this court’s recent opinions during the briefing stage of this 

appeal. We therefore reverse the district court’s calculation of 

child support and remand the issue back to the district court 

with directions. On remand, the district court should consider 

this court’s recent opinions in Bornhorst, supra, and Guthard, 

supra, regarding distributions, and it should determine whether 

and to what extent any distributions Dennis received from 

CPS should be included as income for purposes of calculating 

child support.
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(ii) Net Profits and Retained Earnings

In determining Dennis’ income for the purpose of calculating child support, the district court included CPS’ ordinary 

business income and C & D Leasing’s net rental income (net 

profits of both companies), and the court added back in onehalf of the depreciation deductions taken by those two companies. We will first address the inclusion of the entirety of the 

companies’ net profits as income attributable to Dennis and 

will separately address the inclusion of depreciation.

In determining Dennis’ total monthly income, the district 

court’s 3-year average included CPS’ ordinary business income 

of $39,442 in 2015, $72,587.50 in 2016, and $23,804 in 

2017; these amounts come from Dennis’ K-1’s and represent 

his 50-percent share of CPS’ total ordinary business income. 

The 3-year average also included C & D Leasing’s net rental 

income of $502 in 2015, $107,301.50 in 2016, and $6,790.50 

in 2017; again, these amounts come from Dennis’ K-1’s. 

However, we note that the document relied upon by the district court shows that there was actually a net rental loss of 

$6,790.50 in 2017.

As evidenced by the tax documents in our record, CPS’ ordinary business income, as reflected on Dennis’ K-1’s, is the corporation’s net income before taking into account “Section 179” 

deductions, distributions, and other adjustments not relevant to 

our discussion here. As mentioned previously, when the corporation’s ordinary business income (net profit) exceeds that 

which is actually paid out in distributions to its shareholders, 

then the undistributed profits remain with the corporation and 

constitute retained earnings. A corporation’s retained earnings 

show its accumulated profits. See Guthard v. Guthard, ante

p. 156, 942 N.W.2d 792 (2020).

[18,19] As set forth in the Nebraska Child Support Guidelines, 

“a court may consider as income the retained earnings in a 

closely-held corporation of which a party is a shareholder 

if the earnings appear excessive or inappropriate.” § 4-204. 

In Guthard, supra, we held that whether retained earnings 

are excessive or inappropriate necessarily implies that such 
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earnings are not being retained for legitimate business purposes and could otherwise reasonably be expected to be distributed to a parent-shareholder for inclusion as income for 

child support purposes. A fact-specific inquiry is necessary to 

balance considerations that a well-managed corporation may 

be required to retain a portion of its earnings to maintain corporate operations and survive fluctuations in income, but corporate structures should not be used to shield available income 

that could and should serve as available sources of child support funds. Id. Relevant factors to weigh in determining what 

portion of undistributed corporate earnings may be available 

to a shareholder for child support purposes should include the 

following considerations: (1) the shareholder’s level of control over the corporation’s distributions—as measured by the 

shareholder’s ownership interest, (2) the legitimate business 

interests justifying the retained corporate earnings, and (3) 

the corporation’s history of retained earnings and distributions 

to determine whether there is any affirmative evidence of an 

attempt to shield income by means of retained earnings. Id.

In this case, Dennis and Cantrell each owned 50 percent 

of CPS. Both parties agreed that Cantrell would propose the 

parties’ salaries and distributions each year and that Dennis 

then would agree to the proposal. Cantrell agreed that CPS’ 

profits left in the business were for upcoming expenses and to 

buy equipment. Additionally, Dennis and Cantrell each owned 

50 percent of C & D Leasing. Cantrell testified that all of the 

money in C & D Leasing went to bank loans or additional 

purchases of equipment. The net rental income from C & D 

Leasing was reported on the parties’ K-1’s and individual tax 

returns in the same manner that the ordinary business income 

from CPS was reported.

Therefore, based on the testimony of both parties, the profits retained by CPS were for upcoming expenses and to buy 

equipment and the profits retained by C & D Leasing went to 

bank loans or additional equipment purchases. There was no 

evidence adduced by either party that the retained earnings 

were excessive or inappropriate. In fact, in its final decree, the 
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district court stated, “[W]e have little evidence regarding the 

excessiveness or appropriateness of the income.” However, 

the court noted that Dennis was a very poor historian regarding his business management and the court found that many 

of his statements were not credible. The court also noted that 

“[i]t was quite clear that Dennis was manipulating income and 

deductions to his benefit.”

We are not surprised by the district court’s comment that 

Dennis was a “very poor historian regarding his business management,” since the parties testified that Dennis did the work 

in the field and Cantrell did the office work for the companies 

during their marriage. Also, in 2015 and 2016, the parties 

filed joint tax returns; thus, any “manipulation” of income and 

deductions in those 2 years benefited both parties. The initial divorce pleading was not filed until December 2016, and 

Dennis and Cantrell maintained equal ownership of CPS and 

C & D Leasing until the court approved their mediated agreement in November 2018.

Notably, neither party challenged the legitimacy of the profits 

retained by CPS or C & D Leasing. Also, the district court specifically found that there was little evidence of the excessiveness or the appropriateness of the companies’ income. Without 

such evidence, and based on the evidence that was presented, 

the retained earnings of CPS and C & D Leasing appeared to 

be used to maintain business operations; thus, it cannot be presumptively concluded that retained earnings should be included 

as income. See Guthard, supra (specific inquiry is necessary to 

balance considerations that well-managed corporation may be 

required to retain portion of its earnings to maintain corporate 

operations and survive fluctuations in income, but corporate 

structures should not be used to shield available income that 

could and should serve as available sources of child support funds).

We therefore conclude it was an abuse of discretion for the 

district court to attribute 50 percent of each company’s ordinary business income or net profit to Dennis without regard for 

the actual distributions he received and without evidence that 
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the retained earnings were excessive or inappropriate. When 

determining an appropriate income for Dennis for child support purposes, the reasonableness of the businesses’ retained 

earnings was not challenged, and therefore, the court could not 

simply attribute to Dennis 50 percent of the ordinary business 

income or net rental income of the companies without evidence 

of there being excessive or inappropriate retained earnings. 

Accordingly, we agree with Dennis that only the wages and 

distributions he received were proper sources of income to consider when determining his income for child support purposes. 

And as discussed above, there may be limitations on what portion of his distributions should be included as income for child 

support purposes; any distribution in excess of his tax liability 

on his proportionate share of pass-through income can be considered as income for child support purposes. See, Bornhorst 

v. Bornhorst, ante p. 182, 941 N.W.2d 769 (2020); Guthard v. 

Guthard, ante p. 156, 942 N.W.2d 792 (2020).

(d) Depreciation

In determining Dennis’ total monthly income, the district 

court’s 3-year average also included “[a]dd back” depreciation from CPS of $89,397.50 in 2015, $61,881 in 2016, and 

$50,463.50 in 2017. The 3-year average also included “[a]dd 

back” depreciation from C & D Leasing of $59,807 in 2015, 

$110,472 in 2016, and $31,158.50 in 2017. The district court 

found these depreciation amounts in each company’s respective 

federal tax returns; the depreciation amounts added to Dennis’ 

income represent one-half the total depreciation deducted on 

the business tax returns for those years. Dennis contends that 

no depreciation amounts should have been added into his 

income for child support purposes and that alternatively, the 

district court erred by not sustaining his motion to reopen the 

case before entry of a final order to allow him to bring in an 

expert to testify about these depreciation deductions. We begin 

first by considering the appropriateness of adding back in 

depreciation deductions taken by the businesses during years 

in which each party was a 50-percent owner, and thus equally 
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benefited, and where neither party at trial challenged the depreciation deductions taken on each business’ federal tax return 

for 2015, 2016, and 2017.

Section 4-204 of the Nebraska Child Support Guidelines 

provides, in relevant part:

(C) Depreciation calculated on the cost of ordinary 

and necessary assets may be allowed as a deduction from 

income of the business or farm to arrive at an annualized total monthly income. After an asset is shown to be 

ordinary and necessary, depreciation, if allowed by the 

trial court, shall be calculated by using the “straight-line” 

method, which allocates cost of an asset equally over its 

useful duration or life. An asset’s life should be determined with reference to the Class-lives and Recovery 

Periods Table created pursuant to 26 CFR § 1.167(a)-11. 

A party claiming depreciation shall have the burden of 

establishing entitlement to its allowance as a deduction.

(D) . . . Any party claiming an allowance of depreciation as a deduction from income shall furnish to the court 

and the other party copies of a minimum of 5 years’ tax 

returns at least 14 days before any hearing pertaining to 

the allowance of the deduction.

Notably, the current depreciation rule set forth above first discusses depreciation as a deduction “from income of the business or farm” to arrive at an annualized monthly income for a 

parent. § 4-204. As will be discussed below, a prior version of 

this rule was applicable to a parent who was “self-employed,” 

thus making depreciation deductions a potential issue when 

looking at a self-employed parent’s personal income tax 

returns. In those situations, a Schedule C (entitled “Profit or 

Loss From Business (Sole Proprietorship)”) or Schedule F 

(entitled “Profit or Loss From Farming”) would reflect depreciation deductions from a business or farming operation in 

a parent’s personal tax return. Further, the depreciation rule 

places the burden of proving “entitlement to its allowance as 

a deduction” on the “party claiming depreciation.” § 4-204. 

Since a sole proprietor is able to control purchases made for 
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his or her business, it is reasonable to place the burden on the 

sole proprietor parent to prove whether the depreciation deduction for such purchases, as reflected on his or her personal tax 

return, is appropriate. Interestingly, however, the depreciation 

rule language is broad enough to place a burden on a parent to 

prove the appropriateness of a depreciation deduction taken on 

a business entity’s federal tax return regardless of whether the 

parent has control over such matters, such as a minority shareholder of an S corporation.

Finally, § 4-204 further provides that “[a]ny party claiming 

an allowance of depreciation as a deduction from income . . . ” 

must furnish a minimum of 5 years’ tax returns. In an S corporation situation, the shareholder parent is not claiming an 

allowance of depreciation as a deduction from his or her personal income in most instances; rather, the depreciation deduction has already been taken by the corporation before determining the ordinary business income or net profit that will be 

passed through for tax purposes to the parent shareholder. The 

income attributable to the parent shareholder, as previously 

discussed, is focused more on what wages and distributions 

were actually received by the parent from the S corporation, 

and whether the S corporation’s retention of some of its net 

profits were excessive or inappropriate and could have otherwise been distributed to shareholders. We also note that 

the depreciation rule does not distinguish between personal 

income tax returns and other business entity income tax 

returns, such as those filed by an S corporation or partnership 

as in the present case.

The depreciation rule is easily applied when dealing with a 

sole proprietorship business or farming operation in which the 

taxpayer parent would include in his or her personal federal 

income tax return a Schedule C or Schedule F, with either form 

itemizing the business’ or farm operation’s expenses, deductions, and depreciation. In the past, when factoring in depreciation in cases of self-employment, the depreciation rule required 

adding back depreciation to the sole proprietor’s income for 
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the purpose of calculating child support. We find it helpful to 

consider the prior version of the depreciation rule when considering the current rule and its apparent broader application to 

depreciation that is not claimed on a parent’s personal income 

tax return, but is instead claimed on a separate business entity’s 

federal income tax return.

(i) Depreciation Rule Prior to 

September 2002 Amendment

Prior to the amendment of § 4-204 in September 2002, the 

rule related to depreciation was generally applied to cases 

involving a self-employed parent, and depreciation was added 

back to that parent’s income when determining child support. 

See Gammel v. Gammel, 259 Neb. 738, 741, 612 N.W.2d 207, 

211 (2000) (“paragraph D of the Nebraska Child Support 

Guidelines . . . provides that where a party is self-employed, 

depreciation claimed on tax returns should be added back to 

income”). Notably, in situations of self-employment in a business or farming operation, a party’s personal federal income 

tax return would include a Schedule C for a sole proprietorship 

or a Schedule F for a farming operation. Therefore, a divorcing 

party’s personal tax return would contain the details regarding what expenses or deductions, including depreciation, were 

being claimed to reduce the taxable income of that party, and 

thus also reducing the amount of income to be attributed to 

that party for child support purposes. See Rhoades v. Rhoades, 

258 Neb. 721, 605 N.W.2d 454 (2000) (as general rule, income 

of self-employed person can be determined from his or her 

income tax return). The depreciation rule required adding back 

in depreciation to a party’s income for child support purposes 

if that party was self-employed. See Rauch v. Rauch, 256 Neb. 

257, 263, 590 N.W.2d 170, 175 (1999) (when considering 

income of self-employed farmer, Supreme Court noted that 

paragraph D of guidelines “provides that if a party is selfemployed, depreciation claimed on income tax returns should 

be added back to income or loss from the business or farm to 

arrive at an annualized total monthly income”).
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Additionally, the depreciation to be added back to the selfemployed parent’s income included “Section 179” deductions. 

In Gammel, supra, a district court added “Section 179 deductions as well as Schedule C depreciation back to the total 

income reported” on a father’s tax returns. Gammel, 259 Neb. 

at 741, 612 N.W.2d at 211. The father did not challenge the 

addition of depreciation to his income, but he did take issue 

with adding to his income “the deductions he had taken under 

Section 179.” Gammel, 259 Neb. at 741, 612 N.W.2d at 211. 

The Nebraska Supreme Court noted that “[t]he Nebraska Child 

Support Guidelines require that depreciation be added back to 

income whether such depreciation is taken in the year the parent makes a cash expenditure to purchase property or whether 

it is taken in a subsequent year when no cash expenditure has 

been made.” 259 Neb. at 743, 612 N.W.2d at 211. Further, 

“[a] Section 179 deduction is, in effect, accelerated depreciation taken in the year property is placed in service. See, generally, I.R.C. §§ 167 and 168, referring to deductions taken in 

the first year as ‘depreciation.’” Gammel, 259 Neb. at 743, 612 

N.W.2d at 211.

Another case further developed the law in the area of 

depreciation prior to the 2002 amendment to the depreciation 

rule. In Gase v. Gase, 266 Neb. 975, 671 N.W.2d 223 (2003), 

the mother was an attorney and sole shareholder of several 

subchapter S corporations. In a child support modification 

action, the father claimed the trial court abused its discretion by failing to add depreciation claimed on the mother’s 

federal income tax returns back to her income for purposes 

of calculating child support. The mother conceded that any 

depreciation associated with rental properties owned by her 

personally should be added back to her income, but that the 

depreciation reported on her federal income tax returns related 

to her wholly owned S corporations should not be added back 

to her income because there was no evidence that she was selfemployed. The mother argued that the depreciation “belongs 

to the corporations and not to her,” and as such, the corporate 
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depreciation could not be added back to her personal income 

“without first piercing the corporate veil.” Id. at 983, 671 

N.W.2d at 230. The Nebraska Supreme Court found it unnecessary to pierce the corporate veil and concluded that “the owner 

of a wholly owned S corporation is self-employed within the 

meaning of the guidelines.” Id. at 985, 671 N.W.2d at 231. The 

Supreme Court directed that all depreciation reported on the 

mother’s income tax returns for the 3 years provided and all 

depreciation from the mother’s wholly owned S corporations 

“must be added back to her income in those respective years. 

This includes any deductions reported in those years pursuant 

to § 179.” Gase, 266 Neb. at 985, 671 N.W.2d at 231. See, 

also, Grams v. Grams, 9 Neb. App. 994, 624 N.W.2d 42 (2001) 

(depreciation should be included from father’s wholly owned 

S corporation for purposes of calculating child support).

In summary, prior to the depreciation rule being amended 

in 2002, it was well established that depreciation, including 

“Section 179” deductions, should be added back into a parent’s 

income if that parent was self-employed, which was construed 

to include an owner of a wholly owned S corporation.

(ii) Depreciation Rule After 

September 2002 Amendment

When § 4-204, the depreciation rule, was amended in 

September 2002, it no longer contained the reference to a parent being “self-employed.” Instead, the rule stated in part that 

“[d]epreciation calculated on the cost of ordinary and necessary assets may be allowed as a deduction from income of the 

business or farm to arrive at an annualized monthly income.” 

§ 4-204(C). With this amendment, the depreciation rule grew 

broader in application—it was no longer limited to the “selfemployed,” and it became more flexible in that it now provided 

an opportunity for a party to establish that depreciation should 

be allowed as a deduction when determining a party’s income 

for child support purposes.

The Nebraska Supreme Court’s first opportunity to review a 

case involving the proper treatment of depreciation deductions 
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under the amended rule was in Gress v. Gress, 271 Neb. 122, 

710 N.W.2d 318 (2006), a marriage dissolution case involving a father who was a self-employed farmer. We note that 

at the time of the Gress opinion, the language in § 4-204(C) 

was found in paragraph D of the Nebraska Child Support 

Guidelines; the Nebraska Child Support Guidelines were later 

renumbered and codified into its current form in 2008, but 

the above language from § 4-204 remains the same as it did 

in Gress.

In Gress, the father’s personal tax returns showed that his 

taxable income was determined after deducting a depreciation 

of farm machinery and equipment; the father’s tax preparer 

testified that the deductions were for ordinary and necessary 

assets in farm operations. The district court determined the 

father met his burden and established he was entitled to a 

depreciation deduction under the rule; however, the district 

court expressed uncertainty about allowing the father the full 

amount of the depreciation as it might not be in the children’s 

best interests. The district court then used the mother’s proposed calculations of the father’s income, which averaged 

his income over a 3-year period after adding one-half the 

depreciation deductions for each year back to the corresponding year’s taxable income. The father claimed the reduced 

depreciation deduction was in error, and the Nebraska Supreme 

Court agreed, explaining:

Depreciation as set out in paragraph D is a matter of 

proving the ordinary and necessary expenses of doing 

business. Part of that burden is showing the court that the 

deduction does not represent artificial treatment of assets 

for the purpose of avoiding child support obligations. 

Once the burden is met, the appropriate procedure is for a 

court to use the straight-line depreciation method in calculating the parent’s monthly income. Because a monthly 

income calculation under paragraph D is mathematical 

in nature, the effect of a depreciation deduction on child 

support is not a proper question under paragraph D.
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Gress, 271 Neb. at 128, 710 N.W.2d at 326. The Supreme 

Court concluded that after the district court found the father 

met his burden and established that he was entitled to a depreciation deduction, the district court was then required to calculate the father’s income “using the straight-line method of 

depreciation without any manipulation of the figures.” Id. at 

129, 710 N.W.2d at 326. The Supreme Court pointed out:

Although what effect depreciation has on child support is not a proper question under paragraph D, once a 

potential child support obligation has been determined 

based upon the calculations under paragraph D, paragraph 

C permits a deviation from the guidelines “whenever the 

application of the guidelines in an individual case would 

be unjust or inappropriate.”

Gress, 271 Neb. at 129, 710 N.W.2d at 326. The issue of child 

support was reversed and remanded back to the district court 

for further proceedings.

The Nebraska Supreme Court recently addressed depreciation deductions in a child support modification action involving an S corporation in Hotz v. Hotz, 301 Neb. 102, 917 

N.W.2d 467 (2018). In that case, the father argued the district court erred in not deducting depreciation from his total 

monthly income because he submitted his 2016 personal and 

corporate tax returns into evidence and both included claimed 

depreciations. On appeal, the Nebraska Supreme Court stated, 

“While the [Nebraska Child Support Guidelines] do[] permit 

for an allowance of depreciation as a deduction from total 

monthly income, it also provides specific instructions for proving an entitlement to the deduction and how the deduction 

should be calculated.” Hotz, 301 Neb. at 112, 917 N.W.2d at 

476. It noted § 4-204 requires that a minimum of 5 years’ tax 

returns be furnished, a depreciated asset must be shown to be 

ordinary and necessary, and depreciation must be calculated 

by using the straight-line method. The Supreme Court found 

the district court did not abuse its discretion by not deducting 

the father’s claimed depreciations from his monthly income. 
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See, also, Fichtl v. Fichtl, ante p. 380, 944 N.W.2d 516 (2020) 

(in child support modification, district court erred in awarding 

husband depreciation deductions in calculation of husband’s 

monthly income when he did not meet burden of showing 

he was entitled to depreciation deduction; husband, who was 

50-percent owner of construction business, did not provide 5 

years’ tax returns, did not prove business assets were ordinary 

and necessary, and did not prove depreciation was calculated 

by using straight-line method).

In this case, the district court found that Dennis failed to 

adduce any evidence regarding asset depreciation at trial, and 

then, he asked for leave to reopen the case to put on such 

evidence, which the court denied. The court suggested that 

“Dennis was manipulating income and deductions to his benefit.” Therefore, when calculating Dennis’ income for child 

support purposes, the court included the depreciation figures 

contained on the business income tax returns for CPS and 

C & D Leasing for 2015, 2016, and 2017.

However, unlike the self-employment situations and the 

more recent child support modification cases just summarized, 

the case before us is an initial divorce action involving passthrough income business entities, and during the tax years at 

issue—2015 through 2017—the parties were each 50 percent 

owners of those businesses. The parties were therefore equally 

responsible for the businesses’ purchases and the proper reporting of depreciation deductions, and they both equally received 

the benefit of such deductions during those tax years. Cantrell 

did not challenge their claimed depreciation deductions for 

those tax years for either business, which is not surprising, 

since she was substantially involved in the financial dealings of 

the businesses, including determining how much they would be 

paid in salaries and distributions. Thus, as we pointed out earlier, at least for 2015 and 2016 when the parties filed joint tax 

returns, any “manipulation” of income and deductions in those 

2 years was agreed to by both parties and benefited both parties. Further, although the parties did not file a joint personal 
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tax return in 2017, there is nothing to suggest the 2017 depreciation amounts contained on the businesses’ tax returns for 

that year should be treated any differently, since the businesses 

remained jointly owned until the district court approved the 

parties’ mediated agreement in November 2018.

[20,21] The key to determining whether depreciation deductions should be included as income for child support purposes 

is to show to the court that “the deduction does not represent 

artificial treatment of assets for the purpose of avoiding child 

support obligations.” Gress v. Gress, 271 Neb. 122, 128, 710 

N.W.2d 318, 326 (2006). When a husband and wife hold an 

equal interest and are both active in business entities during 

the course of their marriage, the risk of artificial treatment of 

assets for the purpose of avoiding child support obligations 

does not exist. In this case, the 2015, 2016, and 2017 business 

income tax returns were submitted when the parties were equal 

owners of CPS and C & D Leasing. Thus, unless one equal 

owner of a business affirmatively claims inappropriate, fraudulent, or “artificial” deductions contained on a business’ income 

tax return, the other equal owner should not be required to 

affirmatively prove the validity of depreciation claimed on a 

corporation’s or partnership’s federal income tax return. This 

is especially true here, where both parties had equal authority 

and equal opportunity to ensure the accuracy of their business income tax returns for the tax years at issue, and neither 

party challenged the legitimacy of the depreciation deductions 

at trial.

We therefore conclude that the district court abused its discretion by including the depreciation deductions taken by CPS 

and C & D Leasing when determining Dennis’ income for the 

purpose of calculating child support. We note, however, that 

consideration of depreciation deductions, as well as the appropriateness of retained earnings for CPS and C & D Leasing, 

will certainly be relevant in any future child support modification action involving these parties, since in the future, all such 
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depreciation and retained earnings will be subject to Dennis’ 

sole ownership and control.

(e) Reverse and Remand

We therefore reverse the district court’s calculation of child 

support and remand the issue back to the district court with 

directions to recalculate Dennis’ child support obligation to 

include his annual wage of $67,000 from CPS and any portion of his distributions in excess of the amounts needed to 

cover his personal tax liability on the businesses’ pass-through 

income as discussed above and in Bornhorst v. Bornhorst, ante

p. 182, 941 N.W.2d 769 (2020), and Guthard v. Guthard, ante

p. 156, 942 N.W.2d 792 (2020).

5. Remaining Issues

Dennis argues that the district court erred in sustaining 

relevance objections related to retained earnings and in overruling his motion to reopen the evidence as to depreciation 

expenses for the parties’ companies. Because our analysis of 

retained earnings and depreciation resulted in a favorable outcome for Dennis with regard to these matters, it is not necessary to address these assigned errors. An appellate court is 

not obligated to engage in an analysis that is not necessary to 

adjudicate the case and controversy before it. Seldin v. Estate of 

Silverman, 305 Neb. 185, 939 N.W.2d 768 (2020).

6. Credit for Health Insurance

Cantrell also attempts to cross-appeal the district court’s 

decision to give Dennis a $300 credit for health insurance premiums for the children despite a lack of evidence supporting 

such a credit, but as previously noted, she failed to comply with 

the rules regarding cross-appeals. Although Cantrell claims a 

lack of evidence, we note that the district court received into 

evidence each party’s proposed child support calculation, and 

Dennis’ calculation included a $300 credit for the health insurance premium for the children. Having reviewed the record for 

plain error, we find none.
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VI. CONCLUSION

For the reasons stated above, we reverse the district court’s 

calculation of child support and remand the issue back to the 

district court with directions to recalculate Dennis’ child support obligation using his wage income as set forth above and 

any appropriate portion of his distribution income as discussed 

above. We affirm the remainder of the decree.

Affirmed in part, and in part reversed 

and remanded with directions.