A recent judgment from the Kentucky Court of Appeals in a case titled Bootes v. Bootes has found that giving away all income from a small business does not necessarily exclude that income from a calculation of what child support payments are due.
Michelle and Damon Bootes were married for 17 years, during which they had four children, before instituting divorce proceedings. Damon operates a tax planning business with his father, for which he does all the tax preparation, while his father does administrative tasks. Damon asserted that all income from the business goes to his father to supplement his parents’ social security income. However, Michelle argued that, considering the business has $47,458 in gross receipts each year, this amount goes beyond the administrative costs to operate the business, and that the court should thus include this income as part of the child support calculation.
The trial court had ruled that, since child support is calculated based on the “actual gross income” of the parent, and that Damon had never claimed income from the tax preparation business on his income tax return, it should not be included in a calculation of what he owed in child support. Michelle appealed this decision. The appeals court noted that, even when income isn’t documented, if a party can prove with substantial evidence that the income exists, then it must be included in the court’s calculation of what that parent is obligated to pay in child support. When evaluating the amount of income from self-employment or a small business, the court should deduct only an amount from the gross receipts which can be considered an “ordinary and necessary business expense,” paid to operate the business. The Appeals Court found that, despite the fact that Damon had elected to give away the income, only a portion of that $47,458 should be considered a “business expense” to be excluded from the calculation of his income, but that the majority should be considered income. The court sent the matter back to the trial court to determine what portion of the gross income should be considered reasonable business expenses.
If you are facing a Kentucky divorce or a child custody dispute and need seasoned and compassionate legal assistance for your case, contact Greta Hoffman & Associates in Florence for a consultation at 859-371-2227.