Albrecht v. Albrecht, 2002 MT 227

Summary

The Supreme Court of Montana reviewed a child support award in a dissolution proceeding involving a self-employed parent. The court held that income for a self-employed parent should generally be based on a three-year average of net earnings, rejected imputation of income from an unsold home, and addressed deductions for business expenses and taxes. It affirmed in part, reversed in part, and remanded for further proceedings.

Holdings

1. A self-employed parent's income for child-support purposes should be calculated using a three-year average of net earnings, absent clear and convincing evidence that applying the Child Support Guidelines would be unjust or inappropriate.
2. A district court is not required to accept income-tax returns as the parent's income for child-support purposes when substantial evidence supports a more reliable reconstruction of disposable income.
3. Business expenses claimed for tax purposes are not automatically deductible for child-support purposes; only reasonable, ordinary, necessary, and adequately documented expenses required to produce income may be deducted.
4. A court may not include estimated profit from an unsold home as actual or imputed income where the parent has received no economic benefit and none of the Guidelines' conditions for imputing income exists.
5. When income is not averaged, the court may not calculate allowable tax deductions by averaging taxes paid in prior years; the deductions must correspond to the income and years used to determine support income. On remand, only taxes and Social Security payments made during the years used for the income average should be averaged.
6. The Guidelines do not categorically prohibit consideration of business losses in determining income; the prohibition against using a net business loss to offset other income prevents double counting rather than excluding business losses from the income calculation.
7. The District Court did not abuse its discretion by relying on the expert's audit despite Patricia's participation in reviewing Keith's business records because Keith failed to show that the process actually prejudiced the calculation.

Questions Presented

1. Whether the District Court abused its discretion by calculating a self-employed parent's child-support income using only one year's income rather than a three-year average.
2. Whether the District Court could reject the parent's income-tax returns as the best measure of income for child-support purposes.
3. Whether the District Court properly determined which business expenses were deductible in calculating child-support income.
4. Whether the District Court improperly imputed income from the anticipated sale of an unsold home.
5. Whether the District Court properly calculated allowable tax and Social Security deductions.
6. Whether the District Court improperly excluded business losses from the income calculation.
7. Whether the District Court abused its discretion by relying on the opposing party's participation in an audit of the self-employed parent's business records.

Disposition

reversed_and_remanded