Imputing Income for Child Support Purposes
Wednesday / May 16, 2007
Something you get for no out-of-pocket cost, or a poorly performing investment, can result in imputed income for child support calculations.
Child support is supposed to be based on the income stream the person paying the child support receives. Usually, the income stream consists of the money a person makes from work. But sometimes, income can be "imputed" to things that person receives at no out-of-pocket cost, or it can be inputed to investments when the investments are not performing adequately. These points are shown in three recent cases, from California, Connecticut and Maine.
In the California case (In re: Schlafly), a trial court based a child support award partly on the fact that the father lived in a house that had no mortgage because the father owned it free and clear. The trial court imputed $3,000 per month as income to the father as the rental value of the house. The court of appeals reversed that award because the father was not living in the house rent-free as an employee benefit but because he owned the house. In contrast, in the Maine case (Carolan v. Bell), a trial court was upheld on appeal when it refused to impute $300 in income to a mother when she rented a house from her parents for $1,000 per month. The father argued that because the house had previously rented for $1,300 per month, the mother was, in effect, receiving imputed income in the amount of $300 per month.
The imputed income argument also has been applied to investments. In the same California case (In re: Schlafly), the father's investment return on his stocks equaled only 1.6% per annum. The court observed that if the father had invested in bonds or certificates of deposit - both of which are conservative investments - the father could have earned 3% per annum on his investment instead of 1.6% per annum. Accordingly, the court inputed income at the rate of 3% per annum to the investment. In the Connecticut case (Weinstein v. Weinstein), the court made a similar decision. The court imputed a return of 2.96% per annum to an investment that was yielding a return of only 1.24% per annum because five-year treasury bills accrued interest at 2.96%.
In the California case (In re: Schlafly), a trial court based a child support award partly on the fact that the father lived in a house that had no mortgage because the father owned it free and clear. The trial court imputed $3,000 per month as income to the father as the rental value of the house. The court of appeals reversed that award because the father was not living in the house rent-free as an employee benefit but because he owned the house. In contrast, in the Maine case (Carolan v. Bell), a trial court was upheld on appeal when it refused to impute $300 in income to a mother when she rented a house from her parents for $1,000 per month. The father argued that because the house had previously rented for $1,300 per month, the mother was, in effect, receiving imputed income in the amount of $300 per month.
The imputed income argument also has been applied to investments. In the same California case (In re: Schlafly), the father's investment return on his stocks equaled only 1.6% per annum. The court observed that if the father had invested in bonds or certificates of deposit - both of which are conservative investments - the father could have earned 3% per annum on his investment instead of 1.6% per annum. Accordingly, the court inputed income at the rate of 3% per annum to the investment. In the Connecticut case (Weinstein v. Weinstein), the court made a similar decision. The court imputed a return of 2.96% per annum to an investment that was yielding a return of only 1.24% per annum because five-year treasury bills accrued interest at 2.96%.