969 N.W.2d 184
N.D.2022Background:
- Dean and Tania Gerving divorced in 2017; they share two children with equal residential responsibility; a 2017 judgment required Dean to pay the children’s private school tuition.
- In 2020 the State moved to modify child support, asserting Dean (self‑employed farmer) had average gross annual income of $361,339 and net monthly income of $21,214, producing a guideline obligation of $3,129/month (offset to $2,428 to Tania).
- Dean disputed the State’s calculations, arguing they misstated his income by (1) separating farm gains from farm losses, (2) failing to account for bonus depreciation that offset reported gains, and (3) improperly including land rental income without matching expenses; he also sought a downward deviation for tuition payments.
- The district court adopted the State’s calculations, found Dean’s net monthly income was $21,214, ordered increased support, and declined to deviate for tuition because the divorce judgment already obligates Dean to pay it.
- The Supreme Court affirmed the denial of a deviation for tuition but held the district court erred in calculating Dean’s net self‑employment income and rental income treatment, and remanded for recalculation consistent with the guidelines.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper calculation of net income from self‑employment (aggregation of farm gains and losses) | State: Court correctly included recurring gains and excluded averaged farm losses per guidelines and adopted State's calculations | Dean: Farm gains and losses are related; averaging must treat the farm operation as a single activity so losses offset related gains (TCJA caused "phantom" gains) | Reversed in part: Court erred by separating gains from farm operation losses; related gains and losses must be considered together and losses may reduce related gains on remand |
| Treatment of depreciation/bonus depreciation for traded equipment | State: Depreciation was accounted for in tax returns and no additional add‑back was required | Dean: TCJA created trade‑in reporting that produced phantom gains which should be offset by bonus depreciation | Affirmed in part: Court did not err by refusing to add depreciation back to net income; depreciation was not added back, but remand to aggregate related losses will permit depreciation and gains to be considered together |
| Inclusion of land rental income | State/Plaintiff: Schedule E shows rental income; it is self‑employment income and should be included | Dean: Land is subleased at same rate he pays the owner and he realizes no net income; expenses were misallocated on tax returns and should be matched to rental income | Reversed in part: Court erred by including rental income without properly matching and reallocating expenses; on remand expenses must be applied to rental activity to determine net rental income |
| Deviation for payment of child’s private school tuition | Plaintiff/Tania: The court should not reduce guideline support because divorce judgment obligates Dean to pay tuition | Dean: Payment of tuition is a basis for downward deviation under the guidelines | Affirmed: Court did not abuse discretion; prior written agreement/judgment requiring Dean to pay tuition precluded deviation under the circumstances |
Key Cases Cited
- Eubanks v. Fisketjon, 2021 ND 124, 962 N.W.2d 427 (standards of review for child support determinations)
- Gooss v. Gooss, 2020 ND 233, 951 N.W.2d 247 (court must comply with child support guidelines; interpretation is question of law)
- Halberg v. Halberg, 2010 ND 20, 777 N.W.2d 872 (proper net income finding is essential for support)
- Gunia v. Gunia, 2009 ND 32, 763 N.W.2d 455 (failure to apply guidelines is error of law)
- Clark v. Clark, 2006 ND 182, 721 N.W.2d 6 (court may not add depreciation back into obligor’s net income)
- Torgerson v. Torgerson, 2003 ND 150, 669 N.W.2d 98 (net income derived from tax returns total income)
- Berge v. Berge, 2006 ND 46, 710 N.W.2d 417 (farm equipment sale gains can be nonrecurring under some circumstances)
- Longtine v. Yeado, 1997 ND 166, 567 N.W.2d 819 (treatment of capital gains in farm contexts)