Zakrowski v. Zakrowski
| Decision Date | 29 June 1992 |
| Docket Number | No. 71A03-9106-CV-00162,71A03-9106-CV-00162 |
| Citation | 594 N.E.2d 821 |
| Parties | Thomas L. ZAKROWSKI, Appellant-Respondent, v. Susan Joann ZAKROWSKI, Appellee-Petitioner. |
| Court | Indiana Appellate Court |
Frederick B. Ettl, South Bend, for appellant-respondent.
Mark J. Phillipoff, Patrick D. Murphy, Jones, Obenchain, Ford, Pankow & Lewis, South Bend, for appellee-petitioner.
Thomas Zakrowski appeals an order modifying his child support obligation, presenting for our review a sole (restated) issue: whether the trial court erroneously disallowed certain business expenses in computing income available for child support.
We reverse and remand for recalculation of Thomas' income under the child support guidelines.
The marriage of Thomas and Susan Zakrowski was dissolved on February 26, 1981 and Susan was awarded custody of the couple's two children. On October 5, 1990, Susan petitioned to increase the existing $160.00 per week child support award. An evidentiary hearing was held on January 7, 1991. Evidence adduced at the hearing disclosed that Thomas and Susan each sell insurance policies; each has experienced income fluctuations in recent years.
Susan testified that her 1990 gross income was $44,500; from that amount she paid $1,800 as commissions to other agents. Although Susan is a self-employed individual for income tax purposes, her office is furnished without cost to her. She indicated that her business entertainment expenses are minimal. Susan's available annual income for child support calculations--$42,700--was not disputed by the parties.
The hearing focused largely upon a determination of Thomas' income. Thomas testified that he owns 34 acres of farmland and two residences from which he derives rental income. The net rental income from these properties was not disputed. Thomas also reported ownership of a recently constructed commercial building in which he maintains his insurance office. Petitioner's Exhibit A, admitted into evidence without objection, detailed expenses Thomas attributed to the operation of his "insurance business."
Thomas has been an employee of Allstate Insurance for approximately 22 years. He earns an annual salary of approximately $53,645. However, the current structure of Allstate's broker operations necessitates the incurrence of a substantial amount of employee business expenses, some of which are reimbursable.
Thomas testified that Allstate eliminated its company-owned offices for brokers in 1989. Currently, Allstate requires each broker to furnish his own office space. 1 Allstate then provides an annual rent reimbursement amounting to $3,240 per broker and an office expense reimbursement of $6,538. 2
Allstate also requires the broker to travel to the site of each insured property to measure building dimensions and obtain photographs. The automobile expenses are reported by Thomas on Internal Revenue Service Form 2106 as non-reimbursed employee business expenses. 3
On February 20, 1991, the trial court entered its "Findings, Conclusions, and Order" disallowing $28,115.00 of the claimed business expenses. The court concluded that items 1, 2, 3, 7, 8, 18, 19, 20, 21, 22, 23, 24, 25 and 31 of Exhibit A were capital investments rather than expenses and that item 17 represented a "bookkeeping" deduction. Thomas' annual income was found to be $61,892.00; his child support obligation was increased to $238.00 weekly (plus 59% of future college expenses of the parties' eldest child).
On appeal, Thomas contends that the trial court disallowed business expenses which were "reasonable and necessary" as contemplated by the Indiana Child Support Guidelines. Susan replies that Thomas' decision to invest in commercial real estate should not provide the basis for any reduction in his gross income for child support purposes. 4
Where the trial court has entered special findings pursuant to Ind.Trial Rule 52(A), we review the findings of fact and conclusions of law under the following standard. First, we must determine whether the evidence supports the findings; second, we determine whether the findings support the judgment. Nill v. Nill (1992), Ind.App., 584 N.E.2d 602, 604, reh. denied. The judgment of the trial court will be affirmed if we conclude that the findings support the judgment and are not clearly erroneous. Id.
The trial court's findings of fact listed the following cash outlays as "investments" or a "bookkeeping" entry rather than "expenses":
Mortgage Payments $17,520
Real Estate Taxes 1,496
Insurance 250
Bldg. maint., ceiling fans, shelves paint, light bulbs, shutters, 1,786
landscaping
Advertising 112
Rent 3,240
Blinds 194
Carpet Runners and Mail Box 47
Copy Machine 210
Answering machine & copy cartridge 93
Copier cartridge 52
Telephone Equipment 421
Office Furniture 20
Maintenance--Office 465
Business Auto mileage expense 8496 mi. x $.26 mi. 2,209
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$28,115
Initially, we observe that the cost of various items of office equipment was disallowed. A trial court is vested with discretion in considering purchases of business equipment. Cox v. Cox (1991), Ind.App., 580 N.E.2d 344, 351, trans. denied. Although purchases of business equipment may properly be considered "reasonable and necessary" expenditures in child support computations, a deduction from gross income is not mandatory. Here, the trial court concluded that the items purchased constituted "investments" benefitting Thomas. The finding has evidentiary support.
However, there exists no factual basis in the record to support the finding that Thomas' total commercial mortgage payments represent a capital investment. Rather, the evidence indicates that a portion of the payments are interest expenditures. Upon proper allocation of interest and principal, a trial court may, in its sound discretion, disallow the deduction of principal payments from gross income for child support purposes. Payments of principal may be considered contributions to a parent's net worth, rather than "ordinary and necessary expenses" contemplated by the child support guidelines. See Merrill v. Merrill (1992), Ind.App., 587 N.E.2d 188. Moreover, under certain circumstances, a portion of...
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