It has been a long time since a case has been critical of the amount of support calculated by the trial court. Marriage of Schulze was decided December 29, 1997. Michael Schulze appealed a trial court order that he pay eighty-three percent of his after-tax monthly income for non-allocated family support. Family support is a blended child and spousal support intended to be completely tax deductible by the paying spouse and tax includable by the receiving spouse. The net affect of many family support orders is an increase in the net spendable income in both households.
The Appellate Court reversed the trial court’s decision. The Appellate Court felt the trial court made a number of errors in calculating the support. First, the Appellate Court noted that temporary, or pendente life support, is intended to maintain the status quo that existed prior to the divorce. Spousal support on a permanent basis, however, is significantly different than temporary support, and should not be calculated by determining an appropriate temporary support order.
The pertinent facts of the case are as follows:
Michael worked for his parents in a corporation they owned during the late 1980’s and early 1990’s. He regularly earned in excess of $100,000.00 a year. The year prior to the separation, Michael’s earnings exceeded $160,000.00. His yearly average for the four years prior to separation was $133,000.00. Shortly after the separation, Michael’s parents distributed forty nine percent of the company stock to their three children and consequently reduced Michael’s salary to approximately $80,000.00 per year.
Upon calculating support, the trial judge used Michael’s pre-tax monthly income of $6,628.00 and added $1,100.00 to Michael’s income (the $600,00 difference between the fair rental value and the actual rent paid on a condominium Michael’s mother purchased for him to live in, and $500.00 per month for Michael’s use of a 1989 Mercedes company car). Based on these assumptions the DissoMaster(TM ) program calculated monthly support of $3,627.00 ($2,713.00 for child support and $914.00 for spousal support). DissoMaster(TM) then proposed total family support of $4,778.00, suggesting Michael’s tax liability would decrease. The court agreed and ordered Michael to pay $4,780.00.
The Appellate Court was critical of using temporary support guidelines to establish permanent support orders. The court stated there are different legal bases for the two kinds of support, and further stated:
“In light of the different legal purposes for each kind of support order and the reality that temporary support will tend to be higher than permanent support, Marriage of Olsen, (citation omitted) specifically warned against using temporary spousal support guidelines in a computer program assigned the task of determining permanent support.”
The Court of Appeal was also critical of inclusion of the rental value of the company care and housing as non-taxable income. The court stated since Michael worked for his parents, these benefits were given to him arguably as further employment benefits and, therefore, if considered, they should be considered as additional taxable income. The court avoided dealing with the more difficult issue of continuing gifts from parents to adult children who themselves have their own support obligations.