Gase v. Gase, S-02-1115.

• Decision Date: 14 November 2003
• Docket Number: No. S-02-1115.,S-02-1115.
• Citation: 266 Neb. 975,671 N.W.2d 223
• Parties: Theresa Ann GASE, Appellant and Cross-Appellee, v. John Charles GASE, Appellee and Cross-Appellant.
• Court: Nebraska Supreme Court

671 N.W.2d 223

266 Neb. 975

Theresa Ann GASE, Appellant and Cross-Appellee, v. John Charles GASE, Appellee and Cross-Appellant.

No. S-02-1115.

Supreme Court of Nebraska.

November 14, 2003.

Michael D. Gooch, Lincoln, for appellant.

Angela L. Burmeister and Christian R. Blunk, of Berkshire & Blunk, Omaha, for appellee.

HENDRY, C.J., and WRIGHT, CONNOLLY, GERRARD, McCORMACK, and MILLER-LERMAN, JJ.

McCORMACK, J.

NATURE OF CASE

This is an appeal from an order modifying a divorce decree awarding child support. Theresa Ann Gase filed a petition for modification of decree, seeking to modify the support being paid by John Charles Gase for the minor children of the parties. The district court for Sarpy County entered an order increasing John's monthly support obligation. Theresa appeals the trial court's order. She claims that the trial court erred in calculating the parties' respective incomes, in incorrectly crediting John twice for the children of his second family, and in failing to retroactively apply the modification of child support. John cross-appeals, contending that the trial court erred in failing to add depreciation claimed on Theresa's federal income tax returns back to her income.

BACKGROUND

Theresa and John are the parents of two children born July 3, 1983, and October 19, 1984. Their marriage was dissolved by a decree entered in the district court for Sarpy County. The decree awarded custody of the parties' minor children to Theresa with reasonable visitation to John. The decree further ordered John to pay child support in the sum of $175 per month for each child, for a total of $350 per month. John subsequently remarried; has two children with his current spouse, which children are ages 12 and 4; and lives in Texas. Theresa later filed an application for modification and, following a hearing on the application, the trial court entered an order modifying the decree. The modification order found that Theresa's net monthly income was $5,200 and that John's net monthly income was $2,800. Finding that there had been a material change in circumstances since entry of the original decree, the trial court ordered John to pay monthly child support of $675 for two children and $450 for one child.

On September 13, 2001, Theresa again filed a petition for modification of decree, seeking an increase of John's child support obligation. The petition indicates that it was sworn and subscribed to and served upon John by U.S. mail on April 23, 2001. At or around that time, John signed an undated voluntary appearance. John contends on appeal that the first notice he received that Theresa actually filed the petition for modification was early February 2002, when he received notice from the court that a hearing date had been set. The hearing date had been set for March 20. The record does not reveal whether John and Theresa had any additional discussions regarding the petition for modification between the time John signed the voluntary appearance in approximately April 2001 and the time he learned of the hearing date in approximately February 2002. John's attorney entered her appearance in the matter on February 13. On February 14, John answered and filed a cross-petition requesting a decrease in his child support obligation. On April 22, John sought to continue the hearing originally set for April 25 for the reason that he had not received all responses to discovery. On May 15, Theresa served supplemental documents in reply to John's requests for production of documents.

An evidentiary hearing was held on May 23, 2002, at which John and his current wife's federal income tax returns for the years 1999 through 2001 were offered and received into evidence. John's 2001 W-2 wage and tax statement was also offered and received into evidence. Box No. 1 on John's 2001 W-2, entitled "Wages, tips, other compensation," reported income of $72,441.20. Box No. 12a of John's 2001 W-2 reported an undescribed dollar figure not otherwise included in box No. 1 in the amount of $9,509.20. Also offered and received into evidence was a copy of John's most current pay stub for the period ending March 31, 2002, which pay stub reported year-to-date earnings of $24,858.40. In addition to contributions made to a 401K and a flexible spending account, the pay stub also reflected current and year-to-date FICA payments. John's wife's monthly gross income in 2001 was $2,800.

Theresa is an attorney and is the sole shareholder of several corporations organized under subchapter S (S corporations): Lone Star Solutions, Inc.; Gase Technologies, Inc.; Peel Country, Inc.; and Gase and Associates. See I.R.C. § 1361(a)(1) (2000). Theresa's federal income tax returns for the years 1998 through 2001 and selected accompanying schedules were offered and received into evidence. The returns reported total income of $112,128 in 1998, $95,300 in 1999, and $127,134 in 2001. The 2000 return reported a $48,210 loss. The record reveals that Theresa received W-2 wage and tax statements from Gase Technologies for 1998 and 1999 and from Lone Star Solutions for 2001. Theresa's 1999 W-2 reported the amount of $89,090.76 in box No. 1, "Wages, tips, other compensation," and an undescribed amount in box No. 13 of $7,800. While it is not clear from the record whether the $7,800 was also included in the box No. 1 income, the 1999 W-2 contains a section providing a summary listing of Theresa's income adjustments. This summary reported "EE 401K" deferrals of $7,800, which presumably describes the nature of the amount listed in box No. 13. The 2001 W-2 reported the amount of $32,199.96 in box No. 1, "Wages, tips, other compensation." Box No. 12a reported an undescribed dollar figure not otherwise included in box No. 1 in the amount of $2,799.94.

Theresa's federal income tax returns reported a $44,887 capital gain in 1999 and a $3,000 capital loss in each of the years 2000 and 2001. No capital gain or loss activity was reported in 1998.

Theresa's returns also reported deductions taken for both personal and business depreciation. On her 1999 personal federal income tax return, Theresa took depreciation deductions for rental real estate she personally owned and depreciation associated with Peel Country and Gase Technologies. On her 2000 personal federal income tax return, Theresa took depreciation deductions associated with Lone Star Solutions and Peel Country. Theresa's 2001 personal federal income tax return reported depreciation deductions for her personally owned rental real estate, depreciation associated with Peel Country, and depreciation deductions pursuant to I.R.C. § 179 (2000). Our review of the record reveals that Theresa may have taken additional depreciation deductions not otherwise reflected in the record on appeal.

John offered two proposed worksheets, both of which were received into evidence. The first proposed worksheet 1 calculated John's child support obligation to the two children of his current family at $1,006. The worksheet reflected his income and that of his current wife and reported deductions for federal and state income taxes and FICA. The worksheet also deducted from John's income $491 for "Child Support Previously Ordered" (presumably with respect to the two children from his first family). The second proposed worksheet 1 calculated John's child support obligation to the two children of his first family. This worksheet listed Theresa's monthly income and reported the same income and deductions for John as appeared on the first proposed worksheet 1, with one exception. The $491 for "Child Support Previously Ordered" appearing on the first proposed worksheet 1 was replaced with the calculated child support obligation of $1,006. The second proposed worksheet calculated John's child support obligation at $522.80 for two children. Theresa's proposed worksheet 1 was not received into evidence on lack of foundation and hearsay grounds.

On June 4, 2002, the trial court issued a letter to counsel for the parties resolving the issues before it. With respect to Theresa's income, the court was not convinced that there had been a change upward or downward. Specifically, the court was not persuaded by Theresa's contention that she had sustained a significant reduction in income. Nor was the court persuaded by John's argument that depreciation, when added back in, would show a sizable increase in Theresa's income. Accordingly, for purposes of calculating child support, the trial court indicated it would rely on the finding in the previous modification decree and keep Theresa's monthly income at $5,200. The trial court found that John's income had increased substantially, but noted he was entitled to a deduction for support attributed to the two children of his second family. The court applied a three-step process to determine John's child support obligation to the children of his first family. It is helpful here to quote directly from the trial court's June 4 letter:

The first step is to calculate [John's] child support obligation as to his present family, recognizing there is no divorce in process. [John] and his wife live in the state of Texas and so the state income taxes should be added back in to their net income. In [the first proposed worksheet 1, John's counsel] allowed a deduction of $491 for child support previously ordered-in reality, this figure should be $675. When I round the figures off, the Child Support Guidelines show [John's] obligation for his present family to be the sum of $1,026.

Next, using the $5,200 per month as a net income for [Theresa], and a net income for [John] of $3,300 (a gross of approximately $6,035 with the deductions including the $1,026), [John's] support for two children of his first marriage would be $755 and, for one child, the sum of $520. This equates to a total support of four children in an approximate amount of $1,780. The last step is to apportion this between the two families. This would then require [Jo

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