Troutman v. Troutman
482 S.W.3d 365
Ark. Ct. App.2016Background
- Marilyn Curry Troutman (Curry) and Ronald Troutman (Troutman) divorced in 2005; child support was modified upward in 2011 and 2012 based on Troutman’s self‑employment income using the prior two years’ tax returns.
- In 2014 Troutman petitioned to modify child support, asserting his income had fallen more than 20% (or $100/month), asking the court to set support based on the average of his 2012–2013 net income.
- Troutman is sole shareholder of Boulder Construction (an S corp). 2012 tax year showed high income; 2013 showed a business loss but Boulder’s Schedule M‑1 listed $785,392 deferred income and a $554,745 shareholder distribution to Troutman.
- Curry urged the court to treat the deferred income and shareholder distribution as available income for child‑support purposes; she presented a CPA (Keen) to that effect. Troutman’s CPA (Parham) testified that the deferred income reflected the company’s completed‑project accounting and would be taxed (and appear on Troutman’s return) in later years; the distribution represented previously taxed funds.
- The circuit court accepted the tax‑return methodology (prior two years’ returns), excluded the deferred income and distribution, found a material change in Troutman’s income, set support at $2,108/month, and ordered Troutman to recoup an overpayment of $27,379 by reducing future payments $1,000/month.
- Curry appealed, arguing (1) no material change in circumstances because Troutman had access to more cash than his tax returns showed, and (2) the court erred in its income calculation and methodology.
Issues
| Issue | Plaintiff's Argument (Curry) | Defendant's Argument (Troutman) | Held |
|---|---|---|---|
| Whether a material change in circumstances occurred to permit reduction of child support | Troutman still had access to significant cash (deferred income and distributions); tax returns alone understate available income, so no material change | Troutman’s reported income (2012 vs 2013 returns) fell >20%; Administrative Order No. 10(III)(c) allows using last two years’ tax returns for self‑employed payors | Court found a material change: using 2012–2013 tax returns showed the requisite decline; modification allowed |
| Whether the court erred in excluding Boulder’s deferred income and shareholder distribution from income calculation | Court should have included deferred income and the $554,745 distribution as available income for support | Deferred income reflected accounting timing (completed‑project method) and distribution reflected previously taxed earnings; using tax returns is proper and customary | Court properly relied on two years’ tax returns and credible expert testimony; exclusion upheld |
Key Cases Cited
- Hall v. Hall, 429 S.W.3d 219 (Ark. 2013) (standard of review for child‑support orders and requirement to show material change)
- Brown v. Brown, 440 S.W.3d 361 (Ark. App. 2014) (appellate deference and child‑support review principles)
- Crismon v. Crismon, 34 S.W.3d 763 (Ark. App. 2000) (factfinder resolves conflicting testimony)
- Montgomery v. Bolton, 79 S.W.3d 354 (Ark. 2002) (broad definition of income for child‑support purposes)
- Stuart v. Stuart, 260 S.W.3d 740 (Ark. App. 2007) (income for support may differ from tax‑income)
- Anderson v. Anderson, 963 S.W.2d 604 (Ark. App. 1998) (retained earnings of an S corp may not be used to evade support obligations)