This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).







Shawn Dianne Labarre,

n/k/a Shawn Dianne Labarre-Parker,





Thomas Charles Kane,




Filed January 3, 2006

Reversed and remanded
Klaphake, Judge


Ramsey County District Court

File No. F1-98-50226



Erik F. Hansen, Shari A. Jacobus, Hellmuth & Johnson, P.L.L.C., 10400 Viking Drive, Suite 500, Eden Prairie, MN  55344 (for respondent)


Michael C. Black, 265 West 7th Street, Suite 201, St. Paul, MN  55102 (for appellant)


            Considered and decided by Halbrooks, Presiding Judge, Klaphake, Judge, and Crippen, Judge.*

U N P U B L I S H E D   O P I N I O N


            Appellant Thomas Charles Kane challenges the district court’s review of a child support magistrate’s decision to grant a motion by respondent Shawn Dianne Labarre, n/k/a Shawn Dianne Labarre-Parker, to increase appellant’s child support obligation.  The district court affirmed the magistrate’s decision to increase the child support obligation to $1,469, based on the determination that appellant had experienced a substantial increase in income.  Because the district court erred by (1) rejecting over $14,000 in business deductions claimed by appellant, without allowing appellant an opportunity to prove the legitimacy of those deductions; (2) failing to properly consider appellant’s child support obligation for a subsequent child; and (3) reducing appellant’s estimated gross income by his self-employment taxes paid, rather than considering the standard tax tables, we reverse and remand.


            A district court’s affirmance of a magistrate’s order is reviewed for an abuse of discretion.  Eisenschenk v. Eisenschenk, 668 N.W.2d 235, 240 (Minn. App. 2003), review denied (Minn. Nov. 25, 2003); cf. Minn. R. Gen. Pract. 377.09, subd. 1(b) (noting challenged portions of magistrate’s ruling are reviewed “independent[ly]”).  Our standard of review is the same as it would be if the magistrate’s decision had been made by the district court.  See Ludwigson v. Ludwigson, 642 N.W.2d 441, 445-46 (Minn. App. 2002).

            A district court has broad discretion in determining whether to modify child support orders.  Gully v. Gully, 599 N.W.2d 814, 820 (Minn. 1999).  We will not reverse the district court’s determination of an obligor’s net income for child support purposes unless its clearly erroneous.  Ludwigson, 642 N.W.2d at 446.

            Initially, we note that a district court has broad discretion to determine the income of a self-employed obligor because “the opportunity for a self-employed person to support himself yet report a negligible net income is too well known to require exposition.”  Ferguson v. Ferguson, 357 N.W.2d 104, 108 (Minn. App. 1984).  The district court may consider cash flow, particularly when the calculation of an obligor’s income becomes a “difficult task.”  Schelmeske v. Veit, 390 N.W.2d 309, 311 (Minn. App. 1986).  The court may also consider an obligor’s lifestyle, when it is inconsistent with his reported income and personal expenses.  See Johnson v. Fritz, 406 N.W.2d 614, 615-16 (Minn. App. 1987) (stating that court can take lifestyle of sole business owner into account if figures offered do not comport with evidence that person owned new electronic equipment, airplane, boat, and numerous vehicles).

            Here, the district court did not abuse its discretion by concluding that appellant’s reported income was inaccurate, based on his lifestyle and on the cash flow of his bank accounts.  Nevertheless, because the district court made several clear errors in its calculation of his net income, reversal is required.  On remand, appellant should be given an opportunity to present additional evidence and to offer revised calculations of his gross and net income for child support purposes.

            Business Deductions

            Appellant first argues that the district court improperly added over $14,000 in business deductions back into his income.  The district court found that because appellant’s “Schedule C includes many of the same expenses that were included in the Form 1120S,” those items would be “added back” into the obligor’s income.  While appellant agrees that Form 1120S includes some deductions for business expenses that had the same label as deductions included on his Schedule C, he insists that the district court erred by assuming that the deductions covered the same expenses or were related to expenses paid by his business and were not incurred to generate his personal income.

            Respondent counters that the burden was on appellant and that appellant failed to meet his burden of proving that his claimed deductions were legitimate and that he was not receiving a double deduction for these expenses.  While appellant has the burden to establish the appropriateness of claimed deductions, that burden arises only when the expense is first challenged.  See Minn. Stat. § 518.551, subd. 5b(f) (2004) (stating that “person seeking to deduct an expense, including depreciation, has the burden of proving, if challenged, that the expense is ordinary and necessary”) (emphasis added).  Here, the magistrate first questioned these deductions on her own and appellant was not given a meaningful opportunity to refute the assumptions made by the magistrate.  We therefore agree that appellant should be given an opportunity to present additional evidence or testimony to show that these deductions differ.

Support for Subsequent Child

            Appellant argues that the district court failed to properly consider the amount that he pays in support for a subsequent child.  Minn. Stat. § 518.64, subd. 2 (2004) provides that the needs of a subsequent child “shall” be considered on a motion to modify a prior support obligation.  Minn. Stat. § 518.551, subd. 5f (2004) outlines the circumstances in which a court shall consider the obligor’s support payments for a subsequent child, and generally directs the court to consider the obligor’s ability to pay and the needs of the obligor’s children.  See In re Paternity of J.M.V., 656 N.W.2d 558, 564 (Minn. App. 2003), review denied (Minn. Apr. 29, 2003).

            Here, the district court considered the support obligation that appellant pays for a subsequent child by deducting the monthly amount that he pays from its estimate of his gross income.  As appellant argues, however, the court’s analysis is erroneous because it (1) improperly used the subsequent support payment as a deduction; (2) used the incorrect figure (one month’s payment, rather than one year’s worth); (3) failed to make findings on both children’s needs; (4) failed to determine appellant’s total ability to pay; and (5) failed to allocate the available resources between the two children.

            Respondent insists that appellant waived the right to challenge the failure to properly consider the support he pays for a subsequent child because he failed to specifically identify it as an issue in his motion for review of the magistrate’s decision.  Appellant acknowledges that he did not specifically raise this issue, but he asserts that we should nevertheless consider it given the clear error made by the magistrate and affirmed by the district court, and the magistrate’s failure to follow the strict statutory requirements regarding the needs of subsequent children.  We agree.  Had the district court reviewed the magistrate’s decision more thoroughly and directly addressed appellant’s challenges to the magistrate’s decision, it undoubtedly would have noticed the error made by the magistrate here.

            Failure to Apply Standard Deductions

            Appellant finally argues that the magistrate erred by failing to deduct the required federal and state income taxes from its estimate of his gross income to reach his net income for purposes of application of the child support guidelines.  See Minn. Stat. § 518.551, subd. 5(b) (2004) (defining net income as total monthly income less certain deductions, including federal and state income taxes).  Here, after calculating appellant’s gross income to be $80,490.30, the magistrate deducted only $4,600 in self-employment taxes, a figure from line 55 of his 2003 individual federal income tax return.  The magistrate deducted nothing for state and federal income taxes.  As appellant notes, even in cases involving the estimation of income for support purposes, this court generally allows a deduction for state and federal income taxes.  See, e.g., Marx v. Marx, 409 N.W.2d 526, 529 (Minn. App. 1987) (affirming district court’s estimation of obligor’s income “less 25 percent for taxes and other deductions); Looyen v. Martinson, 390 N.W.2d 465, 468 (Minn. App. 1986) (affirming district court’s calculation of farmer’s net income after subtraction of federal and state taxes); Larson v. Larson, 370 N.W.2d 40, 42-43 (Minn. App. 1985) (holding that district court could disregard tax shelter effect and calculate income based on obligor’s regular earnings, after reducing his wages for standard tax liabilities).  The district court here failed to explain its rejection of the standard deductions for state and federal taxes.

            We therefore reverse and remand for a recalculation of appellant’s income for child support purposes.

            Reversed and remanded.

* Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.