{11} Only income that has been retained by a corporation for corporate purposes or distributed to a shareholder-spouse in an amount sufficient to pay business–related expenses or tax obligations would be deemed unavailable for use by a shareholder-spouse to satisfy the financial obligations imposed by a dissolution of marriage. SeeNMSA 1978, § 7–4–2(A) (1999) (defining “business income” as “income arising from transactions and activity in the regular course of the taxpayer's trade or business and income from the disposition or liquidation of a business or segment of a business”); Roberts v. Wright, 1994–NMCA–022, ¶ 9, 117 N.M. 294, 871 P.2d 390 (refusing to include a parent's corporate earnings, over the amount actually received in payment, in child support calculations); Brett R. Turner, Classifying the Retained Earnings of a Separate Property Business as Marital Property, 15 No. 8 Divorce Litig. 141 (2003) (“[T]he owner of a business should not be required to place protection of the marital estate above all other legitimate business concerns.”). As such, simply attributing K–1 allocations to a shareholder-spouse for tax purposes does not provide a workable framework for the district courts to assess either the needs of the shareholder-spouse or the spouse's ability to pay support.
We have twice had the opportunity, in the context of child support proceedings, to discuss what is meant by ordinary and necessary business expenses for self-employed individuals. InRoberts v. Wright, 117 N.M. 294, 296-97, 871 P.2d 390, 392-93 (Ct.App. 1994), we affirmed the allowance of a deduction of the reinvested earnings of mother's corporation, which were used to purchase inventory to sustain the one sales contract that made mother's business successful. Likewise, in Jurado v. Jurado, 119 N.M. 522, 530, 892 P.2d 969, 977 (Ct.App. 1995), we reversed the disallowance of a deduction for that portion of the earnings reinvested in the business which the evidence established were necessary to sustain it.
Mother's partnership tax records for 1993 indicate that the business was operated at a loss due to depreciation and expenses. However, the trial court is not limited to the tax treatment of business income records, see Roberts v. Wright, 117 N.M. 294, 297, 871 P.2d 390, 393 (Ct.App. 1994), and Mother also testified that the partnership account was used for both business and personal expenses. Thus, there existed evidence on which the trial court could have found that Mother had more than zero income.
However, no findings were made by the trial court, nor was any evidence pointed to by Husband, of how much money was needed to keep Jurado Farms going. Cf. Roberts v. Wright, 117 N.M. 294, 297-98, 871 P.2d 390, 393-94 (Ct. App. 1994). Pursuant to NMSA 1978, Section 40-4-11.2 (Repl.Pamp.
Rainwater, supra; Downey v. Rogers, Ky.App., 847 S.W.2d 63 (1993). See also Gray v. Gray, 67 Ark.App. 202 994 S.W.2d 506 (Ark.App. 1999); Klockow v. Klockow, 979 S.W.2d 482 (Mo.App. 1998); Major v. Major, 124 N.M. 436 952 P.2d 37 (N.M.App. 1997); Roberts v. Wright, 117 N.M. 294 871 P.2d 390 (N.M.App. 1994); Merrill v. Merrill, 587 N.E.2d 188 (Ind.App. 1992); R.T. v. R.T., Del. Supr., 494 A.2d 150 (1985). Along with the trial court's duty to scrutinize taxable income, of particular concern in this case is the requirement, noted above, that modifications of child support be based upon a substantial and continuing change in circumstances.
In Jurado v. Jurado, 119 N.M. 552, 892 P.2d 969 (N.M. Ct. App. 1995), it was recognized that a partnership's taxable earnings retained for capital reinvestment can be treated as an ordinary and necessary expense required to produce business income, which is excluded from the definition of income for child support purposes. See also Roberts v. Wright, 117 N.M. 294, 297, 871 P.2d 390, 393 (N.M. Ct. App. 1994) (for purposes of child support, income did not include corporate earnings reinvested in a large inventory that was necessary for business operations). ¶ 19 In light of Stephanie's failure to provide citation to persuasive authority and well-developed argument on the issue, we decline to decide whether Illinois should follow the approach taken in out-of-state cases. Accordingly, we will not disturb the trial court's ruling that retained earnings reported on line 14 of the Schedule K-1 is part of Stephanie's gross income for purposes of calculating retroactive child support. ¶ 20 Stephanie also contends that the only basis for setting monthly retroactive child support at $1257 was Nathan's claim that that was roughly the amount of child support that he had paid.
Id.¶ 62 In Roberts v. Wright, 1994–NMCA–022, ¶ 9, 117 N.M. 294, 871 P.2d 390, the appellate court in New Mexico held that the trial court properly refused to consider the mother's corporate earnings in calculating her support obligation. The mother reinvested one year's sizeable corporate earnings in her closely held corporation, which were significantly more than previous years, because a government contract required her to purchase substantial inventory, the contract was essential to the corporation's success, and the market was highly competitive with declining profits.
{11} Only income that has been retained by a corporation for corporate purposes or distributed to a shareholder-spouse in an amount sufficient to pay business-related expenses or tax obligations would be deemed unavailable for use by a shareholder-spouse to satisfy the financial obligations imposed by a dissolution of marriage. See NMSA 1978, § 7-4-2(A) (1999) (defining "business income" as "income arising from transactions and activity in the regular course of the taxpayer's trade or business and income from the disposition or liquidation of a business or segment of a business"); Roberts v. Wright, 1994-NMCA-022, ¶ 9, 117 N.M. 294, 871 P.2d 390 (refusing to include a parent's corporate earnings, over the amount actually received in payment, in child support calculations); Brett R. Turner, Classifying the Retained Earnings of a Separate Property Business as Marital Property, 15 No. 8 Divorce Litig. 141 (2003) ("[T]he owner of a business should not be required to place protection of the marital estate above all other legitimate business concerns."). As such, simply attributing K-1 allocations to a shareholder-spouse for tax purposes does not provide a workable framework for the district courts to assess either the needs of the shareholder-spouse or the spouse's ability to pay support.
{11} Only income that has been retained by a corporation for corporate purposes or distributed to a shareholder-spouse in an amount sufficient to pay business related expenses or tax obligations would be deemed unavailable for use by a shareholder-spouse to satisfy the financial obligations imposed by a dissolution of marriage. See NMSA 1978, § 7-4-2(A) (1999) (defining "business income" as "income arising from transactions and activity in the regular course of the taxpayer's trade or business and income from the disposition or liquidation of a business or segment of a business"); Roberts v. Wright, 1994-NMCA-022, ¶ 9, 117 N.M. 294, 871 P.2d 390 (refusing to include a parent's corporate earnings, over the amount actually received in payment, in child support calculations); Brett R. Turner, Classifying the Retained Earnings of a Separate Property Business as Marital Property, 15 No. 8 Divorce Litig. 141 (2003) ("[T]he owner of a business should not be required to place protection of the marital estate above all other legitimate business concerns."). As such, simply attributing K-1 allocations to a shareholder-spouse for tax purposes does not provide a workable framework for the district courts to assess either the needs of the shareholder-spouse or the spouse's ability to pay support.
124 N.M. at 438, 952 P.2d 37. The court in Major noted that in two prior cases, it allowed deductions of earnings that were reinvested in a business after the evidence established these costs were necessary to sustain it. 124 N.M. at 437-38, 952 P.2d 37 (discussing Roberts v. Wright, 117 N.M. 294, 296-97, 871 P.2d 390 [1994], and Jurado v. Jurado, 119 N.M. 522, 530, 892 P.2d 969 [1995] ). But, the court in Major also made clear that " earnings reinvested in the business for the purpose of growth of the business should be treated as income for the purpose of child support."