GROSSO, KRISTINE v. GROSSO, ROCCO ( 2011 )


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  •         SUPREME COURT OF THE STATE OF NEW YORK
    Appellate Division, Fourth Judicial Department
    1385
    CAF 11-00903
    PRESENT: SCUDDER, P.J., CENTRA, CARNI, LINDLEY, AND MARTOCHE, JJ.
    IN THE MATTER OF KRISTINE GROSSO,
    PETITIONER-RESPONDENT-APPELLANT,
    V                             MEMORANDUM AND ORDER
    ROCCO GROSSO, RESPONDENT-APPELLANT-RESPONDENT.
    MACHT, BRENIZER & GINGOLD, P.C., SYRACUSE (JON W. BRENIZER OF
    COUNSEL), FOR RESPONDENT-APPELLANT-RESPONDENT.
    FINOCCHIO & ENGLISH, SYRACUSE (MARK J. ENGLISH OF COUNSEL), FOR
    PETITIONER-RESPONDENT-APPELLANT.
    KAREN J. DOCTER, ATTORNEY FOR THE CHILDREN, FAYETTEVILLE, FOR JOANNA
    G. AND JACLYN G.
    Appeal and cross appeal from an order of the Family Court,
    Onondaga County (Martha E. Mulroy, J.), entered July 20, 2010 in a
    proceeding pursuant to Family Court Act article 4. The order, among
    other things, denied the parties’ objections to an order modifying
    support issued by the Support Magistrate.
    It is hereby ORDERED that the order so appealed from is
    unanimously reversed on the law without costs and the matter is
    remitted to Family Court, Onondaga County, for further proceedings to
    recalculate the father’s income and child support obligation in
    accordance with the following Memorandum: Petitioner mother commenced
    this proceeding seeking, inter alia, an upward modification of the
    child support obligation of respondent father. The Support Magistrate
    increased the father’s support obligation, and Family Court
    thereafter, inter alia, denied the father’s objections to the order of
    the Support Magistrate. The father contends that the Support
    Magistrate’s finding with respect to his income is inconsistent with
    the definition of income in the Child Support Standards Act ([CSSA]
    Family Ct Act § 413). We agree with the father that his total income,
    and thus his child support obligation, must be recalculated in
    compliance with Family Court Act § 413.
    The father, who is the sole shareholder of Syracuse Haulers, a
    subchapter S corporation, contends that the Support Magistrate erred
    in determining that his 2008 adjusted gross income from the business
    of his subchapter S corporation was $707,510.82, including $109,196 in
    capital gains, $5,238 in entertainment expenses, and $562,112.66 in
    imputed income based on increased depreciation.
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    CAF 11-00903
    We reject at the outset the father’s contention that he is not
    “self-employed” within the meaning of the CSSA. Generally, a sole
    shareholder of a subchapter S corporation, such as the father, is
    considered to be self-employed because the corporation’s income is in
    essence the sole shareholder’s income (see generally Matter of Fowler
    v Rivera, 40 AD3d 1093, 1094; Terrell v Terrell, 299 AD2d 810, 812;
    Matter of Smith v Smith, 197 AD2d 830, 831). Capital gains from the
    “subchapter S corporation[] in which [the father] has an interest is
    income for the purpose of determining child support” (Matter of
    Gianniny v Gianniny, 256 AD2d 1079, 1081; see generally Matter of
    Mitchell v Mitchell, 264 AD2d 535, 539, lv denied 94 NY2d 754;
    McFarland v McFarland, 221 AD2d 983, 984). Here, contrary to the
    father’s contention, the Support Magistrate properly included $109,196
    in capital gains in his 2008 income, which the Support Magistrate
    derived from his 2008 individual income tax return.
    With respect to the Support Magistrate’s addition of
    entertainment expenses in the father’s 2008 adjusted gross income, we
    note that, under the CSSA, income includes self-employment deductions,
    less certain expenditures that encompass “unreimbursed employee
    business expenses except to the extent said expenses reduce personal
    expenditures” (Family Ct Act § 413 [1] [b] [5] [vii] [A]). For a
    parent who is self-employed, income is the parent’s “gross income less
    allowable business expenses” (Haas v Haas, 265 AD2d 887, 887 [internal
    quotation marks omitted]). The court thus may include in income
    “entertainment and travel allowances deducted from business income to
    the extent said allowances reduce personal expenditures” (§ 413 [1]
    [b] [5] [vi] [B]).
    Here, the Support Magistrate included $5,238 in entertainment
    expenses in the father’s income that were listed as deductions on the
    2008 tax return of his subchapter S corporation. The Support
    Magistrate described those expenses as “items not found to be expenses
    properly deducted from the corporation income for political
    contributions, travel and entertainment, and unexplained penalties.”
    There is, however, no testimony or other evidence in the record
    regarding whether those expenses were exclusively business expenses
    rather than personal expenses, nor is there testimony or other
    evidence regarding whether those expenses in fact reduced the father’s
    personal expenses (see Matter of Barber v Cahill, 240 AD2d 887, 889).
    Because the mother failed to meet her burden of establishing that the
    expenses were personal in nature, or at least partially so, we
    conclude that the Support Magistrate abused her discretion in
    including the entertainment expenses in the amount of $5,238 in the
    father’s income.
    Finally, we agree with the father that the Support Magistrate
    erred in imputing income to him in the amount of $562,112.66 based on
    increased depreciation. As the father properly contends, on the
    record before us that amount was improperly imputed to his income
    because the Support Magistrate failed to make any calculation as to
    what the straight-line depreciation would have been within the meaning
    of Family Court Act § 413. Although the father’s income for child
    support purposes may ultimately include imputed depreciation income,
    -3-                          1385
    CAF 11-00903
    the manner in which the Support Magistrate calculated the amount was
    not in accordance with Family Court Act § 413 (1) (b) (5) (vi) (A)
    because she did not calculate it as depreciation “greater than
    depreciation calculated on a straight-line basis for the purpose of
    determining business income.” We therefore reverse the order and
    remit the matter to Family Court to recalculate the father’s income
    and child support obligation in accordance with Family Court Act §
    413.
    We have considered the contention of the mother raised on her
    cross appeal and conclude that it is without merit.
    Entered:   December 30, 2011                    Frances E. Cafarell
    Clerk of the Court
    

Document Info

Docket Number: CAF 11-00903

Filed Date: 12/30/2011

Precedential Status: Precedential

Modified Date: 10/8/2016