McHugh v. McHugh
| Decision Date | 31 December 1997 |
| Docket Number | 95-3659 and 96-1928,95-3067,Nos. 95-2867,s. 95-2867 |
| Citation | 702 So.2d 639 |
| Parties | 23 Fla. L. Weekly D82 Elizabeth McHUGH, Appellant/Cross-Appellee, v. Kevin P. McHUGH, Appellee/Cross-Appellant. |
| Court | Florida District Court of Appeals |
Mark D. Ewart, West Palm Beach, for appellant/cross-appellee.
Lewis Kapner of Lewis Kapner, P.A., West Palm Beach, for appellee/cross-appellant.
The parties both appeal portions of a final judgment of dissolution of marriage. They raise multiple claims of error associated with the identification, valuation and distribution of marital assets; the award of both permanent and rehabilitative alimony; and the required payment of other assorted expenses for the children of the marriage. We affirm in part and reverse in part.
The parties were married in 1983 and had two minor children at the time of the divorce. The husband worked throughout the marriage in the auto sales industry. The wife also worked in the auto sales industry but has not worked in the past several years due to bouts of depression. While the wife's mental health was a concern, the husband had problems with his physical health due to a heart condition.
The husband lost his job with a Florida car dealership in 1991. He then took a job as chief executive officer of Hall Auto World of Virginia ("Hall Auto World") in July of 1991. The wife was originally planning to move to Virginia and join the husband. However, after continuing marital problems, she instead filed an action for dissolution in Florida.
One significant area of disagreement between the parties was the husband's income and the treatment of the husband's stock in Hall Auto World as a marital asset. At some point after his employment began, he signed a stock purchase agreement with Hall Auto World to acquire part of its stock. Although the husband entered the agreement after the wife filed the dissolution action, the trial court found that the stock purchase agreement was an important part of the compensation package which induced the husband to take the position in the first place. The agreement gave the husband the opportunity to buy a percentage of stock of certain related Hall Auto World companies for $450,000, for which the husband signed a promissory note. While the note did not have a due date, $150,000 was forgiven in 1993, and $150,000 was forgiven in 1994. The husband reported these amounts as income on his 1993 and 1994 tax returns. The trial court did not include these amounts as part of the husband's recurring income for child support purposes. But the trial court did determine that the stock was a marital asset, as it was the husband's experience, gained from the Florida job, which made him an eligible candidate for the position at Hall Auto World.
The court equitably divided all of the assets, including the Hall Auto World stock and the value of the retirement plan from the husband's prior employment. It awarded the wife $2,500 per month in rehabilitative alimony, $1,500 per month in permanent alimony, and child support based on a net monthly income to the husband of $17,340. The trial court also required the husband to maintain life insurance policies to insure the payment of child support; ordered the husband to maintain health insurance for the children and directed that any reasonable medical or dental expenses not covered by insurance would be paid 97% by the husband, 3% by the wife; and provided for the continuation of Florida Pre-paid college accounts for the children.
In her appeal, the wife first challenges the trial court's calculation of the husband's income for child support purposes, noting three categories of income which she contends the trial court erroneously excluded. First, the trial court excluded $247,000 in Schedule K-1 income of Hall Auto World attributable to the husband's stock ownership. Hall Auto World was a Subchapter S corporation and as such the income of the corporation is passed through to its shareholders, as if they had received it individually, even when the corporation retains it. Second, it excluded $124,000 which Hall Auto World paid to the IRS for the tax liability on the Schedule K-1 income. Finally, the court excluded the $150,000 in loan forgiveness on the stock purchase agreement for the Hall Auto World stock.
The trial court did not include the Schedule K-1 income because the husband did not receive it. Hall Auto World retained the income for purposes of building the business and keeping it going. If the husband had received the income, it would have been income as contemplated by section 61.30(2), Florida Statutes (1993), which provides, in part, that:
(a) Gross income shall include, but is not limited to, the following items:
....
3. Business income from sources such as self-employment, partnership, close corporations, and independent contracts. "Business income" means gross receipts minus ordinary and necessary expenses required to produce income.
The trial court believed the husband's uncontradicted testimony that the K-1 income was not available to him. The wife offered no proof that the husband, being only a 10% shareholder of the company, had any access to, or control over, these funds. The trial court did not, accordingly, err in excluding it as income. 1 For the same reason, we reject the wife's contention that Hall Auto World's payment of the husband's tax liability on the Schedule K-1 income should have been included in the husband's income for child support purposes.
On the husband's 1993 and 1994 tax returns, he reported as income $150,000 of forgiven debt on the stock purchase agreement. The trial court refused to include this amount in income because it was nonrecurring. In addition, as the wife's expert noted, the husband was receiving an asset of value for the forgiven debt. The trial court determined the stock was a marital asset for purposes of equitable distribution. As a result, it was appropriate not to consider the payment for the stock as both income and an asset for equitable distribution. See Waldman v. Waldman, 520 So.2d 87 (Fla. 3d DCA 1988)(injustice would result if same asset were considered in both property distribution and child support obligations). The wife has shown no abuse of discretion.
We also agree with the trial court's determination that the husband's stock in Hall Auto World was a marital asset. The wife presented evidence that the stock agreement was part of the compensation package, which formed the incentive for the husband to take the position during the marriage. Moreover, prior to the final hearing, the husband had paid for $300,000 of the stock through forgiveness of the promissory note which he had executed in connection with its acquisition. Noting that it had not included this forgiveness of debt as part of the husband's income in determining the child support, the trial court concluded that it was "just and equitable" that the...
To continue reading
Request your trial
-
Diez v. Davey
...431, 193 P.3d 466 (2008) ; Walker v. Grow, 170 Md.App. 255, 280, 907 A.2d 255 (2006) ; Tebbe, 815 N.E.2d at 184; McHugh v. McHugh, 702 So.2d 639, 642 (Fla.Dist.Ct.App., 1997).7 Early in the litigation, plaintiff sought sole physical and legal custody of the children. However, at the time th......
-
J.S. v. C.C.
...retained by the corporation is not available to a shareholder parent to satisfy a child support obligation. See McHugh v. McHugh, 702 So.2d 639, 642 (Fla.Dist.Ct. App.1997); Tebbe v. Tebbe, 815 N.E.2d 180, 184 (Ind.Ct.App.2004); Walker v. Grow, 170 Md.App. 255, 280-281, 907 A.2d 255 (2006).......
-
In re Marriage of Brand
...that determined that such distributions should not be included when determining support obligations. See, e.g., McHugh v. McHugh, 702 So.2d 639, 642 (Fla. App. 1997). Respondent points out that his children have never received the benefit of the taxable share of income from these Subchapter......
-
Borchard v. Borchard
...v. Corchado, 648 So.2d 1261 (Fla. 4th DCA 1995) (approving rehabilitative alimony awards to "bridge the gap"); McHugh v. McHugh, 702 So.2d 639 (Fla. 4th DCA 1997) (same); Green v. Green, 672 So.2d 49 (Fla. 4th DCA 1996) (same); Shea v. Shea, 572 So.2d 558 (Fla. 1st DCA 1990) (same); Whitley......
-
Alimony and support
...error in imputing retained income of S corporation to husband for purposes of calculating child support and alimony); McHugh v. McHugh, 702 So. 2d 639 (Fla. 4th DCA 1997) (no error in excluding from husband’s income amount attributable to Subchapter S corporation, tax paid by corporation on......
-
Appellate court trends in permanent alimony for "Gray Area" divorces: 1997-2007.
...Walker, 873 So. 2d 565 (Fla. 2d D.C.A. 2004); Walker, 818 So. 2d 711; Yitzhari, 906 So. 2d 1250; Byers, 910 So. 2d 336; McHugh v. McHugh, 702 So. 2d 639 (Fla. 4th D.C.A. 1997); Greene v. Greene, 895 So. 2d 503 (Fla. 5th D.C.A. 2005); Bracero v. Bracero, 849 So. 2d 388 (Fla. 5th D.C.A. 2003)......
-
An update on Florida alimony case law: are alimony guidelines a part of our future? .
...by trial 1999) court Nelson v. 12 years $12,000 per Nelson year 721 So. 2d 388 (Fla. 4th DCA 1998) McHugh v. less than 0 McHugh 14 years 702 So. 2d 639 (Fla. 4th DCA 1997) Cerra v. Cerra 24 years late 40s $5,000 820 So. 2d 398 during (Fla. 5th DCA marriage; 2002) $20,000 after separation Re......
-
Tax Filing Status?Joint, Married Filing Separately, Head of Household
...of tax on the pass-through income does not change the availability to the shareholder of further income as was held in McHugh v. McHugh , 702 So.2d 639 (Fla. 4th DCA 1997). Furthermore, in McHugh, supra, as part of the Husband’s buy-in of the S corporation’s stock, he gave a promissory note......