may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Itasca County Human Services
and Lori Anderson,
Eugene I. Ferweda,
Filed April 1, 1997
Affirmed as modified
Itasca County District Court
File No. FX-83-430
John J. Muhar, Itasca County Attorney, Susan Gustafson, Assistant County Attorney, Itasca County Courthouse, 123 Northeast Fourth Street, Grand Rapids, MN 55744 (for Respondents)
Considered and decided by Amundson, Presiding Judge, Short, Judge, and Klaphake, Judge.
Respondents Itasca County Human Services and Lori Anderson brought a motion to modify appellant Eugene I. Ferweda's child support obligation. Following a hearing, the Administrative Law Judge (ALJ) issued an order increasing appellant's child support obligation from $324 to $541 per month. Because appellant is entitled to deduct his children's health insurance costs from his gross income before child support is computed, see Minn. Stat. § 518.551, subd. 5(c) (Supp. 1995), and because the trial court's calculation of appellant's net income otherwise has a reasonable basis in fact, we affirm as modified.
The definition of net income provided in the child support guidelines excludes only taxes, social security, and other payroll-type deductions; there is no provision for business deductions or expenses. See Martin v. Martin, 364 N.W.2d 475, 478 (Minn. App. 1985). Nevertheless, a trial court may deduct reasonable business expenses incurred to generate income. See, e.g., Stevens County Soc. Serv. Dep't v. Banken, 403 N.W.2d 693, 697 (Minn. App. 1987).
1. Depreciation Deduction
Appellant's 1995 federal tax return lists total depreciation deductions of $20,482 and no taxable income. The ALJ allowed $6,132 of the claimed depreciation deductions from appellant's gross income and imputed the remaining $14,350 to appellant as income.
Appellant argues that he is entitled to deduct all or a larger portion of the $20,482 because it relates to a legitimate business enterprise, rather than a tax shelter or paper loss. Partial disallowance of an obligor's depreciation deduction is proper, however, when some of the claimed amount represents accelerated depreciation. See Freking v. Freking, 479 N.W.2d 736, 740 (Minn. App. 1992). In this case, almost all of the claimed depreciation is accelerated: appellant testified that he purchased a Cat Line 88 Loader for $22,000 in 1995 and took the maximum amount of $17,500 as a section 179 deduction in 1995. Given this, the ALJ's disallowance of most of appellant's claimed depreciation deduction was proper. Cf. id. (upholding trial court's disallowance of accelerated portion of depreciation deduction, based on party's testimony that actual depreciation was about half of accelerated depreciation).
2. Deduction for Motor Vehicle Use
Appellant does not own a personal vehicle and he uses his business's semi-tractor for personal use. While he admitted that he could have estimated his mileage for personal use, he did not provide that evidence and declined to provide any estimates. The ALJ imputed the sum of $3,750 as income to appellant for personal vehicle use, or 12,000 miles times $.31 per mile. Absent any evidence in the record to the contrary, 12,000 miles per year is a reasonable figure for personal use of an automobile. Cf. Taflin v. Taflin, 366 N.W.2d 315, 319 (Minn. App. 1985) (appellate court will not speculate and appellant will not be heard to complain when appellant failed to provide reviewable record).
3. Home-related Business Expenses
The ALJ imputed to appellant as income $559 in utilities, $2,541 in mortgage interest, and $2,196 in other expenses, figures taken from Form 8829 of appellant's 1995 tax return. Appellant insists that Form 8829 shows that because 50 percent of his house is regularly and exclusively used for business, any overlap has been addressed and 50 percent of these household expenses should be deducted as legitimate business expenses.
Use of a home as a storage or work area is not an actual out-of-pocket expense. Because none of the imputed items represents direct expenses to the business, allowing the deduction would permit appellant to use his business to pay his personal expenses, thus reducing the income available for child support. Therefore, the ALJ properly included these figures in its calculation of appellant's income.
4. Other Business Expenses
Appellant argues that the ALJ failed to allow deductions for advertising, legal fees, rent/lease of equipment, business insurance, equipment repairs, taxes and license fees, and interest on business loans as reflected on appellant's 1995 tax return. Respondents correctly note, however, that because the ALJ did not specifically list these expenses as disallowed or imputed items, they were not included in appellant's income.
5. Obligor's Ability to Pay
Appellant insists that the ALJ improperly rejected his claim that he is unable to pay a number of business obligations. Under certain circumstances, a trial court may consider an obligor's level of business or personal debt. See Minn. Stat. § 518.551, subd. 5(c); Dean v. Pelton, 437 N.W.2d 762, 764 (Minn. App. 1989) (support order reversed and remanded when trial court made no finding on whether obligor's consumer debt was reasonably incurred for necessary support of child or for necessary generation of income); Stevens, 403 N.W.2d at 697. By testifying that he is currently repaying at least one of the debts, the $7,000 owed to the Minnesota Department of Jobs and Training for late quarterly payments, appellant has shown that he actually has the ability to pay that debt. And at least two of the other debts, the $12,000 for concrete planks and $3,500 for sand, were costs incurred in 1996 and will presumably be claimed as expenses on appellant's 1996 tax return. Here, the ALJ calculated appellant's current income based on his 1995 tax return. Finally, the record shows that appellant has substantial assets, including numerous pieces of real property that he purchased before the children were born. While appellant may choose not to pay his debts by divesting himself of these assets, the fact remains that he has the ability to pay child support.
6. Findings on Appellant's Gross Income
The ALJ appears to have made clerical errors in findings #9 and #10. Nevertheless, the erroneous figures were not used by the ALJ in computing appellant's final child support obligation.
We also note that respondents claim that any mistakes made by the ALJ are further minimized by the fact that the ALJ allowed a tax deduction of $167 per month for income taxes, despite the fact that appellant pays no taxes, thus reducing the net monthly income for child support purposes to $1,803 per month. However, appellant pays no taxes because his taxable income is zero; if, as the ALJ imputed, his gross income were $23,653 or $1,970 per month, he would pay taxes of $167 per month. Thus, the allowance of a deduction for taxes was appropriate, even though appellant actually pays no taxes.
7. Cost of Children's Health Insurance
The ALJ ordered appellant to pay 50 percent of the children's medical and dental insurance premiums, a sum of $81 per month. Appellant does not contest this obligation. He merely argues he is entitled to take this expense as a deduction from his gross income before child support is computed. See Minn. Stat. § 518.551, subd. 5(c).
Respondents argue that while this cost is ordinarily allowed, the record does not indicate that appellant previously paid, voluntarily or by order, any insurance premiums. However, because appellant is now ordered to do so, he is entitled to deduct the corresponding cost from his imputed income before application of the child support guidelines. We therefore reduce appellant's gross monthly income from $1,970 to $1,889 and his guidelines support to $518 per month. See Minn. Stat. § 518.551, subd. 5(b) (Supp. 1995).
Affirmed as modified.