Tenn. Father Quits Job & Owes Child Support Based on Actual Earnings

Tennessee child support law on income determination in Tennessee family law from the Tennessee Court of Appeals.

Beem v. Beem – Father’s Income Not Imputed If Quits Job Under These Facts

Robert Beem (“Husband”) appealed the judgment of the trial court ordering him to pay child support, alimony, and attorney’s fees to Barbara Beem (“Wife”).  The parties were divorced in October 1994, and agreed that the Husband would pay the Wife as child support the sum of $272.00 per month based on the fact that the Husband was unemployed and making $850.00 per month.  The court of appeals concluded that the trial court erred in ordering the Husband to pay child support of $1,059 per month based on the court’s finding that he had the ability to earn a gross annual income of $55,000 ($4,583 per month).

The evidence at the trial court hearing established that the Husband earned in excess of $55,000 from his former employment with Kimberly-Clark until 1994 when his job was eliminated.  Then the Husband started his own consulting business.  Trained as an engineer in the pulp and paper industry he testified that he also sought employment at various companies from which he solicited business, and he provided his resume to a number of employment search firms, but the his efforts to obtain a full-time position were unsuccessful.

At the time the parties entered into the divorce agreement, the Husband was unemployed and was earning no income from the business, but by the date of the hearing, the Husband reportedly was earning a gross monthly income of $2,970.  From March 16, 1995, to June 30, 1995, gross receipts from the Husband’s business totaled over $35,000, but he reported business expenses of $24,691.71.  As a result, the Husband’s gross income from self-employment for this three-and-a-half month period was $10,395.24 ($2,970/month).  The Husband testified that his business was improving and that he anticipated being able to earn a gross income of $3,500 per month for the rest of the year.

The appellate court stated that by designating $55,000 in gross annual income to the Husband, the trial court seemed to be influenced by two factors: (1) that the Husband earned in excess of $55,000 while he was employed by Kimberly-Clark; and (2) that, as a sole proprietor, the Husband had “a motivation to not be productive” and “to minimize” his reported income.  The more difficult issue presented in this case, the court of appeals explained, was whether the trial court’s skepticism of the Husband’s reported gross income from self-employment warranted the imputation of income to the Husband.

The Husband was entitled to deduct reasonable expenses necessary to produce such income when calculating his income, and could exclude depreciation, home offices, excessive promotional, excessive travel, excessive car expenses, or excessive personal expenses.  The Wife questioned the high amount of expenses claimed by the Husband for a home business, as well as his extensive business travel.  The Wife also testified that the Husband use to have an annual contract with Federal Express worth $80,000 per year.  On cross-examination, the Husband admitted that he had the contract, but he told the court that FedEx canceled the contract in July 1994.  The trial court specifically declined to find that the Husband had not truthfully reported his gross income from self-employment, but indicated that it would view the Husband’s financial statement and documents “with some degree of skepticism.”  However, the appellate court held that neither the trial court’s findings nor the evidence at the hearing below demonstrated that the Husband was manipulating his income, and that the business expenses were reasonable.  All of the evidence, in fact, pointed to the Husband successfully seeking clients for his consulting business.

Based on the foregoing evidence, court of appeals concluded that the record did not support the imputation of income to the Husband in excess of $3,500 per month, the amount suggested by the Husband below and on appeal.  Accordingly, the court modified the Husband’s child support obligation to $833 per month.

Beem v. Beem, 1996 WL 636491 (Tenn. Ct. App. 1996).

See original opinion for exact language.  Legal citations omitted.

Memphis divorce attorney, Miles Mason, Sr., JD, CPA, practices family law exclusively with the Miles Mason Family Law Group, PLC. To learn more about Tennessee child support laws and guidelines, read and view:

 

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