Opinion ID: 1247879
Heading Depth: 1
Heading Rank: 10

Heading: Capital Gains Income

Text: As with overtime, if the mother shows that a portion of the father's wages are paid in the form of stock which is regularly sold and results in capital gains income at the end of the year, it is appropriate to consider such income under paragraph D of the Guidelines in calculating child support. Again, however, if the father rebuts the presumption by showing that the sale of the stock and the resulting capital gains income is speculative in nature and that he has little or no control over the timing of the future sales of the stock, the income should be excluded. In the instant case, the father received stock as part of his compensation and his employer reduced his cash wages by the value of the stock. His biweekly pay stub shows that he receives 6 percent of his wages in the form of stock. The record shows that during the 2 years prior to the modification hearing, the father regularly sold the stock within months after he received it and that he consistently received capital gains income from those sales. He reported capital gains income of $979 and $888 in the 2 years prior to this action from the sale of the stock he received from his employer. Absent evidence to the contrary, the record supports the conclusion that capital gains income has been and will be a regular part of the father's income. Therefore, it is to be included in his income calculation unless the father can rebut the presumption by showing that the sale of the stock and resulting capital gains income is speculative in nature and that he has little or no control over the disposition of the stock. There is no evidence in the record offered by the father showing why the capital gains income should not be included in the child support calculation. To the contrary, the evidence before us reveals that the father (1) receives stock as part of his compensation, (2) sells the stock each year, and (3) has consistently received capital gains income from the sales of the stock. Thus, the father has not rebutted the presumption of including the capital gains income in the child support calculation. Therefore, the district court erred in not including the capital gains income in the child support calculation. Based on our de novo review of the record, we determine that the equivalent of $933.50 of yearly capital gains income, which is his average capital gains income from the previous 2 years, is to be included in calculating the father's income. Further, we determine that such income is to be divided by 12 and included in the calculation of the father's monthly income prior to the calculation of federal taxes. Short-term capital gains, which are gains on the sale of stock held for less than 1 year, are taxable at the same rates as ordinary income. See, I.R.C. § 1222(1) (1994); 33A Am.Jur.2d Federal Taxation ¶ 11125 (2000).