The parties’ 2013 divorce stipulation of settlement provided that child support for their two children would be adjusted annually. Beginning May 1, 2014:

“the parties shall set by April 30, a payment schedule of the Parent’s total obligation for base child support ‘made pursuant to the formula set forth below and income caps for the fiscal year beginning May 1 and continuing through April 30th of the following year. This schedule shall be based on the actual income’ for the previous calendar year. The Father shall then pay this base child support’ amount to the Mother in monthly installments.” [emphasis added]

For the purpose of computing base child support, the stipulation defined “income” as “the gross earned income solely attributable to a party and as listed on the Form 1040 United States Individual Income Tax Return filed by the parties, less (1) FICA taxes actually paid; (2) Medicare taxes actually paid; less (3) New York City or Yonkers income or earnings taxes actually paid.”

In 2016, the mother received a salary of $86,801 for her work as a veterinarian. She also received $39,631 in “[o]rdinary dividends” and $245,629 in “[r]ental real estate, royalties, partnerships, S corporations, trusts, etc.”  In 2017, the father calculated his base child support obligation using the mother’s adjusted gross income of $369,092. The mother disputed the calculation, contending that the income derived from her ownership interest in the LLCs was not “earned” income and therefore did not fall under the stipulation’s definition of “income.”


Continue Reading Drafting Income Calculations in Divorce Settlement Agreements

If divorcing parties will file their income tax returns jointly, how do you allocate each party’s fair share of taxes? How do you draft an unambiguous provision that spells that out?

Such were among the questions raised by the July 18, 2018 decision of the Appellate Division, Second Department, in Cohen v. Cohen.

There, in October 2013, the parties entered into a settlement stipulation which was incorporated into their 2014 judgment of divorce. Article XIII, paragraph “1,” of the stipulation addressed the parties’ respective liability for their jointly-filed 2013 tax returns: any taxes due were to be “paid by the parties in proportion to their respective income.”

In January 2015, the husband moved to enforce the stipulation by seeking a determination of the wife’s proportionate liability for the parties’ jointly filed 2013 taxes and to direct the wife to pay that sum. In the order appealed from, Supreme Court Nassau County Justice Stacy D. Bennett granted the husband’s motion and determined that the wife was responsible for 11.3% of the parties’ tax liability for 2013, giving the parties credit for any payments already made.

On appeal, the Second Department held that the relevant provision was ambiguous as to how to calculate the parties’ respective income. The appellate court noted that whether an agreement is ambiguous is a question of law for the courts. Moreover, the Second Department held that the parties’ submissions to Justice Bennett were insufficient to resolve the ambiguity.


Continue Reading Drafting an Income Tax Allocation Provision for Returns Filed During the Divorce

K-1-cropped-wideIn its May 11, 2016 decision in Eifert v. Eifert, the Appellate Division, Second Department, appears to discuss the interrelationship between the calculation of child support and the “income” shown on a partnership K-1 tax form. In truth, it does not.

In their divorce settlement agreement, the parties agreed that the father would pay child support consisting of two components. The first component required the father to pay $4,400 per month. As summarized by the Second Department in its opinion, the second component required the father to pay “25% of the income he derived from his ownership of stock in Eifert French & Co.”

Years later, the mother sought to recover child support arrears in the sum of $63,283.25 arising from the second component of the father’s child support obligation. The mother arrived at this sum by performing calculations based on K-1 statements received by the father from Eifert French & Co.

In opposition, the father contended that the second component of his child support obligation should be calculated based only on distribution checks he received from Eifert French & Co, rather than the income reflected on his K-1 statements. Based on that limitation, the father calculated that the correct amount of arrears he owed for this second component of his child support obligation was $21,137.49.

Supreme Court, Westchester County Justice Colleen D. Duffy agreed with the father and found arrears to be $21,137.49. The mother appealed.


Continue Reading K-1 Income and the Calculation of Child Support

Calulator on 100s 6 redThe Third Department gave us insight into its analysis of child support awards in two recent decisions in which it increased those awards.

What to do when the parents’ combined income exceeds the Child Support Standards Act (C.S.S.A.) cap, now $141,000, appears to be, at the trial level, often county-, if not judge-dependent. Use by the lower courts around the state upon these decisions will vary, perhaps greatly.

In Petersen v. Petersen, decided February 26, 2015, the Third Department increased the divorce-action award of Albany Supreme Court Justice Eugene P. Devine (now, himself, sitting on the Third Department).

The parties had one child, born in 1999. After the parties separated and lived apart for several years, the husband commenced this divorce action based on the parties’ separation agreement. After finding that the child support provision of the separation agreement did not comply with the Child Support Standards Act, a trial was held to address, among other things, child support.

Justice Devine granted the divorce, incorporated the parties’ separation agreement except for the weekly child support provision, and ordered the husband to pay child support in the amount of $414 per week, declining to order child support on any income above the C.S.S.A. statutory cap, then $136,000 (and now $141,000). The wife appealed.


Continue Reading Increasing Child Support On Appeal: Awards On Income Over The Cap

The IRS is enhancing processes to address the discrepancies between the deductions taken by alimony payers and the income reported by alimony recipients. This is in response to a report of the Treasury Inspector General for Tax Administration issued March 31, 2014 (TIGTA #2014-40-022).

Alimony is a payment to or for the benefit

Three Second Department decisions within eight days this month reveal the discretion of the trial court when income is not apparent (no pun intended) on a determination of a parent’s basic child support obligation.

In Fein v. Fein, the Appellate Division, Second Department, affirmed the determination of Westchester County Supreme Court Justice Bruce E.

Whether the payment of union dues is to be deducted for the purpose of determining C.S.S.A. income is to be decided on a case by case basis. Rejecting the deduction in S.H. v. S.H., a June 17, 2013 opinion withdrawn from publication, Supreme Court Clinton County Acting Justice Timothy J. Lawliss held that the father failed to meet his burden to show that those dues did not reduce his personal expenses.

In this divorce action, the father was employed at a union plant and paid monthly union dues to the United Steel Workers.

This opinion concerned only whether or not union dues paid by the father should be deducted from the father’s gross income prior to calculating the father’s income for child support purposes.

Domestic Relations Law §240(1-b) sets forth the methodology the Court must follow to determine the non-custodial parent’s child support obligation. Pursuant to D.R.L. §240(1-b)(b)(5), income for support purposes shall mean, but shall not be limited to, the sum of the amounts determined by the application of clauses (i), (ii), (iii), (iv), (v) and (vi) of that sub-paragraph, reduced by the amount determined by the application of clause (vii) of that sub-paragraph.

Union dues are not a specifically allowed deduction under D.R.L. §240(1-b)(b)(5)(vii), nor does the subsection contain a catch all “other” category leaving deductibility to the Court’s discretion. The question before the Court, then, was whether or not union dues qualify as a deduction under the only possible category: “unreimbursed employee business expenses except to the extent said expenses reduce personal expenditures” (subsection [vii][A]).


Continue Reading Union Dues Do Not, Here, Reduce Income For C.S.S.A. Purposes

Have you looked at an IRS Form 1040 (pdf) lately?

Looking at the 1040 is supposed to begin the C.S.S.A. calculation for determining child support.  For actions commenced on or after October 13, 2010, it is also the first step when determining temporary maintenance. When computing child support under either the Family Court Act or the Domestic Relations Law, the calculation starts with a determination of parental income. F.C.A. §413(c)(1) or D.R.L. §240(1-b)(c)(1). Determining parental income under either F.C.A. §413(b)(5)(i) or D.R.L. §240(1-b)(b)(5)(i) begins by looking at the:

gross (total) income as should have been or should be reported in the most recent federal income tax return.

The recent amendment to D.R.L. §237(B) adopts the C.S.S.A. definition to begin the calculation of a temporary support award under D.R.L. §237(B)(5-a)(b)(4):

“Income” shall mean:

(a)  income as defined in the child support standards act . . . .

There actually is a line on the federal income tax return which reports the “total income.”  It’s line 22: Total Income.jpg

Although “gross” income is a term in the statute, but not the 1040, its context is made clear when reference is made to the calculation of Adjusted Gross Income which begins on line 23.


Continue Reading "Gross (Total) Income" for the Purposes of Child Support and Temporary Maintenance