Donahoe v. Donahoe (Nebraska 2020)

For self-employed parents, certain expenses may be treated as income for child support. The parents filed for divorce. The father is the sole owner of a business, which is organized as an S-Corporation. For 2016, he reported compensation on his personal tax return, not as a salary on his business return. This meant he wouldn’t be treated as an employee of his business. The mother’s expert testified that as a result certain deductions he took on his business return for personal expenses should be treated as income to him because they no longer qualified as business expenses. In addition, the business made cash payments to the father, which should be counted as income. The trial court added up his compensation, the business expenses, and the cash payments to set his 2016 income. To determine his income for child support, the court averaged his income from 2015 and 2016. The father appealed, arguing that the trial court should have used the compensation shown on his Form 1040 to determine his income, essentially his compensation and business income only. The appellate court affirmed the decision. It found the child support guidelines purposefully broadly define income. The appellate found the choices the father made around reporting his income coupled with the testimony about the consequences of those choices justified the income determination.