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Improper computation of rental income causes Court of Appeals to remand child support determination

South Carolina attorney Brian A. DiMarco must really love our appellate courts in August because for the second straight August he has obtained a published victory in his own domestic litigation.  The August 15, 2012 Court of Appeals opinion in DiMarco v. DiMarco, 399 S.C. 295, 731 S.E.2d 617 (Ct. App. 2012), partially reversed and remanded the issue of his child support obligation, finding the family court failed to properly determine his rental income.

At trial, in calculating Father’s annual income, the family court included $11,263 per year in rental income.  The Court of Appeals agreed with Father’s position that this was in error:

At the hearing before the family court, Father’s accountant testified the rental properties were operating at a loss. Father testified that high interest rates, evictions, and trouble finding tenants with decent credit contributed to the losses on the rental properties.  Father also testified as to the specific expenses spent for maintaining the rental property of 6 Grey Leaf Court.  Father explained that all the expenses were represented in the 2006 tax return and that he had receipts to support the tax returns. Father asked the court if he should go through the expenses for each rental property, and the court responded that if the expenses were included in the 2006 tax return, there was no need to go through the expenses.  Father’s 2006 tax return included all the expenses for each rental property and represented that the rental properties were operating at a loss.

In calculating Father’s income for child support purposes, the family court found Father earned $11,263 per year in net rental income, which constituted his gross rental income less mortgage interest, taxes, and insurance.  While the court did not specifically state in its order that it relied on the rental income amounts listed in Father’s 2006 tax returns in making its determination, it appears the court arrived at $11,263 per year in rental income by subtracting mortgage interest, taxes, and insurance from the gross rental income listed on Father’s 2006 tax returns.  The family court did not deduct the ordinary and necessary expenses of the rental properties referenced in Father’s tax returns.  Specifically, the family court did not deduct expenses for cleaning and maintenance, legal fees, supplies, and association dues.

We find Father should be given the opportunity to present evidence of the expenses related to his rental income for the court’s consideration. Accordingly, we reverse the family court’s calculation of Father’s rental income and remand for a recalculation.

Father also argued that the family court improperly included capital gains and his wife’s rental income in determining child support.  The Court of Appeals found the capital gains issue was not preserved for review because Father had not raised this issue in a Rule 59(e), SCRCP, motion.  It refused to address the issue of his wife’s rental income because “[i]n his brief, Father failed to cite any case law or authority to support his argument, and therefore, we find it is abandoned on appeal.”

It is unclear what authority there would be to show that a spouse’s income isn’t income for child support purposes but there isn’t any authority for the proposition that it is either.  Other than when one spouse shifts income to the other spouse to avoid child support or alimony obligations, I have never seen a spouse’s income considered relevant on these issues.

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