This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (1998).






In Re the Marriage of:


Lori Nash-Kadechka,

n/k/a Lori Hill, petitioner,





Raymond E. Kadechka,



Filed July 25, 2000


Kalitowski, Judge

Dissenting, Klaphake, Judge


Ramsey County District Court

File No. DMF2901292


Stephen M. Lindlof, 2580 White Bear Avenue, Suite 103, St. Paul, MN 55109 (for respondent)


Scott R. Martin, Scott R. Martin, P.A., 4856 Banning Avenue, White Bear Lake, MN 55110 (for appellant)


            Considered and decided by Klaphake, Presiding Judge, Kalitowski, Judge, and Stoneburner, Judge.

U N P U B L I S H E D   O P I N I O N


On appeal after remand, appellant Raymond E. Kadechka alleges that the child support magistrate erred in calculating his net monthly income for child support purposes by failing to give appellant credit for all his claimed business depreciation deductions.  Appellant also alleges the magistrate abused her discretion by refusing to consider additional evidence appellant indicated was available for review.  We affirm.



            Modification of child support is within the district court’s discretion and will not be reversed on appeal absent an abuse of discretion.  Hennessy v. Stelton, 302 Minn. 550, 550, 224 N.W.2d 926, 927 (1974).  This standard applies to the review of a child support magistrate’s decision as well.  See Lee v. Lee, 459 N.W.2d 365, 369 (Minn. App. 1990) (stating that standard of review applied to a child support determination by administrative law judge), review denied (Minn. Oct. 18, 1990).  An appellate court will not reverse a district court’s determination of net income used to calculate child support if it has a reasonable basis in fact.  Hicks v. Hicks, 533 N.W.2d 885, 886 (Minn. App. 1995).

            Income from self-employment is defined by statute as follows:

Income from self-employment is equal to gross receipts minus ordinary and necessary expenses.  Ordinary and necessary expenses do not include amounts allowed by the Internal Revenue Service for accelerated depreciation expenses or investment tax credits or any other business expenses determined by the court to be inappropriate for determining income for purposes of child support.  The person seeking to deduct an expense, including depreciation, has the burden of proving, if challenged, that the expense is ordinary and necessary.


Minn. Stat. § 518.551, subd. 5b(f) (Supp. 1999).  Net income may be different from taxable income.  Id.

A total disregard of depreciation is reversible error.  Freking v. Freking, 479 N.W.2d 736, 740 (Minn. App. 1992).  Courts must evaluate claimed depreciation deductions to determine whether they reflect true depreciation or depreciation for tax purposes only.  Beltz v. Beltz, 466 N.W.2d 765, 767 (Minn. App. 1991), review denied (Minn. April 29, May 23, 1991).  When the record contains evidence of legitimate depreciation deductions, courts should consider those deductions in determining an obligor’s net income.  Preussner v. Timmer, 414 N.W.2d 577, 579 (Minn. App. 1987).

            Appellant argues the magistrate’s decision was an abuse of discretion because the magistrate declined to credit a large part of the business depreciation deductions for Fast Lane Printing, a limited liability company of which appellant is the 90% owner.  Appellant has previously appealed the child support magistrate’s[1] modification of child support.  In that appeal, this court remanded for further factual findings regarding the legitimacy of Fast Lane Printing’s business deductions and losses in 1996 and 1997.  Nash-Kadechka v. Kadechka, No. C4-98-1963, 1999 WL 343863, at *5 (Minn. App. June 1, 1999).  Moreover, the court gave appellant a specific instruction regarding his burden on remand, stating that “[w]e remind appellant that he bears the burden of proof on this issue and must present adequate evidence and witnesses to support his claims.”  Id.

The narrow issue before us is whether the magistrate erred in finding appellant failed to satisfy his burden of presenting adequate evidence that all of Fast Lane Printing’s business depreciation deductions were ordinary and necessary expenses for determining his income for purposes of child support.  The relevant evidence on remand consisted of (1) appellant’s individual tax returns for 1996 and 1997; (2) the 1996 and 1997 business tax returns for Fast Lane Printing; (3) an affidavit by appellant’s accountant; (4) an affidavit by appellant; and (5) exhibits to appellant’s affidavit including general ledgers of expenses for Fast Lane Printing, canceled checks from Fast Lane Printing, a list of depreciation calculations for 1996, and a receipt for equipment received from Impact Printing.

The tax returns are not conclusive evidence of appellant’s income.  See Stephenson v. Stephenson, 258 Minn. 435, 436, 104 N.W.2d 517, 518-19 (1960) (stating that tax returns are evidence of income but not conclusive as to the amount of income); Otte v. Otte, 368 N.W.2d 293, 297 (Minn. App. 1985) (stating that “taxable income is not always a reliable indication of net income”).  In an affidavit presented to the magistrate on remand, appellant’s accountant calculated appellant’s income as $607 per month based on the tax returns.  But appellant had indicated that his monthly income was more than twice that amount in a previous affidavit.  Thus, by appellant’s own admission, the tax returns did not reflect his actual economic situation.

The accountant’s affidavit indicated that the depreciation deductions were legitimate tax deductions.  But even if the deductions were legitimate for tax purposes, they may not be appropriate for determining income for child support purposes.  Minn. Stat. § 518.551, subd. 5b(f).  In addition, the accountant’s affidavit indicated that part of the business depreciation deductions in 1997 were accelerated depreciation deductions.  The magistrate properly disregarded accelerated depreciation deductions in determining appellant’s income.  Id.

Appellant indicated in his affidavit that the Fast Lane Printing equipment being depreciated actually declined in value.  To support this claim he attached a receipt for equipment that was traded to another printing company.  But the receipt was for equipment received from Impact Printing, another business of which appellant was the majority owner.  Appellant provided no evidence establishing that the equipment in the receipt was originally from Fast Lane Printing or that the equipment was the same equipment depreciated on his tax returns.  Appellant’s depreciation calculations merely restated the information from his tax returns.  The general ledgers of expenses and canceled checks were relevant to determine whether appellant’s expenditures were legitimate but not whether the depreciation deductions reflected his actual economic situation.

We conclude it was not an abuse of discretion for the magistrate to find appellant failed to correlate the business depreciation deductions to the actual life of his assets or his actual financial situation and to allow only ten percent of the claimed depreciation.  In addition, because the magistrate’s decision was based on numerous credibility determinations, we defer to these determinations.  Sefkow v. Sefkow, 427 N.W.2d 203, 210 (Minn. 1988). 


            Appellant argues that the magistrate’s decision was an abuse of discretion because the magistrate refused to consider receipts that appellant said were available upon request.  Appellant stated that the magistrate could review the boxes of receipts but that they provided “the same information as the canceled checks” that were already before the court.  Because the receipts were not properly admitted into evidence and contained no new information, the magistrate did not abuse her discretion by not reviewing them.  See Spooner v. Spooner, 410 N.W.2d 412, 413 (Minn. App. 1987) (stating that in a proceeding to determine child support, a party has a duty to supply financial information to the court in a proper fashion and that failure to do so justifies adverse inferences).


KLAPHAKE, Judge (dissenting)

            I respectfully dissent.  I believe that the child support magistrate abused her discretion when she rejected appellant’s claimed depreciation figures and substituted a depreciation deduction that has no basis in the record.

            On remand, the magistrate concluded that appellant had not met his burden of proving that “all of the depreciation claimed by Fast Lane Printing should be considered a legitimate and necessary business deduction for the purpose of calculating his child support obligation.”

            Even assuming, as the magistrate concluded, that appellant failed to sustain his burden of proof that “all of the depreciation” claimed was not necessary for income production, the magistrate has a continuing obligation to make findings that have a reasonable basis in fact and that are not contrary to the evidence.  See Schneider v. Schneider, 473 N.W.2d 329, 331 (Minn. App. 1991); Warwick v. Warwick, 438 N.W.2d 673, 676 (Minn. App. 1989).  Legitimate business expenses, including depreciation deductions that are necessary for the generation of income, must be considered by a fact finder when determining an obligor’s net income for the purposes of child support.  County of Nicollet v. Haakenson, 497 N.W.2d 611, 615 (Minn. App. 1993).

            Here, the magistrate allowed ten percent of the claimed depreciation.  That ten percent figure chosen by the magistrate has no reasonable basis in fact or in the record.  At the very least, the magistrate should have extrapolated from the evidence that she did have, which included appellant’s tax returns, his capital accounts, a five-year depreciation schedule for the printing equipment, and a seven-year schedule for the office furniture.  The practical effect of allowing only ten percent of appellant’s claimed depreciation deductions is to assign a recovery period of 50 years to computer-mechanical printing equipment, or two percent of the value each year (ten percent of twenty percent).  Application of the same reasoning gives the furniture a 70-year useful life.  These figures defy common sense.  Although it was entirely within her discretion to reject appellant’s claimed recovery period, the magistrate had an obligation to accept a depreciation figure in line with the evidence and with common sense.

            I would therefore reverse and remand, once again, for additional findings on depreciation.


[1] The title “child support magistrate” replaces the former title of “administrative law judge.”  See 1999 Minn. Laws ch. 196, art. 2.