437 P.3d 46
Kan. Ct. App.2018Background
- Chad and Denise Dean, divorced after a long marriage; they are both self-employed and amassed a large real estate portfolio (50+ rental properties) and over $1,000,000 net estate.
- Chad owned three real estate management companies and a majority interest in a roofing company; Denise worked as a real estate agent.
- At a 10-day evidentiary hearing experts offered two methods to calculate Chad’s income for child support: a net income method (deducts depreciation, not principal payments) and a cash flow method (deducts principal payments, not depreciation).
- The district court adopted the cash flow method and excluded so-called “non-liquid capital gains” (principal mortgage paydowns that increase equity) from gross income, reasoning inclusion would spawn ongoing litigation and be tedious to calculate.
- Denise appealed solely arguing the court erred by excluding those capital gains from gross income under the Kansas Child Support Guidelines. The appellate court limited review to this legal issue.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court properly excluded non-liquid capital gains (principal mortgage reductions/equity build-up) from gross income for child support | Denise: The Guidelines’ definition of gross income is broad and requires including such rental income; excluding principal repayments unlawfully reduces gross income | Chad: Court’s written findings justify deviating from counting those amounts; cash-flow method avoids endless litigation and is more practical | Court: Reversed — court erred. The Guidelines’ definition of gross income must be applied; excluding principal reductions was not permitted without Guidelines authority |
Key Cases Cited
- In re Marriage of Brand, 273 Kan. 346 (discusses case-by-case treatment of corporation distributions and shielding income)
- In re Marriage of Matthews, 40 Kan. App. 2d 422 (income retained or used to pay debt remains income for child support)
- In re Marriage of Wiese, 41 Kan. App. 2d 553 (court has discretion on depreciation treatment under Guidelines)
- In re Marriage of Thurmond, 265 Kan. 715 (any deviation from Guidelines must include written findings)