Posted by: koherston | January 17, 2013

Imputed Income and Child Support Deviation in Clarksville Divorce: Halliday v. Halliday

Facts: The parties divorced after 17 years of marriage. They have two children. There are two issues on appeal that I think are of interest to my readers: imputing income to Mother for child support and and an upward deviation in child support for the children’s private school expenses.

The proof showed that Wife has undergraduate and master’s degrees in education and 12 years of teaching experience. She testified that the last time she taught was in the Spring of 2005, at which point she and Husband agreed that she would stay home to care for the children and household. Husband likewise testified that he and Wife “had an agreement, just like any other partnership, that she’d take care of the kids. . . .”

As part of the division of property, the trial court awarded several rental properties to Wife and that the court found “generates taxable income of approximately $4,000 monthly” less expenses such as property taxes and repairs/maintenance.

In determining the amount of child support to be paid by Husband, the trial court considered and rejected Husband’s argument that income should be imputed to Wife. The trial court found that “Wife has no current income.”

The trial court also  included in the Permanent Parenting Plan a requirement that Husband “pay the costs of the children’s private high school tuition, fees, activity fees, lunch program, school trips, required books and school supplies and equipment, reasonable uniforms, regular school expenses, school lunches and tutors through their 12th grade graduation.” The trial court did not make findings with respect to the amount of these expenses or enter a monthly average of the expenses into the deviation section of the child support worksheets.

Husband appealed.

On Appeal: The Court of Appeals affirmed in part and reversed in part.

Imputed income. Husband argued that, because the trial court later found that Wife had the ability to earn a salary as a school teacher, the trial court should have imputed income to Wife in determining the amount of child support he should pay.

Awards of child support are governed by the Tennessee Child Support Guidelines, which provide that, in determining child support, income may be imputed to a parent as follows:

(I) If a parent has been determined by a tribunal to be willfully and/or voluntarily underemployed or unemployed; or
(II) When there is no reliable evidence of income; or
(III) When the parent owns substantial non-income producing assets, the court may impute income based upon a reasonable rate of return upon the assets.

The Guidelines do not presume that a parent is willfully or voluntarily unemployed. The Guidelines enumerate factors relevant to the determination of willful or voluntary underemployment or unemployment and recognize “the role of a stay-at-home parent as an important and valuable factor in a child’s life.” Whether a parent is willfully or voluntarily unemployed is a question of fact that requires careful consideration of attendant circumstances.

After reviewing the record, the Court concluded that the

evidence supports the trial court’s rejection of Husband’s contention that Wife was voluntarily or willfully unemployed and that, as a consequence, income should be imputed to her for child support purposes. It is undisputed that Wife left her employment outside the home beginning in 2005 to care for the children, who were then six and eight years of age, by agreement with Husband; the trial court properly considered this agreement in holding that Wife was not willfully or voluntarily unemployed.

Husband then argued that income should have been imputed to Wife considering the trial court’s award of income-earning rental properties to Wife.

Under the Guidelines, a parent’s gross income includes “all income from any source,” including income from self-employment. “Income from self-employment includes income from . . . rental properties . . . less ordinary and reasonable expenses necessary to produce such income.” Courts are wary of increasing child support based on possible income that is merely speculative. Instead, they look for “income regularly received by the obligor.”

After reviewing the record, the Court concluded:

The trial court did not err in not assigning income from rental property to Wife in its determination of child support. The record establishes that, while Wife may derive income from the rental properties awarded to her, the amount of such income is speculative, because of the uncertainty of the expenditures required to manage and maintain the property. In light of the uncertainty of the amount of income Wife would receive from the properties, as well as the effort required for her to manage the property in addition to maintaining regular employment and performing her role as primary residential parent, the trial court properly declined to include potential income from the rental properties in its determination of Wife’s income.

On the issue of imputed income, the trial court was affirmed.

Upward deviation. Husband argued the trial court erred in awarding an upward deviation from the presumptive amount of child support by failing to make specific findings with respect to the children’s private school costs.

The trial court may order an upward deviation from the Guidelines for extraordinary educational expenses including tuition and other expenses associated with private schooling. The Guidelines require that a monthly average of extraordinary educational expenses be based on evidence of prior or anticipated expenses and entered into the deviation section of the child support worksheets.

The Court reviewed the record and found that

[n]o evidence was heard with respect to the amount of potential private school expenses for the children. Furthermore, as the children never attended private school before the divorce, no evidence was available of prior private school expenses. The only testimony with respect to private schooling was Wife’s testimony that she would like to have the option to send the children to private school if she was unable to stay in her current home.

In the absence of evidence required by the regulations to support an upward deviation for extraordinary educational expenses and in the absence of the factual findings by the trial court, this Court cannot determine whether the trial court abused its discretion. We remand the case for the trial court to make specific findings with respect to potential private school expenses for the children, as required by . . . the Guidelines.

Thus, the trial court’s refusal to impute income to Mother was affirmed while the upward deviation in child support was reversed and remanded for more specific findings.

K.O.’s Comment: It is also worth noting that Wife sought to have the cost of an expert’s report awarded as a discretionary cost. That effort failed because the expense did not fall precisely within the narrow scope of Rule 54.04. The Court classified the expense as a marital debt, however, and held it should be equitably divided by the trial court on remand.

Halliday v. Halliday (Tennessee Court of Appeals, Middle Section, December 6, 2012).

Information provided by K.O. Herston: Knoxville, Tennessee Matrimonial, Divorce and Family Law Attorney.


Responses

  1. Reblogged this on Arnold & Wadsworth – Washington and commented:
    Imputed income in divorce cases can be a sensitive subject. See how Tennessee has dealt with the issue.


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