This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2002).
STATE OF MINNESOTA
IN COURT OF APPEALS
In re: Leyla Tarlan, petitioner,
Filed July 22, 2003
Affirmed in part and remanded in part
Beltrami County District Court
File No. F998935
Kay Nord Hunt, Marc A. Johannsen, Christopher R. Grote, Lommen, Nelson, Cole & Stageberg, P.A., 1800 IDS Center, 80 South 8th Street, Minneapolis, MN 55402 (for appellant)
James D. Hovey, Pearson Christenson, P.L.L.P., 24 North 4th Street, P.O. Box 5758, Grand Forks, ND 58206-5758 (for respondent)
Considered and decided by Shumaker, Presiding Judge, Anderson, Judge, and Halbrooks, Judge.
Appellant contends that the district court erred in ordering her to pay child support at the guideline cap set forth in Minn. Stat. § 518.551 (2002) and abused its discretion by (1) giving retroactive effect to the child-support order; (2) awarding respondent the federal and state dependency deductions for the parties’ three minor children; and (3) denying counseling for the minor children. Because we conclude that the district court did not abuse its discretion by denying counseling and by awarding the tax exemptions to respondent, the custodial parent, we affirm on those issues. But because the district court made insufficient findings regarding the child-support calculation and basis for the retroactive award of child support, we remand those issues to the district court.
Appellant Leyla Tarlan and respondent Alan Sorenson were married for 18 years and have three minor children. The district court granted the parties’ dissolution of marriage on February 2, 1999, but reserved the issues of custody, visitation, child support, and property distribution. On April 11, 2000, the court awarded primary physical custody and sole legal custody of the children to respondent.
At a June 27, 2002 hearing on the issue of child support, the court heard testimony from appellant concerning her income and ability to pay child support and her claimed inability to talk with the children at their school programs. Prior to the dissolution, both parties owned a closely held corporation known as Bookcraft, Inc. The corporation did business as Beaver Bookstore on the Bemidji State University campus. After the dissolution, respondent sold his interest in the corporation to appellant.
In fiscal year 2000, Bookcraft, Inc. reported revenues in excess of $600,000 on its corporate tax return. But appellant testified that the revenues subsequently decreased significantly when the Beaver Bookstore, which had been the only campus bookstore, lost its contract with the university and was forced to move. Although appellant relocated the bookstore in an off-campus location, it was forced to compete with a Barnes and Noble bookstore that took over the on-campus site. In addition to the bookstore, appellant also opened an auto-sales business, Auto Sales of Bemidji, in 2000.
Appellant testified that on May 28, 2002, Bookcraft, Inc. stopped selling books and she sold the assets of the bookstore for $11,500 plus the inventory. At that time, appellant believed that the sale of Auto Sales of Bemidji would occur in July 2002. She testified that both sales would result in losses but that Bookcraft, Inc. would continue to own the building that formerly housed both businesses and would begin to lease the space.
Appellant also testified that Bookcraft borrowed a total of $607,000 from her mother, Stella Tarlan. None of the money was repaid to Tarlan before her death in 2001. Appellant testified that she is the primary heir of Tarlan’s estate and that, once the estate’s property is distributed, she will essentially be paying herself if she repays the loans made by Tarlan. Tarlan’s assets at the time of her death totaled approximately one-half million dollars, not including the loan that appellant received.
Appellant did not file personal tax returns in 2000 and 2001, because she did not earn enough money to require filing. At the time of the hearing, appellant was employed but had not drawn a salary since the time that both appellant and respondent operated the business. Appellant testified that she had difficulty working because she could not concentrate due to harassment by respondent and because she often stays at the Women’s Shelter and travels to North Dakota to see her children. Appellant has been living off assets in her mother’s trust account. Appellant testified that her only available assets are those that were divided at the dissolution and the house in which she resides.
The district court made factual findings including that (1) appellant stated that she has insufficient income to pay child support, but on one occasion she submitted a motion offering to pay monthly child support in the amount of $4,166.66 if certain conditions were met; (2) appellant offered to deposit $35,000 with the court in order to resolve an issue regarding the parties’ homestead while, at the same time, obtaining a loan in excess of $600,000, which had not been repaid; and (3) appellant has monthly expenses of $2,819.58, which do not include car or house payments.
The court concluded, in part, that
[b]ased upon her financial records and her lifestyle, [appellant] has at least the ability to pay support based upon the income guideline cap set forth at Minnesota Statute § 518.551.
The court further concluded that appellant continued to support herself in a comfortable manner, consistent with an individual who has access to substantial resources.
The court ordered that “[r]etroactive to 8-01-01 [appellant] shall pay as child support the amount of $2198 per month.” Beginning on July 1, 2002, the court ordered appellant to pay $2,363 per month in child support and held that respondent would receive the federal and state tax dependency deductions for the children. The court denied all other pending motions. This appeal follows.
1. Did the district court err in its calculation of appellant’s net income for child support purposes?
Relying on Stangel v. Stangel, 366 N.W.2d 747 (Minn. App. 1995), appellant argues that, because loans or gifts cannot be included in a calculation of net income, the district court erred as a matter of law in setting appellant’s monthly net income at the guideline cap established by Minn. Stat. § 518.551, subd. 5(b), (k) (2002). Appellant also contends that the district court erred by failing to make findings as to the amount of her monthly income.
This court will affirm the district court’s findings of net income for the purposes of child support if those findings have a reasonable basis in fact and are not clearly erroneous. State ex rel. Rimolde v. Tinker, 601 N.W.2d 468, 470 (Minn. App. 1999). The district court abuses its discretion when it sets child support in a manner that is against logic and the facts on the record. Rutten v. Rutten, 347 N.W.2d 47, 50 (Minn. 1984). But “[w]hether a source of funds is income for determining a person’s support obligation is a question of law.” Sherburne County Soc. Servs. v. Riedle, 481 N.W.2d 111, 112 (Minn. App. 1992).
In setting child support, the district court must make written findings that establish the obligor’s income and any other significant evidence used as a basis for making the presumptive guideline calculations or reasons for deviation. Minn. Stat. § 518.551, subd. 5(i) (2002). Child-support guidelines “are a rebuttable presumption and shall be used in all cases when establishing or modifying child support.” Id. “The court shall derive a specific dollar amount for child support by multiplying the obligor’s net income by the percentage indicated by the * * * guidelines.” Minn. Stat. § 518.551, subd. 5(b). Minn. Stat. § 518.54, subd. 6 (2002), defines income as “any form of periodic payment to an individual,” and provides a non-exclusive list of payments that fall within the definition of income.
Minn. Stat. § 518.551, subd. 5(c) (2002), sets forth factors other than income that the district court “shall take into consideration” in setting child support. Minn. Stat. § 518.551, subd. 5(c) (2002). Those factors include, among other things, “all earnings, income, and resources of the parents, including real and personal property,” the standard of living the child would have enjoyed had the dissolution not occurred, the benefit the parent receiving the income-tax dependency exemption receives, and any debt of the parents. Id.
As correctly argued by appellant, in Stangel, this court concluded that loans from family and friends should not be considered income for purposes of calculating child support because the loans “were not periodic, were not ‘payments,’ and were not the type of income which could or should provide a dependable source of child support” under Minn. Stat. § 518.54, subd. 6 (1984). 366 N.W.2d at 749; but see Kuronen v. Kuronen, 499 N.W.2d 51, 53 (Minn. App. 1993) (concluding that whether or not the assets are periodic payments is inconsequential because, by statute, the court is required to take into account personal property as well as income in determining an appropriate modification), review denied (Minn. June 22, 1993). But the fact that loans have not been considered income is not decisive in this case. Here, the district court relied primarily on its statutory duty to consider appellant’s resources, other than income, in calculating child support.
In considering resources and whether to include assets in a party’s income for the purposes of determining child support, this court has looked at whether the payment of the asset is made directly to the party, whether the party has control over the expenditure of the funds, and whether the asset is reliable. See In re Ramsey County ex rel. Pierce County, Wisconsin v. Carey, 645 N.W.2d 747, 750-52 (Minn. App. 2002) (concluding that because there were no periodic payments made to Carey and Carey had no control over the expenditure of the funds, those resources could not be applied to a child-support determination); Barnier v. Wells, 476 N.W.2d 795, 797 (Minn. App. 1991) (holding that a gift regularly received from a dependable source may be considered for the purpose of determining a child-support payment, but “an expected gift is not always a resource subject to child support”).
But in a decision determining whether the liquidation of assets to meet a monthly child-support obligation was proper, we stated that
an obligor’s capital assets are not the paramount consideration in determining a child support obligation, but are instead considered within the confines of established principles governing all support decisions.
Quaid v. Quaid, 403 N.W.2d 904, 907 (Minn. App. 1987), review denied (Minn. June 30, 1987).
Here, in considering appellant’s ability to pay child support, the district court’s findings seem to have focused on the apparent inconsistency that (1) although appellant stated that she lacks the income to pay child support, she brought a conditional motion that would have obligated her to pay $4,166.66 per month in child support; (2) she offered to deposit $35,000 with the court to resolve an issue regarding the homestead; (3) she had received a $600,000 loan from her mother’s estate to run her business and had not repaid it; and (4) she had monthly living expenses of $2,819.58 that did not include house or car payments. After making general findings indicating appellant’s apparent resources, the court concluded as a matter of law that appellant “has substantial resources available to her to meet her needs as well as support her children” and ordered income guideline cap child-support payments retroactive to August 1, 2001. But “[i]t is error to perpetuate the use of appellant’s capital assets without findings on the total assets of each party.” Id. at 908.
Because the district court’s findings are not sufficient for appellate review, we remand this issue for additional findings.
2. Did the district court abuse its discretion in giving retroactive effect to the order to pay child support?
Appellant argues that the district court abused its discretion in giving the child-support order retroactive effect.
Where support is reserved in the original decree, a subsequent establishment of a support obligation is treated as an initial support order rather than a modification of a prior support order.
Davis v. Davis, 631 N.W.2d 822, 827 (Minn. App. 2001) (quotations omitted). In Davis, the dissolution order reserved the matter of child support and the court observed in the decree that child support would be established once the mother’s salary reached $600. Id. at 824. In its order establishing child support, the court ordered the child-support payments to be retroactive to a date three and one-half years before the father’s motion to establish child support, the date on which the court concluded that the mother’s salary reached $600. Id. at 825. On appeal in Davis, we observed that “[g]enerally, where no prior order to pay child support exists, it is improper to give a support order retroactive effect.” Id. at 827 (citation omitted). We then closely examined the language of the decree and reasoned that because the language of the original decree established child support once mother’s salary reached $600 but did not require mother to begin to pay support once her salary reached $600, the district court abused its discretion in making the obligation retroactive. Id. at 827; cf. Martin v. Martin, 401 N.W.2d 107, 111 (Minn. App. 1987) (concluding that court did not incorrectly order mother to pay child support from date mother became a full-time employee because obligation not considered retroactive where initial court order set obligation to begin only after mother returned to full-time employment).
Here, in the dissolution judgment filed February 2, 1999, the court reserved the issue of child support “to the court after trial.” In its April 2000 order, the district court made its custody award and again reserved the child-support issue. Respondent brought a motion seeking an award of child support in July 2001. In June 2002, an evidentiary hearing took place on the issue of appellant’s income for the purposes of child support. The district court then set the child support retroactive to August 1, 2001. See Davis, 631 N.W.2d at 827 (treating subsequent establishment of child support as initial support order and not modification order). Respondent contends that this order of retroactive child support is distinguishable from Davis because the court-ordered support commenced the month after he brought his motion, rather than before. But respondent offers no authority in support of his argument.
Respondent also argues by analogy that Minnesota courts allow a modification of support to be retroactive from the date of notice of the motion for modification. See Minn. Stat. § 518.64, subd. 2(d) (2002) (allowing retroactive modification). But the Davis court addressed this issue, holding that because the action was to establish the mother’s initial child-support obligation, the modification of the child-support statute did not apply and whether the district court abused its discretion in ordering retroactive support is dependent upon the statutory basis for establishing support. Davis, 631 N.W.2d at 826. Because this is an initial order for child support, there is no statutory basis for ordering retroactive child support.
We must next examine the language of the child-support decrees to determine whether the district court acted within its discretion to order retroactive support. See id. at 827 (closely examining the language of the decree to determine whether or not the district court abused its discretion in making the obligation retroactive). Here, the language of the orders reserving child support do not address the question of when the obligation should begin. Because the court’s orders do not provide sufficient language for us to review the court’s intent, we remand for the district court to address (1) whether support was to be initiated as of a particular date; (2) if so, when; and (3) if not, to exercise its discretion to determine the date as of which the children’s best interests and the parties’ financial circumstances require the obligation to be effective. We note that no party made or is making a claim that support should be effective as of a date before the date respondent sought support. Whether to reopen the record on this point shall be discretionary with the district court.
3. Did the district court abuse its discretion by awarding respondent federal and state dependency deductions for the parties’ three minor children?
Appellant contends that the district court abused its discretion in ordering appellant to pay child support but granting respondent the federal and state dependency deductions for the parties’ minor children. See Valento v. Valento, 385 N.W.2d 860, 863 (Minn. App. 1986), review denied (Minn. June 30, 1986) (noting that courts review allocation of tax dependency deduction on abuse of discretion standard). The district court has discretion in awarding tax exemptions. Crosby v. Crosby, 587 N.W.2d 292, 298 (Minn. App. 1998), review denied (Minn. Feb. 18, 1999). In its order, the district court concluded that respondent was entitled to the federal and state tax dependency deductions for the minor children but made no additional findings.
The Internal Revenue Code provides that, upon dissolution of a marriage, the parent granted primary custody of a minor child may claim the child as a dependent. 26 U.S.C. § 152(e)(1) (2000). Under 26 U.S.C. § 152(a) (2000), a dependent is one who receives over half of his or her support from the taxpayer. Unless an exception applies, where a child is in the custody of one or both parents for over half the year,
such child shall be treated * * * as receiving over half of his support * * * from the parent having custody for a greater portion of the calendar year.
26 U.S.C. § 152(e)(1); see Gerardy v. Gerardy, 406 N.W.2d 10, 14 (Minn. App. 1987) (holding that the court erred by ignoring the language of the rule under the federal tax code). Although the custodial parent is presumptively awarded the dependency exemptions,
[t]he code does not preclude state district courts from allocating tax dependency exemptions to a non-custodial parent incident to the determination of child support and physical custody.
Rogers v. Rogers, 622 N.W.2d 813, 823 (Minn. 2001) (citations omitted). In Rogers, the supreme court examined the district court’s findings regarding consideration of the relative resources of the parties and who would benefit from the exemption. Id. The supreme court concluded that sufficient evidence supported the district court’s conclusion. Id. Here, the district court concluded that respondent was entitled to the federal and state dependency deductions, but made no findings regarding the relative resources of the parties, the needs of the children, and which party would benefit. See Minn. Stat. § 518.551, subd. 5(c) (factors the court should consider, including benefit to parent receiving tax exemption and resources). But this case is distinguishable from Rogers. Here, the court is awarding the deductions according to federal tax law. Because the court’s order was consistent with the Internal Revenue Code and because the court had broad discretion in awarding tax exemptions, we conclude that the court did not abuse its discretion.
4. Did the district court abuse its discretion in denying counseling for the minor children?
In September 2001, appellant sought an order requiring respondent to enroll the children in counseling. The district court denied the motion. In its April 2000 order awarding custody to respondent, the court found that “[t]he children are developing normally and are in good health.” The court received respondent’s affidavit stating that he had obtained counseling for the children until the counselor determined that therapy was no longer required. Although the court chose not to ask respondent for documentation of the therapy or for documentation from the children’s school, we conclude that, on this record, the court did not abuse its discretion in denying appellant’s motion. Therefore, we affirm this issue.
Affirmed in part and remanded in part.
 Appellant contends that it is paradoxical for the court to give respondent the tax deduction on the ground that appellant has no income and files no tax returns while the court also finds that appellant has income to pay child support. Although appellant may have no income for tax purposes, the income and resources available to appellant for her child-support obligation may be separate.
 Appellant had also claimed that the district court erred by refusing to enforce appellant’s access to the children, but this issue is no longer before us due to a later order by the district court.