Tuesday, March 7, 2006

Case Law Developments: Dealing with Depreciation Deductions in Calculating Child Support

The Nebraska and Iowa courts have addressed the proper method to address depreciation deductions in calculating income from self-employment for child support purposes.  In both cases, the court had dissallowed the entirety of depreciation deductions in calculating the income of the self-employed farmer fathers.

In Nebraska, the supreme court concluded that, so long as deductions do not represent artificial treatment of assets for the purpose of avoiding child support obligations, the court should include depreciation deductions in calculating income, using the straight-line depreciation method.  Only after arriving at a child support amount based on this income may the court consider whether a deviation from the presumed child support amount is necesssary.  In this case, the trial court had determined that Husband - a self-employed farmer - was entitled to a depreciation deduction, but it did not then use the straight-line method for calculating the deduction.  Rather, the court used Husband's depreciation figures from his taxes, which used a declining-balance method, and then added back one-half of the depreciated amounts in order to arrive at Husband's income for child support purposes.  The Nebraska Supreme Court reversed because the trial court had manipulated the amount of income in order to vary the support amount under the guidelines.  Instead, the court required trial courts to follow a strict two-step process: "Deviations from the guidelines must take into consideration the best interests of the child, and in the event of a deviation, the trial court must state the amount of support that would have been required under the guidelines absent the deviation and include the reason for the deviation in the findings portion of the decree or order ..."

Gress v. Gress, 271 Neb. 122; 2006 Neb. LEXIS 33 (March 3, 2006)
Opinion on the web (last visited March 6, 2006 bgf)

The Iowa Court of Appeals addressed the same issues, affirming the trial court's decision to disregard husband's depreciation deductions in order to provide adequate child support.

In re Marriage of Ruth, 2006 Iowa App. LEXIS 178 (March 1, 2006)
Opinion on the web (last visited March 6, 2006 bgf)

http://lawprofessors.typepad.com/family_law/2006/03/case_law_develo_6.html

Child Support (establishing) | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef00d83528ce7c53ef

Listed below are links to weblogs that reference Case Law Developments: Dealing with Depreciation Deductions in Calculating Child Support:

Comments

Post a comment