Opinion ID: 886038
Heading Depth: 2
Heading Rank: 1

Heading: Failure to consider income from years other than 1999.

Text: ¶ 10 Keith contends that the District Court erred by calculating his actual income for child support purposes based on his income for 1999 alone, rather than taking a three-year average as required by law. He alleges this error resulted in a skewed and inaccurate portrayal of his income. ¶ 11 In determining child support obligations, a district court must follow the Child Support Guidelines (Guidelines) unless clear and convincing evidence is produced demonstrating that the application of the standards and guidelines is unjust to the child or to any of the parties, or is inappropriate in that particular case. Section 40-4-204(3)(a), MCA; See In re Marriage of Albinger, 2002 MT 104, ¶ 12, 47 P.3d 820, ¶ 12, 309 Mont. 437, ¶ 12. The Instructions for Completing Child Support Worksheets provide that determination of the income for a self-employed parent usually requires an average of at least three years of the net income from Schedule C of that parent's income tax returns. ¶ 12 This Court has recommended consideration of at least two years of income taxes when a district court is determining gross income. In re Marriage of Jacobson (1992), 251 Mont. 394, 399, 825 P.2d 561, 565. Furthermore, Rule 37.62.108(3)(a), ARM, provides that income should be annualized to avoid the possibility of skewed application of the Guidelines based on temporary or seasonal conditions. The period over which income is averaged should be sufficient to accurately reflect the parent's earning ability. Rule 37.62.108(3)(a), ARM. While Worksheet A does not mandate calculating income using a three-year average, the Guidelines and our cases create a strong preference for averaging income. Finally, a district court must be realistic and take the actual situation of the parties into account when calculating child support obligations. In re Marriage of Noel, 265 Mont. at 252, 875 P.2d at 359. The end sought is equity and accuracy in determining income of the party charged with child support obligations, while serving the best interests of the child. It would serve no one's best interests to attribute unrealistic income to a parent. If we expect a parent to meet both his needs and the needs of the children, child support calculations must be realistic. ¶ 13 Patricia cites two cases in which this Court affirmed a district court's award of child support based upon one year's income. In re Marriage of Jacobson, 251 Mont. at 399, 825 P.2d at 565; In re Marriage of Nash (1992), 254 Mont. 231, 235-36, 836 P.2d 598, 600-01. While we did not require evidence of income from more than one year in either case, the cited cases are inapplicable due to the factual differences from this case. In both Jacobson and Nash, the obligated parties were employees receiving wages rather than self-employed individuals. In re Marriage of Nash, 254 Mont. at 233, 836 P.2d at 600; In re Marriage of Jacobson, 251 Mont. at 399, 825 P.2d at 565. The preference for a three-year average on net income expressed in Worksheet A applies to self-employed individuals who do not receive income in the form of wages or a salary. A salaried employee or wage earner's income can be more easily ascertained by reviewing one year of income because, absent a foreseeable promotion, salary or wages can be presumed to remain consistent or predictable over a period of time. However, self-employment is not as predictable. Self-employed business owners experience fluctuations in profits from year to year. Therefore, it is necessary to consider the business history to fairly and accurately determine income. ¶ 14 We conclude that the District Court abused its discretion when it based determination of Keith's income on only what he earned in 1999. Income for a self-employed parent should be calculated based on a three-year average of that parent's net earnings. A district court is not permitted to deviate from the Guidelines absent clear and convincing evidence that following the Guidelines would be unjust to the child or to any of the parties, or is inappropriate in that particular case. The testimony of Mr. Bourdeau fails to provide clear and convincing evidence that applying the three-year average of net earnings from Schedule C would result in injustice. Mr. Bourdeau's testimony does not provide specific evidence that the cost of auditing previous years would be prohibitive and he could only speculate about inaccuracies of the previous tax years. Accordingly, we conclude the District Court abused its discretion by deviating from the Guidelines' preference for a three-year average of net income for a self-employed parent.