This is part 2 in a two-part series on the basics of net resources for calculation of child support.

Deemed Income

Deemed Income is a term we get from Texas Family Code Section 154.067:

“Deemed Income

(a)        When appropriate, in order to determine the net resources available for child support, the court may assign a reasonable amount of deemed income attributable to assets that do not currently produce income.  The court shall also consider whether certain property that is not producing income can be liquidated without an unreasonable financial sacrifice because of cyclical or other market conditions.  If there is no effective market for the property, the carrying costs of such an investment, including property taxes and note payments, shall be offset against the income attributed to the property.

(b)        The court may assign a reasonable amount of deemed income to income-producing assets that a party has voluntarily transferred or on which earnings have intentionally been reduced.”

We have all found ourselves at one time or another saying, “He has more damned income than that – I mean deemed income, Your Honor.”  Appellate Courts that have upheld child support awards which are alleged to exceed guideline support by recognizing countless sources from which income can be deemed.  The cases below barely scratch the surface.

Family Partnership – In Houston, the First Court of Appeals recently addressed the inclusion of a father’s phantom income from a family partnership in determining his child support.[1] Although the father and his mother testified that the partnership would not distribute any profits until her death or year 2052, the courts of appeals affirmed the trial court’s court inclusion of this phantom income, finding that the partnership agreement provides that “[a]llocations to the partner or partnership income and gain” increase a partner’s capital account.  Essentially, the court treated the father’s partnership interest like a retirement account which has value, but that value is not yet accessible (an assets that does not currently produce income).

Real Estate Partnership – Although the obligor claimed he did not physically receive cash distributions from these partnerships, the trial court appears to have deemed an undetermined amount of income from the real estate partnerships and oil and gas partnerships and the Fourteenth Court of Appeals upheld the ruling stating that a trial court is allowed to “assign a reasonable amount of income attributable to assets that do not currently produce income.”[2]

Employment Expenses – The Dallas Court of Appeals imputed income from employment-related expenses being paid by the obligor, including vehicles, oil, gas, insurance, and maintenance, travel expenses, entertainment expenses, housekeeping, and care for the obligor’s livestock and pets.[3]  The obligor did a good job of detailing these expenses and removing them from his gross income, but the trial court did a better job of adding them all back in when determining his net resources.

Employee Benefits – Use of car, paid car insurance, and expense accounts were all determined to be non-cash employment benefits from which income can be deemed by the trial court and court of appeals affirmed.[4]

Gifts / Scholarships – The First Court of Appeals addressed whether monthly net resources on an obligor (college student) included support from his family and athletic scholarships.[5]  The trial court assigned a cash value to the gifts and scholarships being received by the obligor, determining his net resources to be $2,000.00 per month.  The court of appeals affirmed.

Beyond the Guidelines

A child support order conforming to the guidelines is presumed to be in the best interest of the child.[6] But, when justified, the code allows the court to order child support payments in an amount other than that established by the guidelines if the evidence rebuts the presumption that application of the guidelines is in the best interest of the child and justifies variance from the guidelines.[7]  That means if you can give the court a specific reason why application of the guidelines would be “unjust or inappropriate” under your client’s facts, the court can deviate.[8]  When determining whether deviation is justified, best interest comes first, but the rest of the standard depends on whether the obligor makes more or less than $8,550 in net resources per month.

Best Interest of the Child

When determining whether to deviate from the guidelines, the court will always first look to the best interest of the child.[9] “The ‘best interest of the child’ shall always be the trial court’s primary consideration in determining questions of child support. Trial courts have wide discretion in determining the best interest of the child.”[10]

Net Resources of Obligor Less Than $8,550

The child support guidelines were written to apply in situations in which the obligor’s net resources are less than $8,550 per month, in which case the court is required to presumptively apply the percentages set forth in the guidelines when rendering a child support order.[11]

Net Resources of Obligor Greater Than $8,550

The guidelines tell us that when an obligor has net resources in excess of $8,550 per month, guideline percentages apply to the first $8,550 of the obligor’s net resources, and the court may order additional amounts of child support depending on the income of the parties and proven needs of the child.[12] Unlike the list of factors the code provides when an obligor has monthly net resources of $8,5540 or less, other than “income of the parties and proven needs of the child”, they provide little to no guidance on what should be considered when an obligor’s monthly net resources are in excess of $8,550.    

Conclusion

When preparing to seek support beyond the guidelines, re-read the code and then think outside the book.  The more evidence presented on the obligor’s abilities to support, resources of the obligor, assets available for support, assets that could produce income, and the proven needs of the children – the better chance you have at getting the deviation your client needs.

[1] Matthews v. Northrup,  2010 WL 2133910 (Tex. App.—Houston [1st Dist.] 2010, pet. filed Oct. 6, 2010) (memo opinion).

[2] Roosth v. Roosth, 889 S.W.2d 445, 455 (Tex. App.—Houston [14th Dist.] 1994, writ denied).

[3] Anderson v. Anderson, 770 S.W.2d 92, 96 (Tex. App.—Dallas 1989, no writ).

[4] Golias v. Golias, 861 S.W.2d 401, 404 (Tex. App.—Beaumont 1993, no writ).

[5] In re L.R.P., 98 S.W.3d 312, 313-15 (Tex. App.—Houston [1st Dist.] 2003, pet. dism’d); But see Ikard v. Ikard, 819 S.W.2d 644 (Tex. App.-El Paso 1991, no writ), and Tucker v. Tucker, 908 S.W.2d 530 (Tex. App.-San Antonio 1995, no writ) (both finding that “gifts” should not be included in determining resources).

[6] Tex. Fam. Code §154.122(a).

[7] Tex. Fam. Code §154.123(a).

[8] Tex. Fam. Code §154.122(b); see also Tex. Fam. Code §154.130.

[9] Rodriguez v. Rodriguez, 860 S.W.2d 414, 418 (Tex. 1993).

[10] Clark v. Jamison, 874 S.W.2d 312, 316-17 (Tex. App.—Houston[14th Dist.] 1994, no writ).

[11] Tex. Fam. Code §154.125(b); see also Tex. Fam. Code §154.122.

[12] Tex. Fam. Code §154.126(a).