Opinion ID: 1219332
Heading Depth: 2
Heading Rank: 3

Heading: Ongoing Child Support

Text: In addition to the $275 per month award for child support arrearages, the trial court ordered Alton to pay Lee Ann $1,100 per month in ongoing support until the older of their two children turns eighteen. At that time Alton's payments will be reduced to $815 per month until the younger child turns eighteen. The amounts were calculated using Civil Rule 90.3. On appeal, Alton argued that the trial court erred by denying him an offset pursuant to the shared custody provisions of Rule 90.3(b) and (f). Rule 90.3(a) provides that when one parent is awarded sole or primary physical custody the child support award is computed as a percentage of the noncustodial spouse's adjusted annual income. If the parents have shared physical custody, child support is calculated by making a determination using Rule 90.3(a) of what each parent would pay if the other parent had primary custody, multiplying this amount by the percentage of time the other parent will have physical custody of the children, and awarding the spouse with the lower resulting figure the difference. Rule 90.3(b). According to the version of Rule 90.3(f) in effect at relevant times, [a] parent has shared or joint physical custody of children for purposes of this rule if the children reside with the parent for a specified period of at least 25% of the year. [4] According to the visitation schedule, the children spend enough time with Alton to require a finding of shared custody. [5] On remand the court should calculate Alton's child support obligation pursuant to Rule 90.3(b). Alton also alleged that the trial court miscalculated his adjusted annual income for Rule 90.3(a) purposes. The rule does not explicitly address how adjusted annual income should be calculated for a sole proprietor such as Alton. He argued that in determining his adjusted annual income, the court should have deducted the legitimate business expenses incorporated in his tax records, and payments of principal toward the purchase of a piece of business equipment (a grader). Lee Ann responded that tax write-offs frequently do not reflect economic reality and that allowing capital expenditures gives the obligor too much discretion with which to diminish a child support obligation. The trial court rejected use of tax records and chose instead to start with gross receipts and deduct eight specific expenses: rent, utilities, equipment maintenance, income tax, social security, medical insurance, payments into a retirement plan, and debt servicing costs on equipment that existed at the time of separation. The court included as income $6,000 representing the rent Alton would have had to pay to live in one unit of a four-plex that he owned. We find that the trial court erred in a number of respects regarding the calculation of Alton's income. First, it was a mistake to include as income the $6,000 the court estimated to be the imputed benefit to Alton of living in the four-plex. As owner of the property he should not be required, in effect, to pay to live there. Imputing rental income raises difficult valuation problems. D. Posin, Federal Income Taxation of Individuals, p. 16 n. 17 (1983). It is not called for in Rule 90.3 nor is it suggested by the committee commentary to the rule. In unusual cases special circumstances may justify imputing rental income under the good cause exception set out in subparagraph (c) of the rule. [6] Furthermore, while we acknowledge the court's concerns regarding the accuracy of an income tax return as a reflection of true income, the technique the court employed did not allow sufficient recognition of appropriate business expenses. Although the committee commentary to Rule 90.3 states that there should be no deduction for accelerated depreciation, see Rule 90.3 Comment III. B., there is no similar suggestion with respect to straightline depreciation of business equipment. Depreciation is a means of reflecting on an annual basis the costs of capital equipment. Such costs are real and should not be disregarded unless it appears that equipment was acquired in order to avoid or reduce the obligor's child support obligation. Unless that is the case here, on remand, the court should allow a realistic deduction for depreciation. [7]