IN THE INTEREST OF THE CHILDREN OF KNIGHT
317 P.3d 210
Okla. Civ. App.2013Background
- Mother (Sara Knight) filed a paternity action (March 2010) for support of the parties’ daughter; Father (David Lincoln) acknowledged paternity. Trial was Nov. 4, 2011; judgment Feb. 29, 2012.
- Trial court imputed income to Father by averaging 2008–2011, arriving at annual income of $198,006.20 and gross monthly income of $16,500.52; ordered child support and found arrearage from Nov. 1, 2008–Feb. 10, 2012.
- Father’s reported income included farm (Schedule F), rental income, proceeds from sale of a ranch and homestead, gifts/loans from parents, unemployment and other deposits; Father claimed low monthly income and argued many receipts were loans or reinvested proceeds.
- Mother sought support under Oklahoma’s Guidelines (43 O.S. §118) and 10 O.S. §83; trial court included capital gains and various receipts in Father’s gross income and denied set-off for Father’s care of children.
- Court of Civil Appeals affirmed in part but found legal errors in the trial court’s calculation: it failed to deduct ordinary and reasonable business expenses from self-employment/rental income and failed to deduct the corpus (cost basis) from ranch sale proceeds when calculating capital gain.
- Modified child support: $1,259.91/month; modified arrearage: $45,526.83 (plus interest per trial court). Order affirmed as modified.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether court properly computed Father's income for support by including self‑employment/rental gross receipts without deducting ordinary business expenses | Mother: include gross receipts and various deposits as passive/earned income under Guidelines to reflect true ability to pay | Lincoln: must deduct ordinary and reasonable expenses necessary to produce self‑employment and rental income (per §118B(E)) | Court: trial court erred; deductible ordinary and reasonable expenses (other than depreciation and taxes where noted) must be subtracted; adjusted income accordingly |
| Whether proceeds from sale of ranch/homestead are includable as income and whether corpus (cost basis) must be deducted | Mother: realized capital gains and sale proceeds count as income; homestead sale proceeds may be included for child support despite homestead protection | Lincoln: sale proceeds are not income if reinvested; corpus should not be treated as gain | Court: capital gains are income for child support; corpus (return of principal) is not income and must be deducted from sale proceeds; homestead exemption does not permit avoiding child support |
| Whether trial court properly treated gifts/loans from parents, unemployment, and unexplained deposits as income for imputation | Mother: gifts, past unemployment and unexplained deposits are proper to include when imputing income given Father’s lifestyle and unexplained funding | Lincoln: amounts were loans or nonrecurring and should not be imputed as income | Court: Guidelines list gifts as passive income; trial court did not err in treating these items as income/imputing income given evidence and credibility findings |
| Whether trial court should have credited Father for daytime care, reducing arrearage | Father: he cared for child and Mother’s other child while Mother worked and should get set‑offs against arrears | Mother: contested Father’s testimony; no documentary proof of expenditures | Court: Father failed to prove set‑offs; trial court’s credibility choice stands; arrearage modified only to reflect corrected income calculations |
Key Cases Cited
- Eisner v. Macomber, 252 U.S. 189 (establishes that profit from sale/conversion of capital is income)
- C.I.R. v. Glenshaw Glass Co., 348 U.S. 426 (broad formulation of taxable income/gain)
- Thomas v. Thomas, 932 P.2d 54 (Okla. Ct. App.) (return of corpus is not income)
- Bond v. Bond, 916 P.2d 272 (Okla. Ct. App.) (appellate remedy in equity: render judgment trial court should have entered)
- Burrows v. Burrows, 886 P.2d 984 (Okla.) (homestead exemption cannot be used to avoid child support)