Earnings From Assets Can Be Imputed As Income

A California Appellate court recently affirmed a trial court decision to impute a father’s rental income (based on the fair market rental value and the net equity in his properties), and distributions from his pension, when calculating his income to determine child support payments. In re Marriage of Dacumos, 76 Cal.App.4th 150, is one of the first reported cases to consider rental income and earnings from assets in calculating child support.

The father argued that the California child support Guidelines does not allow the court to impute income based on assets, as opposed to allowing the court to impute income based on earnings from employment. Family Code Section 4058(b) allows the court to “impute income based on earning capacity of a parent in lieu of the parent’s actual income, consistent with the best interests of the child.” Therefore, the issue before the court was whether the definition of earning capacity is limited to earnings from work or could be extended to include earnings from assets. The court found no authority that excluded the ability to find an “earning capacity based on assets” and held that such a limitation would not be appropriate in determining child support.

The court stated that the child support guideline defines income broadly and means “income from whatever source derived” Family Code section 4058(a). Earning capacity is the ability to earn from employment, and is also wages or dividends earned as compensation for labor or the use of capital. The court held that “earn” means to “bring in by way of return.” All assets can be considered, including stock portfolios and pensions in calculating child support.

The court reasoned that its decision was based on the legislative intent to consider all sources of imputed income. Family Code section 4053 provides that the states top priority is the interests of the child in determining child support, and a parent’s first and principal obligation is to support the child according to the parent’s circumstances and station in life. Child support orders must ensure that the child receives sufficient support.