### IN THE S UP REME COURT OF TENNESS EE AT KNOXVI LLE Ma y 1, 200 7 S es sio n NORA ELI ZABET H KI LBY MOO RE v. RONNI E DALE MOO RE Appeal by Permission from the C ourt of Appeals, Eastern Section

Circuit Court

for Bradley County No. 91-124 John B. Hagl er, Jr ., Judge

No. E2005-02469-SC-R11- CV - Filed Septem ber 5, 2007
We gr anted pe rmission to appeal to determine whether income from a nonre curring capital gain may be conside red in de termining a pare nt’s gross income for purposes of modifying c hild support. We ho ld that in c omefr om an iso late d or “o ne -time ” c apit a l gai n must be inc lud e d in c a lc ulatin g g ro ss income and that the t rial court err ed in dismiss ing the petit ion to modify child support. Acc ordingly, we a ffirm the judgment of the Court of Appeals and remand t his casefor c alculation of c hild support pu rs uant t o th e Chi ld S up po rt Gu ide lin e s. Te nn. R . A pp. P . 1 1 A ppe al b y P e r mi ssi on; Judg me nt of th e Co ur t o f A ppe als Af fi r me d; Case Re manded
J ANIC E M. H OLDER , J., delivere d the opinion of the court, in w hich W I L L I AM M. B ARKER , C.J., and C OR NE LI A A. C LA R K and G AR Y R. W ADE , JJ., joined. Roger E. Jenne , Cleveland, Te nnessee , for the a ppellant, Ronnie DaleMoore. John T. Rice, Chattanooga, T ennesse e, for the appe llee, Nor a Eliza

beth Kilby Moore. OP IN ION
I. Factua l and Proce dural Bac kground
In 1978, Ronnie Dale Moore (“Mr

. Moore” ) acquir ed by gift thirty sha res of stock in Ed’s Cycles, Inc . (“Ed’ s Cyc l es ”) , a b u siness operated by his father . Mr. Moore’ s sister also ac quired thi rty s ha re s o f s toc k inEd ’s Cyc le s. Hi s f athe r r e taine d n in ety shar e s o f s toc k inthefamil y business. Mr. Moore and his sister wer e both e mployees of Ed’ s Cycles. Mr. Mooremarrie d Nora El iz abe th Kilb y M oo re(“ Ms. Mo or e ” ) i n 1 98 0. Af te r h is f athe r’ s death in 198 2, Mr . Moo re a ndhis sis te r e a c h in he ri te d ano the r f orty- fi vesh are s o f s toc k inthebu sin e ss. When the parties divorced in May 1991, Mr. and Ms. Moore ente red into a “ Separation and Property Settlement Agre ement” in w hich Mr. Moore was awa rded all of his common stock in Ed’sT h e p a rtie s’ y o u n g e r c h ild a p p e a rs to h a v e b e e n tw e lv e o r t h irte e n y e a rs o f ag e a t th e tim e o f th e sto c k sa le 1 i n J une 2001.

Ch i l d s up po r t m od i fi cat i on i s gov er ned b y T enness ee C od e A nn ot ated se cti on 36-5-101(g) ( 20 06 )

. See 2 K ap l an v . B u g all a, 1 8 8 S .W .3d 6 3 2 , 6 3 6 (T en n . 2 0 0 6 ). T en n esse e C o d e A n n o t ated sec t i o n 3 6 -5 -1 0 1 (g )(1 ) p ro v i d es, i n pe rt i n en t pa rt , “ [u]p o n a p p l i cat i o n o f ei t h er p art y , the co u rt sh al l d ecree an i n crease or de crease of s u p p o rt w h en t h ere i s f ou nd t o be a s i gn i fi cant var i ance, as d efi ned i n t he chi l d s up po r t g ui del i nes es t abl i s hed b y s ub s ect i on ( e) , bet w een t he gu i del i nes and t he am ou nt of s up po r t cur r ent l y order ed .

. . . ” T he curr ent provi s i on quo t ed abov e does not di ff er s ub s t ant i vel y fr om t he pert i nent l angu age i n t he provi s i on t hat exi s t ed at t he t i m e o f t he t r i al court ’ s hear i ng i n t hi s ca s e, Tenne s s ee Code Annot at ed s ec t i on 36- 5- 101( a) ( 1) ( Supp. 2002) , a nd w e t her efor e c i t e t o t he c ur r ent s t at ut e. K apl an, 18 8 S. W

. 3d at 636 & n. 5. Th e Ch i l d Su pp ort G ui del i nes i n eff ect at t he t i m e t he pet i t i o n fo r m o d i ficat i on w as fi l ed p ro v id e d , h o w e v e r, th a t an o rd e r o f su p p o rt is n o t elig ib le fo r m o d ific a tio n u n le ss th e r e i s a “ sig n ific a n t v a ria n c e ,” d e fin e d a s “ a t l e a st 1 5 % if th e c u rr e n t su p p o rt is o n e h u n d re d d o llar s ($ 1 0 0 .0 0 ) o r g re a te r p e r m o n th ” b e tw e e n th e C h ild Su p p o rt G u i d el i n es and t h e am o u n t o f sup p o rt cu rr en t l y o rdered

. See T en n . C o m p . R

. & R eg s. 12 4 0 -2-4 -. 0 2 (3) (19 9 4 ). B eca use t he pend i ng pet i t i on w as fi l ed befor e t he C hi l d Sup po r t G ui del i nes w er e revi s ed, t he pri or vers i on i s appl i cabl e. K apl an, 188 S. W

. 3d a t 637 n. 6. -2- Cyc le s. Th e a gr e e me nt d id n ot l is t any pro perty a s th e “ se pa rate ” pr op e rty o f e ith e r p arty. Ms. Moore wa s granted primary physical c ustody of t he parties’ t wo m inor children, and Mr. Moore w as or de re d to pay $ 10 0 p e r w e e k inc hil d s up po rt

. In June 2001, Mr. Moor e sold all of his share s of stock in Ed’s Cycles to his sist er f or $687,550. His sister paid him an additional $100,000 for a covenant not to compete. At closing, Mr. Moore r ece ived twenty per cent of the total sales price and $100,000, the amount of t he covenant not to c omp e te . T heba lanc e of thepr oc e e ds fr om thesto c k sal e wa s sec ur e d by a pro mis so ry no te to be paid in monthly installm ent s o v er a fi ve-ye ar pe riod. Mr. Mooreleft his employment at Ed’s Cycles in June 2001 and r emained une mployed until early 2002. The pa rties’ older

child became emanc ipated in June 2001, the same month as the stock sale. 1 In De cembe r 2001, Ms. Moor e filed a petition to modify child support, claiming that she is entitled to an in c re a se in c hil d s up po rt a s a re su lt of the inc omere a liz e d b y M r. Mo or e fr om thesa le of his stock in E d’s Cycles. She contende d that a “significant variance” exists be tween M r. M o o re’ s 2 c ur re nt c hil d s up po rt ob lig atio n an d the a mou nt of c hil d sup po rt that w ou ld b e ow e d if theinc ome from the stock sale wer e included in the c alculation. The pa rties pre sented e xpert testim ony conce rning the value of t he ca pital gain rec eived by Mr. Moore, and the trial court denied Ms. Moore’ s petition to modify child support. The trial c ourt c on c lud e d th at a

“ on e -timec apit a l gain” sh ou ld n ot be c on sid e re d inc a lc ulatin g M r. Mo or e ’s gr os s income for

the purposes of determining his child support obligation. The trial court, theref ore, ma de no finding as to the amount of the capital gain. The Court of Appeals r ever sed, holding that “there is no legal basis for an isolated ca pital gain rule.” We gr anted r eview.
II . A nalys is Whethe r income f

rom a single or “one- time” capital gain must be included in ca lculating a pare nt’s gross income for the purpose of

modifying child support is a question of law. W e re viewE u b a n k , w h ic h se e m s to b e th e g e n e sis o f th e iso la te d c a p ital g a in ru le , is a m e m o r a n d u m o p in io n th a t, 3

ac cor di ng t o Rul e 10 of t he Rul es of

t he Cour t of

A ppea l s , “ s hal l not be publ i s hed, and s hal l not be c i t ed or r el i ed on fo r a n y re a so n in a n y u n re la te d c a se .” T h e re fo re , t h e C o u rt o f A p p e a ls o b se rv e d in th e in sta n t ca se th a t E u b a n k sh o u ld n o t ha v e b een ci t ed i n H al l an d t h at “[w ]e r eg ret t h at t h e t ri al co u rt w as l ed in to e rr o r b y o u r e rr o n eo u s ci t i n g of a m e m o ra n d u m o p in io n .”

T h e C h ild S u p p o rt G u i d eli n es c u rren t l y i n effe ct l i k ew i se in clu d e c ap i t al g ain s i n t h e d efin i t i o n o f g ro ss 4 i n co m e. See T en n . C o m p . R

. & R eg s. 12 4 0 -2-4 -. 0 4 (3)(a)( 1 )( x i i i ) ( 2 0 0 6 ). -3- questions of law denovo, aff ording no presumption of cor rec tness to the trial court’ s conclusions of law. K esser

v. Kesser , 201 S.W.3d 636, 644 (Tenn. 2006)

. Ou r i nte rm e diate app e llate c ou rt ’s de c isi on s a rein c onfl ict c on c e rn ing wh e the r o ne -time c apit a l g a ins mus t beinc lud e d inc a lc ulatin g a pa re nt’ s g ro ss i nc omefo r c hil d s up po rt pu rp os e s. Some case s hold that the Child S upport Guidelines do not require the i nclusion of isolated ca pital gains transa ctions in gross income. See Eubank v. Eubank, No. 02A01-9110CV00242, 1992 WL 295546, at *3 (Tenn. Ct. App. Oct. 20, 1992) (c oncluding that the Child S upport Guidelines do not

“ re qu ir e theinc lus ionin g ro ss i nc ome of a n iso late d c apit a l gains tr a ns a c tio n” ); se e a lso Hall v. Hall, No . 0 3A 01 -9 70 1- GS- 00 03 0, 19 97 W L 40 42 58 , at *3 (T e nn . Ct . A pp . J uly 21 , 1 99 7) (a dh e ri ng to theho ldi ng in E ub a nk

that th e Chi ld S up po rt Gu ide lin e s do no t re qu ir e inc lus ion in g ro ss i nc ome of iso late d c apit a l gains ). Inoth er case s, ho we ve r, theCou rt of Ap pe a ls h a s in c lud e d o ne -time 3 capital gains in the calculation of child support. See Ellis v. Ellis, No. E2003-01327- COA-R3-CV, 20 04 W L 1 1 0 2 4 1 6 , at* 8

- 9 ( T e n n . C t

. A p p . M a y 1 7 , 2 0 0 4 ) ( ap p r o v i n g o f th e u s e o f

a o n e - t i me capital ga inf

r o m th e s a leo f

a h o u s e inc a lc u lati n g th e o b li g o r ’ s g r o s s in c o mef o r c h il dsupport pu rp os e s) ; T a ylo r v . T a ylo r, No . M19 99 -0 23 98 -C OA -R 3- CV , 200 3 W L 2 13 02 98 8, at *9 (T e nn . Ct

. App. J u n e 6 , 2 0 0 3 ) ( “ A s a g e n e r a l m att e r , a ll c ap it a l g a in s –e v e n th o s e r e a li z e df r o m an is o lated tr a ns a c tio n – mus t be c on sid e re d a s gr os s inc ome fo r the pu rp os e of de te rm ini ng a par ent ’s c hild support obligation.”); Eldridge v. Eldridge, 137 S.W.3d 1, 22 (Tenn. Ct. App. 2002) ( observing that the ca pital gain r ealize d as a r esult of the saleof one of the parties’ re sidence s should be included when de termining the obligor’s income f or child support purpose s); S m i t h v. Smit h, No. 01A-01-9705- CH-00216, 1997 WL 672646, at *3 (Tenn. Ct. App. O ct. 29, 1997) (rejec ting the obligor’s argume nt that the exer cise of his stock options was a one-time event and conc luding that the Chi ld Sup po rt

Gu ide lin e s “ do no t pe rm it thetria l c ou rt to i gn or e c apit a l gains in c a lc ulatin g c hil d support”). I n the i nstant case , the C ourt of Appe als followed the mor e re cent c ase la w and c oncluded the reis n o le ga l ba sis fo r e xc lud ing iso late d c apit a l gains fr om thec a lc ulatio n o f c hil d s up po rt

. At thetim e Ms. Mo or e fi le d th e pe titionfo r m od if ic atio n o f c hil d s up po rt

at is su e in this c a se , t he Chi ld S up po rt

Gu ide lin e s e xp lic itl y in c lud e d “ c apit a l gains ” in thede fi nitionof “ gr os s income.” T he Child Support Guidelines broadly def ine gross income to “ include all income fr om any sourc e . . . whe ther e arne d or unea rned, and includes but is not lim ited to . . . c a p it a l g a ins .” Tenn. Comp. R. & Regs. 1240-2-4-.03(3) (a) (1) ( 1994) (e m phasis added)

. The Child Support 4 Guidelines do not e xempt isolated capital gains from inclusion as gross income. Inde ed, wehave observe d, “[g] ener ally, capital gains are incl u d ed i n the def inition of gross income.” Brooks v. Bro o k s , 9 9 2 S. W

. 2 d 4 0 3 , 4 0 7 ( T e n n . 1 9 9 9 ) ; s e e a ls o K e s s e r , 2 0 1 S. W

. 3 d at 6 4 6 ( n o ti n g th at theI n K es s er , t hi s Cour t a l s o he l d t hat c api t al l os s es m ay not be cons i der ed i n det er m i ni ng chi l d s uppor t due f r om 5 capi t al gai ns. 201 S. W

. 3d at 646

. A r ece nt s t at ut ory am endm ent , eff ect i ve J ul y 1, 200 7, h ow ever , requi r es capi t al l oss es t o be de d u ct ed fr o m c a p i t al ga i n s i n each ye ar f o r t h e p u rpo se of cal cu l at i n g i n co m e p u rs u an t t o t h e C h i l d Su p p o rt G ui del i nes . Se e A ct of M ay 18, 2007, 2007 Tenn. Pub. A ct s 1 8 7 § 6 ( am endi ng Tenne s s ee Code Annot at ed s ec t i on 3 6 -5-1 0 1 (e)( 1 )( B ))

. -4- obligor’s ca

pital gains should be considere d in calc ulating child support for modification purposes). 5 Ina dd iti onto theinc lus ionof c apit a l gains a s “ gr os s in c ome ,” theChi ld S up po rt Gu ide lin e s a lso include as “ gross income” items suc h as bonuses, gifts, seve ranc e pay, and prize s, all of which a re typically nonrec urring income. T enn. Comp. R. & R egs. 1240-2- 4-.03(3) (a) (1) ( 1994).
We now hold that under the Child S upport Guidelines all ca pital gains, including those from an isolated transaction, should be considered in calc ulating gross income for the purpose of

setting child support. This holding is consistent with the plain language of the Child S upport Guidelines and with the goal e xpresse d in the Child S upport Guidelines t h at “to the extent that either pa rent e njo ys a hig he r s tand ardof

liv ing , th e c hil d( re n) sh are (s ) in that hig he r stand ard .” Te nn . Co mp. R. & Regs. 1240-2-4.01( 3 )(e) (2006) . The failure to include Mr. Moor e’s substantial ca pital gain as income in modifying his child support obligation would i gnore thepurpose and the plain language of t he Child Support Guidelines and would deny his child the opportunity to enjoy the standar d of living to which she is entitled.
III . Conclusion
W e ho ld that in c ome fr om an is olate d o r “ on e -time ” c apit a l gain mus t bec on sid e re d in calcu l ating gross income for the purpose of

modifying child support. Accor dingly, we af firm the jud gme nt o f theCou rt

of Ap pe a ls andre mandthi s c a se to the tria l c ou rt to de te rm inetheapp ro priate amount of child support based upon the parties’ curr ent financial information and theChild S upport Guidelines. Costs of this appeal a re taxed to the appe llant, Ronnie Dale Moore , and his surety, for which exe cution may issue if nec essary.

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