Opinion ID: 2636996
Heading Depth: 4
Heading Rank: 1

Heading: It was error to deny Kim a deduction for the depreciation of her rental properties.

Text: Kim's child support guidelines affidavit claimed a $15,000 deduction for the depreciation of several rental properties. [14] Citing Hilderbrand v. Hilderbrand, [15] the superior court disallowed Kim's proposed depreciation deduction. Kim appeals this ruling. The commentary to Alaska Civil Rule 90.3 states: Income from self-employment, rent, royalties, or joint ownership of a partnership or closely held corporation includes the gross receipts minus the ordinary and necessary expenses required to produce the income. [16] We have held that the superior court should normally allow a deduction for the straight line depreciation  the difference between the original cost of an asset and its scrap value divided by the estimated useful life of the asset  of a child support obligor's business real estate as an ordinary and necessary business expense. [17] But we held in Hilderbrand that a depreciation deduction is not allowed if it could not be claimed for tax purposes. [18] Citing Hilderbrand, the trial court disallowed Kim's proposed depreciation deduction. The court did not find, however, that the proposed deduction could not be claimed for tax purposes. Indeed, Schedule E of the parties' 1995-97 federal income tax returns, which Kim submitted to the superior court, claimed a depreciation deduction for the same rental properties, and the record contains no evidence that the Internal Revenue Service denied those deductions. We therefore vacate the child support award and remand for recalculation of Kim's child support obligation, allowing Kim a deduction for the straight line depreciation of her rental properties.