Perlenfein v. Perlenfei

848 P.2d 604 (1993)

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Nature of the Case

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Facts

H is a manager and minority shareholder of Albany Rental, INC. a closely held corporation. H gets a salary of $2,000 per month and owns 27.5% of the shares. His mother owns 45.5%, and his brothers own 25% and 2% respectively. Albany is a subchapter S corporation, and its profits are treated for federal income tax purposes as income to the shareholders. The shareholders also get credit against the income for accelerated depreciation. To meet federal income tax liability, the shareholders get yearly dividends sufficient to pay the taxes owed. All other profits of the corporation are retained for reinvestment. W is the sole proprietor of an incorporated accounting business, and she gets a salary of $2,000 per month. All other profits are retained by the corporation. W and H divorced in 1988, and they have two minor children. W got custody and H was ordered to pay $250 per month in support. W moved for modification of that amount contending that Albany's profits and accelerated depreciation credits in the amount of $4,792 per month should be used to calculate gross income for child support obligations. The court attributed $2,000 more in gross income from those sources and that the support should be $778 per month. H appealed and W cross-appealed. The appeals court held that before such income could be held as attributable for child support, there must be some right to receive it or the ability to control the distribution of the income. The appeals court then determined that H's extra hidden income could not be used but that W's income could as she was the sole shareholder of her corporation. W then petitioned for review. (The statutes under attack are listed on page 901 Clark 6th).