Clark v. Clark
Annotate this Case
Clark v. Clark (99-028); 172 Vt. 351; 779 A.2d 42
[Filed 22-Jun-2001]
[Motion for Reargument Denied 02-Aug-2001]
NOTICE: This opinion is subject to motions for reargument under
V.R.A.P. 40 as well as formal revision before publication in the Vermont
Reports. Readers are requested to notify the Reporter of Decisions,
Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
any errors in order that corrections may be made before this opinion goes
to press.
No. 99-028
Alison M. Clark Supreme Court
On Appeal from
v. Chittenden Family Court
Thomas B. Clark June Term, 2000
Linda Levitt, J.
Mary P. Kehoe of Saxer Anderson Wolinsky & Sunshine, P.C., Burlington, for
Defendant-Appellant.
Kathleen B. Hobart of Fitzpatrick & Hobart, Jeffersonville, for
Plaintiff-Appellee.
PRESENT: Amestoy, C.J., Dooley, Johnson and Skoglund, JJ., and Toor, Supr. J.,
Specially Assigned.
SKOGLUND, J. Father appeals from an order of the Chittenden Family
Court granting mother's motion to modify child support. He argues that
the court had no jurisdiction to modify the award because mother failed to
meet her burden of showing a real, substantial and unanticipated change of
circumstances, see 15 V.S.A. § 660(a) & (b); and, even if the court had
jurisdiction, it incorrectly determined the amount of the modified award.
We affirm.
The following facts are not in dispute. Mother and father were
married in 1980. Their son Justin was born in 1982 and their daughter
Mattie was born in 1986. Justin suffers from moderate
cerebral palsy and, developmentally, is about five years behind his
chronological age. He also suffers from attention deficit disorder and,
as a result, has problems with his peers and with authority figures.
Mattie is healthy and has no special needs.
During the marriage, the parties resided in Charlotte, and Justin
attended Charlotte Elementary School, where he received special education
services. The parties were divorced in 1993. Pursuant to the parties'
stipulation, the court, in its final divorce order, awarded mother
parental rights and responsibilities for Justin and Mattie, awarded father
visitation, and provided that child support would be determined by the
magistrate. Over father's objection, the court awarded mother sole
possession of her interest in her father's estate and the Alison Clark
Trust, a testamentary trust established by her father. The magistrate
subsequently set child support at $944.92 per month, pursuant to the
parties' stipulation.
Father appealed the portion of the family court's decision that
awarded mother the estate and trust. In March 1994, the magistrate issued
a child support order in the amount of $1,287.00 per month, in accordance
with the child support guidelines. Father agreed to dismiss his appeal
when mother agreed to stipulate to a child support order of $600.00 per
month. In November 1994, the parties stipulated to child support of
$600.00 per month, and in December 1994, the magistrate amended the order
accordingly. The amended order deviated from the child support guidelines
by more than ten percent.
In the spring of 1994, mother moved to South Burlington because she
found Charlotte too isolating, and because she had heard positive things
about the South Burlington school system's program for special-needs
children. Justin, however, had difficulty in the school system. In March
1995, mother visited Crotchet Mountain Rehabilitation Center and
Preparatory School in New
Hampshire, determined it was appropriate for Justin, and enrolled him there
in June 1995, at a cost of $88,349.00 per year. In September 1995, mother
filed a motion to modify child support; in June 1998, the magistrate
granted mother's motion and set child support at $1,707.00 per month. The
family court affirmed. Father appeals.
I. Real, Substantial and Unanticipated Change of Circumstances
Father first argues that the court had no jurisdiction to modify the
award. According to father, because Justin's needs were apparent from an
early age, the fact that he required special schooling was not a real,
substantial, and unanticipated change of circumstances. (FN1)
15 V.S.A. § 660(a) provides, in pertinent part:
On motion of either parent . . . and upon a showing of a real,
substantial and unanticipated change of circumstances, the court may
annul, vary or modify a child support order, whether or not the order
is based upon a stipulation or agreement.
15 V.S.A. § 660(b) provides, in pertinent part:
A child support order . . . [that] varies more than ten percent from the
amounts required to be paid under the support guideline, shall be
considered a real, substantial and unanticipated change of
circumstances.
Under § 660(b), because the child support order mother sought to
modify deviated from the guidelines by more than ten percent, the court
had jurisdiction to modify the order. See Grimes v. Grimes, 159 Vt. 399,
406, 621 A.2d 211, 214 (1992) (declining to reach issue of whether decrease
in father's income was real, substantial and unanticipated change in
circumstances under § 660(a), citing § 660(b), and stating: "Because it
is undisputed that the 1987 order set the child support obligation more
than 10% above the guideline amount, the court did not err in modifying the
order.").
II. Amount of award
Father argues that the court incorrectly determined the amount of the
modified award because the court failed to impute income to mother for
stocks that father contends are performing poorly, stocks that were not
generating any income at the time of the hearing, expenses the trust incurs
annually, and the increase in value of the trust corpus. Further, father
argues, the court erroneously imputed $600 per month in income to him
based upon the monthly rental value of a cottage that father's employer
allows him to live in for free.
In Vermont, child support obligations are based upon the gross incomes
of the parties. See Ainsworth v. Ainsworth, 154 Vt. 103, 107, 574 A.2d 772, 775 (1990). The language of 15 V.S.A. § 653(5) defines "gross
income," in the context of child support calculations, as the "actual gross
income of the parent," including "income from any source, including, but
not limited to, . . . trust income." 15 V.S.A. § 653(5)(A)(i).
Furthermore, the definition of gross income provides that "[i]ncome at the
current rate for long-term United States Treasury Bills shall be imputed to
nonincome producing assets with an aggregate fair market value of
$10,000.00 or more." Id. (emphasis added).
The magistrate declined to impute income to mother for stocks that
father contended were performing poorly because he concluded that mother's
investments were income-producing assets. The family court affirmed.
Here, it is undisputed that mother's investments are income producing
assets. Thus, because the statute only applies to nonincome producing
assets, father's argument fails. See Tarrant v. Department of Taxes, 169
Vt. 189, 197, 733 A.2d 733, 739 (1999) (In determining legislative intent,
we begin with plain meaning of statutory language; if legislative intent is
clear from language, we enforce statute "according to its terms without
resorting to statutory construction."). As a policy matter, father argues
that courts should require child support obligors and obligees "to at
least make reasonable investments." We disagree. It is not the role of
the judiciary to second guess personal investment decisions or to
micromanage investment portfolios. And while we note that, "'[i]n a given
set of circumstances, the court may determine that it is appropriate to
require a parent to reinvest or liquidate certain assets to provide for his
or her children,'" this is not such a case. Ogborn v. Hilts, 692 N.Y.S.2d 490, 492 (App. Div. 1999) (quoting Webb v. Rugg, 602 N.Y.S.2d 716, 718
(App. Div.1993)). (FN2)
Next, father argues that the court erred in refusing to impute income
to mother for $643,000 worth of stocks in mother's trust that were not
producing income at the time of the hearing. According to father, the
evidence before the magistrate did not support his or the family court's
conclusion that those stocks were income producing assets. However, father
concedes that these stocks and the stocks he contends were performing
poorly were commingled in one investment account. As we stated above, the
facts of this case do not give rise to the circumstances in which a court
should evaluate the parties' investment portfolios. To require courts in
every case to carefully examine an investment account and determine which
stocks are producing income and which are not, would be an overly
burdensome task. (FN3)
Father also argues that the court erred in failing to impute income to
mother based upon $32,000 in trust-related taxes, legal and accounting
fees, and fiduciary fees that are paid out of trust income annually.
Under the terms of the trust, mother was entitled to the trust corpus when
she reached the age of forty. Because mother is over forty years old, she
could elect to have the trust distributed to her. Instead, mother
continues to use the executors of the trust to administer the trust,
thereby incurring annual fees and expenses. Father contends that because
mother chooses to leave the funds in the trust, the fees should be imputed
to her as income.
Father's argument appears to be based on a confusion regarding the
distinction, for child support obligation purposes, between the income a
trust generates, and the amount of such income that a beneficiary actually
realizes. As noted, the governing statute includes "trust income" in the
definition of a parent's "gross income." See 15 V.S.A. § 653(5)(A)(i).
In construing a statute, "'our overriding objective must be to effectuate
the intent of the Legislature.'" State v. Dixon, 169 Vt. 15, 17, 725 A.2d 920, 922 (1999) (quoting State v. Read, 165 Vt. 141, 147, 680 A.2d 944, 948 (1996)). In doing so, our first step "'is to look at the language
of the statute itself [because] [w]e presume the Legislature intended the
plain, ordinary meaning of the language.'" Id. (quoting State v. O'Neill,
165 Vt. 270, 275, 682 A.2d 943, 946 (1996)). It is clear from a reading
of the plain language of the statute that the legislature intended to
define income in terms of the parent's income, and not the
income generated by a trust.
Father presented no evidence that the amount of taxes and fees paid
was unreasonable, or what a reasonable fee would be to manage this
particular trust. Accordingly, in determining whether trust income used
to pay the costs of administering the trust should be imputed to mother,
the only question is whether she was entitled to receive as income the
amounts paid by the trustees for administrative costs. The terms of the
trust provide the trustees complete discretion over charging these costs
of administration either against principal, or against income, and do not
provide mother with any control over which source of payment is selected.
At trial, both parties' experts testified that the income mother
receives is the net income of the trust, after the costs of administration
have been deducted. Were the trustees to pay administrative costs out of
principal, leaving the gross income generated by the trust untouched, that
entire amount of trust income would be eligible for consideration in
calculating mother's child support obligation. The same would be true if
she was to invoke her right to have the trust principal distributed to her,
as there would then be no restriction on her right to the income generated
by the trust assets. These scenarios do not, however, reflect the reality
of mother's situation. The amount of trust income she receives is exactly
what she is entitled to receive, and what the trust requires to be
distributed to her, and no more, in light of the trustees' discretionary
election to charge administrative costs to trust income. Therefore, the
amount of trust income expended to pay the costs of administration are not
imputable to mother as income, and thus are not to be considered in
determining her child support obligation. The family court did not abuse
its discretion in not attributing the fees to mother as income.
Father next argues that the court erred by refusing to impute income
to mother based on the
increase in the corpus, or "capital gain" as he characterizes the increase
in corpus, of her father's trust. According to father, under 15 V.S.A. §
653(5)(A)(1), the increase in value of the trust corpus should be
considered a capital gain. While testimony was presented and the issue was
argued before the magistrate, father failed to raise this issue when he
appealed to the family court. A review of the required statement of
questions to be determined by the family court, see V.R.F.P. 8 (g)(3)(B),
and the accompanying memorandum shows that father did not argue this
question on appeal to the family court. As he failed to raise the issue
before the family court, he has waived the right to raise it on appeal to
this Court. See Morais v. Yee, 162 Vt. 366, 372, 648 A.2d 405, 410 (1994)
(arguments not presented before the trial court are not considered by this
Court).
Finally, father argues that the court erred in imputing $600 per month
in income to him based upon the monthly rental value of a cottage in which
his employer allows him to live free of charge, and which father occupies
approximately fourteen nights a month. On appeal, father contends there
was no evidence that staying at the cottage reduces his personal living
expenses. See 15 V.S.A. § 653(5)(A)(ii) (gross income includes: "in-kind
payments received by a parent in the course of employment . . . if they
reduce personal living expenses"). At trial, however, father affirmed that
the cottage was an in-kind benefit from his employer which reduced the
cost of his living expenses. The testimony of father, and of mother's
expert, agreed that the rental value of the cottage was $600 per month.
Father stated that he only resided in the cottage because it was offered
for free, and if he had to pay to stay there, he would instead stay in a
local motel. Thus, but for the housing provided by his employer, father
would incur additional monthly personal living expenses. Therefore, it was
proper to impute to father the rental value of the property. See McDaniel
v. McDaniel, 653 So. 2d 1076, 1077 (Fla. Dist. Ct. App. 1995) (under
statutory scheme including as
gross income for child support purposes in-kind payments to the extent that
they reduce living expenses, court properly included on monthly basis the
value of company car provided to husband).
Affirmed.
FOR THE COURT:
_________________________________
Associate Justice
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Footnotes
FN1. The magistrate found that Crotched Mountain was not an extraordinary
educational expense for purposes of determining mother's income. See 15
V.S.A. § 653(4) & (9). He did, however, find that Justin's enrollment at
Crotched Mountain was a real, substantial and unanticipated change of
circumstances for purposes of establishing jurisdiction to modify the
support order. The family court affirmed. Father does not argue that the
magistrate erred in finding that Crotched Mountain was not an
extraordinary educational expense. Therefore, we do not address the
issue.
FN2. The cases cited by the dissent to support the imputation by the court
of a higher rate of return on investments than is maintained by the party
are factually distinguished by an underlying obfuscation or deliberate
attempt to conceal assets. For example, in Miller v. Miller, 734 A.2d 752
(N.J. 1999), husband, a longtime market manager for Merrill Lynch and an
"experienced investor," sought a downward modification of his alimony
payments. On a net worth of over $6 million, $4.5 million of which was
liquid, the trial court granted husband's motion and reduced wife's alimony
from $200,000 per year to $48,000. Husband had invested his assets in a
manner yielding only 1.6 % interest. On appeal, the order was reversed
and remanded for recalculation using a method attributing investment
earnings at the rate on long-term A-rate corporate bonds. The court noted
that "a supporting spouse cannot insulate his or her assets from the
alimony calculus by investing those assets in a non-income producing
manner." Id. at 760. In Kay v. Kay, 339 N.E.2d 143 (N.Y. 1975), husband
claimed annual income of $28,000 but owned real estate and stock valued at
nearly one million dollars. He had attempted to obscure the true amount
of his income, deceiving his wife during their marriage as to his true
income level, and presenting "complicated testimony at trial in an effort
to explain away much of this income as spent on business needs." Id. at
145. It was against this factual backdrop that the court held that "if it
were necessary for the husband here to utilize his capital or other
assets, they would not be exempt from the requirement that he maintain the
marital standard of living simply because he voluntarily maintains his
finances in a form that limits the income they produce." Id. at 146.
And, in Pagar v. Pagar, 379 N.E.2d 1293, 1297 (Mass. Ct. App. 1980),
husband sought a downward modification of alimony and child support
payments after investing $49,000 in a yacht from which he subsequently
received income of $23 a week as captain. Because of "obscurities" in the
husband's expenses listed in his financial statements, and after
commenting on the fact that husband was "maintaining his finances in a form
that limits the income he receives, twenty-three dollars a week, from an
initial $49,000 investment," the court found he had not met his burden and
declined to modify his obligation.
The only case cited by dissent involving a trust beneficiary is In re
Dick, 18 Cal. Rptr. 2d 743 (Ct. App. 1993), in which the husband had
transferred more than $20 million in assets to various offshore trusts and
corporations, which he placed in the control of others acting for his
benefit. The appeals court stated that "[t]he crucial finding was that
husband had organized his assets so that he had created 'a labyrinth of
trusts and corporations designed by him . . . to shield and protect [him]
from creditors" and to avoid tax liability. Id. at 752. The court then
looked past the apparent form of ownership to determine the extent of
husband's true interest and the availability of those assets in assessing
his ability to pay spousal support. Id. at 751-52. There is no suggestion
in this case that mother has been duplicitous in her arrangements for
income.
FN3. The dissent argues that we should create a presumption imputing a
reasonable rate of return on underearning assets in child support cases,
rebuttable upon a showing that the parent has a purpose for investing in
the underearning assets which benefits the children eligible for support.
Post, at 9-10. In the present case, the family court awarded mother all of
her inherited wealth, including the trust established by her father,
despite father's strong opposition. In the 1993 findings and memorandum
of decision, the court concluded:
The crux of this case is that [father's] obligation to pay
maintenance is roughly offset by [mother's] good fortune in
inheriting a substantial estate from her family, which will be
needed to maintain a standard of living approximately that
established during the marriage (and which [father] will continue
to enjoy due to his relatively high earning capacity) and provide
somewhat for the reasonable needs of Justin for the foreseeable
future. So there is no misunderstanding, the court finds that
Justin is a child with serious disabilities which probably will
require that he receive substantial life time care.
The trial court apparently anticipated plaintiff's ongoing and
long-term care obligations for her son.
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Concurring and Dissenting
NOTICE: This opinion is subject to motions for reargument under V.R.A.P.
40 as well as formal revision before publication in the Vermont Reports.
Readers are requested to notify the Reporter of Decisions, Vermont Supreme
Court, 109 State Street, Montpelier, Vermont 05609-0801 of any errors in
order that corrections may be made before this opinion goes to press.
No. 99-028
Alison M. Clark Supreme Court
On Appeal from
v. Chittenden Family Court
Thomas B. Clark June Term, 2000
Linda Levitt, J.
Mary P. Kehoe of Saxer Anderson Wolinsky & Sunshine, P.C., Burlington, for
Defendant-Appellant.
Kathleen B. Hobart of Fitzpatrick & Hobart, Jeffersonville, for
Plaintiff-Appellee.
PRESENT: Amestoy, C.J., Dooley, Johnson and Skoglund, JJ., and Toor, Supr. J.,
Specially Assigned.
JOHNSON, J., concurring and dissenting. Today, the majority invites
parents to shelter their assets from consideration in calculating child
support obligations and allows parents to prioritize payments to their
financial advisors - to arrange such shelters - over support for their
children. The majority decides that it is "an overly burdensome task" for
the courts to follow the Legislative mandate to determine the income
potential of certain assets owned by parents. Ante, at 6. To simplify our
job, it holds that, for child support purposes: (1) courts cannot impute
income to underearning assets no matter how valuable the assets, nor how
little income the assets are earning, (2) contrary to the mandate of 15
V.S.A. § 653(5)(A)(i), courts cannot impute income to nonincome
producing assets either when they are commingled with income producing
assets in a single investment portfolio, and (3) fees for managing trust
investments, no matter how unreasonable, cannot be imputed as income to a
beneficiary who voluntarily chooses to have investments managed by
trustees. As a result of the majority decision, parents may invest in
growth assets - assets that grow in value but produce little or no income
- and insulate vast wealth from consideration in determining child support
obligations. While these rules indeed simplify our job in calculating
child support obligations, I believe they are contrary to Vermont's child
support laws and policy, which require child support obligations to
reflect the actual means of the parents. I therefore dissent from part II
of the majority's decision.
The child support calculation in this case fails to reflect the actual
means of mother. Mother does not work for remuneration. She receives
income from two trusts, the Douglas E. McWilliams Trust, and the Alison B.
Clark Trust, both testamentary trusts established by her father. The most
recent valuations of the trusts prior to the trial were from January 31,
1997. On that date the McWilliams trust was valued at $2,655,968 and the
Clark trust was valued at $102,492. At the time of the divorce in 1993,
mother was entitled to the corpus of the Clark trust, and as of mother's
fortieth birthday in 1995, she was entitled to the corpus of the McWilliams
trust also. Mother has chosen, however, to keep the corpus in each trust
and to continue to have the trusts managed by the trustees selected by her
father, at a cost of approximately $32,000 per year.
Father argues that the magistrate erred in determining mother's income
because he considered only the income mother reported on her tax returns,
which was almost entirely money distributed from the trusts to mother. By
this method, averaging mother's income for 1995 and 1996, the magistrate
found that mother has annual income of $113,584, about a 4 percent return
on the trusts'
investments. (FN1) Father contends that 4 percent is an unreasonable
return when long-termUnited States Treasury Bills were earning 6.96
percent at the time of the trial. Father presented three methods for
calculating mother's income.
The first method is based on the actual growth of the trusts,
including both income and capital growth. At the time the parties were
divorced on November 30, 1993, the value of the McWilliams trust was
$2,259,987. Thirty-eight months later, on January 31, 1997, the trust
assets had a value of $2,655,968, an increase in value of $395,981.
During the same thirty eight months, $543,610 was paid from the trust for
taxes, administrative fees and commissions, and distributions to mother.
Adding the increase in the value of the trust to the amount distributed
from the trust ($395,981+$543,610), father's expert concluded that for the
thirty-eight month period, the McWilliams trust grew by $939,591, an
annualized growth of $296,713 or an annualized rate of growth of about 13
percent.
Father maintains that mother's actual rate of return on the McWilliams
trust is 13 percent, not the 4 percent she has been receiving from the
trust. Because mother has withdrawn only 4 percent of the return on the
trust over the past three years, the trust has grown considerably. Father
points out that the magistrate's calculation ignores this substantial
capital growth. He contends that the growth of the trusts as well as the
income of the trusts should be considered for child support purposes,
otherwise mother is insulating a substantial increase in her wealth from
the child support calculation. He contends that mother's income should be
calculated by multiplying the 13 percent actual rate of return mother has
obtained over the past three years by the current value of the trust.
Following this method, mother's annual income from the McWilliams trust is
$345,276. Performing similar calculations for the Clark trust, father
argues that mothers earns an additional $11,000 including interest,
dividends and growth. Father's first method of calculating mother's
income, therefore, produces a total annual income of $356,276.
Second, even if we do not apply the 13 percent actual rate of return
mother has had on the McWilliams trust, father contends that the Court
should, at minimum, impute income to mother at the rate for long-term
United States Treasury Bills, 6.96 percent at the time of the trial.
Father maintains that it is unreasonable to earn less than the
treasury-bill rate on investments, and indeed, our child support statute
requires courts to impute income to a parent on nonincome producing assets
at the long-term treasury bill rate. See 15 V.S.A. § 653(5)(A)(i). At
this rate, the $2,655,968 value of the McWilliams trust provides an annual
income of $184,855, and the $102,492 value of the Clark trust provides an
annual income of $7,133, for a total annual income of $191,988 using
father's second method.
Father also presents a third method of calculating mother's income,
which does not capture the substantial growth of mother's investments but
he claims, nonetheless, produces a more accurate picture of mother's
actual means than the method used by the magistrate. He claims that, under
15 V.S.A. § 653(5)(A)(i), the magistrate was required to impute income to
mother on $643,000 worth of nonincome producing stocks held in the
McWilliams trust. At the 6.96 percent treasury bill rate, prescribed by §
653(5)(A)(i), this produces additional income of $44,753. He also argues
that the Court should consider the administrative fees of $32,000 annually
as income to mother because mother chooses to keep her money in these
trusts and therefore chooses to pay these unnecessary and excessive fees.
Adding the income imputed to the nonincome producing stocks and the
administrative fees to the $113,584 annual income found by the magistrate
produces a total income of $190,347 under father's third method of
calculation.
I.
The main issue in this case is whether Vermont courts should impute to
parents a reasonable rate of return on capital investments for purposes of
determining their child support obligations. The Supreme Court of New
Jersey carefully examined the same issue in the context of an alimony case.
In Miller v. Miller, 734 A.2d 752 (N.J. 1999), the ex-husband received
only $137,500 per year in income from his 4.5 million dollar investment
portfolio because he invested primarily in growth stock. The ex-wife
argued that the ex-husband's decision to invest for capital gains rather
than for a larger stream of income did not justify a reduction in her
alimony. She maintained that the court should impute income to the
ex-husband from the investments in the same way that courts impute income
to underemployed supporting spouses. Id. at 759. The court agreed: "Given
that both income earned through employment and investment income may be
considered in a court's calculation of an alimony award, it follows that
there is no functional difference between imputing income to the
supporting spouse earned from employment versus that earned from
investment." Id. at 760. In both instances, the courts may impute income
to an underearning asset, either underearning human capital or
underearning investment capital. Id.
The Miller Court found that the ex-husband could have invested his
substantial assets to yield more than the 1.6 percent rate of return it
was earning on his growth stock investments. It concluded that it was
therefore "appropriate to impute a reasonable income" from the ex-husband's
investments. Id. at 761. The court rejected a proposal to impute income
at the rate of 12 percent, the average annual growth rate of stocks,
because of the risks involved in the stock market. Rather, it concluded
that a prudent balance between investment risk and investment return was
the rate on long-term A-rated corporate bonds. Thus, it required the
trial courts to impute income from underearning investments at the average
rate of long-term A-rated corporate bonds over the past five years, 7.7
percent in that case. The court did not require the ex-husband to change
his investments, it simply required "the imputation of a more reasonable
income from those investments." Id.
The rationale in Miller applies equally in the context of child
support. For example, in Kay v. Kay, 339 N.E.2d 143, 145-46 (N.Y. 1975),
the Court of Appeals of New York ruled that a father's capital resources,
including real estate and growth stock investments, could be considered in
determining his support obligation for his ex-wife and children. The court
held that the father was not exempt from maintaining alimony and child
support at the marital standard of living "simply because he voluntarily
maintains his finances in a form that limits the income they produce." Id.
at 146. It reasoned that the situation was analogous to cases involving
unemployed or underemployed supporting spouses, "cases wherein our courts
have considered the income a husband is capable of earning by honest
efforts, given his education and opportunities." Id. The court concluded
that the father's resources rather than his net income should be
considered in determining what the father could afford for alimony and
child support. Id.
Although few courts have addressed the issue of underearning assets in
the context of a child support case, those that have addressed the issue
have imputed income. See, e.g., Pagar v. Pagar, 397 N.E.2d 1293, 1297
(Mass. Ct. App. 1980) (reversing decision to reduce father's support
obligation where father invested $49,000 in yacht for chartering business
and earned twenty-three dollars per week as boat captain because income
potential from business was not adequate to outweigh limited return father
was making on investment); Kay, 339 N.E.2d at 145-46; see generally
Annotation, Divorce and Separation: Attributing Undisclosed Income to
Parent or Spouse for Purposes of Making Child or Spousal Support Award, 70
ALR4th 173 § 12 (1989 & Supp. 2000). Because Vermont courts consider
income from investments and income from employment for child support
purposes, it follows that if we impute income to underemployed parents, we
should impute income to parents with underearning investments. (FN2)
II.
Mother argues, nevertheless, that the magistrate may not impute income
to the underearning investments in this case because they are held in a
trust, not in her own name. Thus, mother maintains that the form in which
the assets are held should be controlling. Although we have not addressed
this issue in Vermont, the case law in other states holds that the form in
which assets or income is held is not controlling in child support and
alimony cases. In such cases, courts have looked beyond the legal
entities - corporations and trusts - controlled by parents and supporting
spouses to determine the actual means available for support.
For example, courts have imputed income to parents from underearning
interests in closely-held corporations. Thus, "[w]hen an obligor is the
sole stockholder of a corporation and determines his or her own salary,
the corporation's income may be considered in determining the obligor's
earning capacity." Bleth v. Bleth, 607 N.W.2d 577, 579 (N.D. 2000).
Similarly, courts impute income to parents with significant control over
earnings of a corporation where the corporation has
retained earnings that the parent could have received as salary. Id.;
see, e.g, Kelley v. Kelley, 656 So. 2d 1343, 1345 (Fla. Dist. Ct. App.
1995) (parent cannot avoid child support by being under compensated by
closely-held family corporation); Merrill v. Merrill, 587 N.E.2d 188, 191
(Ind. Ct. App. 1992) (retained earnings are profit earned by pharmacy,
which is solely owned by father, and could properly be considered income
to father despite father's choice to roll over profits into business);
Boudreau v. Benitz, 827 S.W.2d 732, 734 (Mo. Ct. App. 1992) (no error for
purposes of child support in attributing to father's income amounts listed
as retained earnings on balance sheet for corporation solely owned by
father and new wife); Buley v. Buley, 530 N.Y.S.2d 697, 698 (N.Y. App.
Div. 1988) (court properly considered factors other than current earnings
in determining fathers income for child support purposes because father
owns own business and could control net draw); see generally Annotation,
Divorce and Separation, supra §§ 4-7.
When a parent has an interest in a closely-held corporation, courts
pierce the corporate veil to reveal the true sources of income available
to the parent to provide support. See, e.g., Boudreau, 827 S.W.2d at 734
(where father and new wife owned 100 percent of corporation, trial court
did not err in piercing veil of corporation and attributing to father
amounts listed as retained earnings and loan from stockholder on corporate
balance sheet); see also Maier v. Maier, 418 A.2d 558, 560-61 (Pa. Super.
Ct. 1980) (because ex-husband is sole stockholder of two corporations and
determines his own salary, case is appropriate for piercing corporate veil
to consider income of corporations in determining ex-husband's earning
capacity). In determining whether to impute income to a parent from a
closely-held corporation, the central question is whether the parent has
control over the income and assets of the corporation. See Bleth, 607 N.W.2d at 579.
These cases are directly analogous to the case before us. Mother's
true income is veiled by
the legal formality of the trust, like the parent who is a sole shareholder
of a corporation or the parent who has significant control over corporate
earnings in a closely-held corporation. Just as courts have pierced the
corporate veil in those cases to examine the income potential of the
parent, this Court should pierce the veil of mother's trusts here to
accurately examine her income potential. The issue here should not be
whether the assets are held in mother's name or in the name of the trust
but rather whether the assets are within her control. See also In re
Dick, 18 Cal. Rptr. 2d 743, 752 (Cal. App. Div. 1993) (affirming trial
court award of spousal support based on income imputed to obligor from
various off-shore trusts and corporations, although not in obligor's name,
in his control). Because mother here has control of the assets in both
trusts, this is an appropriate case to impute a reasonable rate of return
from her low-yield investments. The legal formality of the trust should
not distract us from acknowledging that all the trusts' assets belong to
mother and should be considered in determining the child support
obligation.
In sum, just as courts have imputed a reasonable rate of return on
underearning investments in alimony cases, and in child support cases have
imputed, (1) a reasonable income to parents from underearning interests in
closely-held corporations, and (2) a reasonable income to underemployed
parents, see also 15 V.S.A. § 653(5)(A)(iii) ("gross income" for child
support purposes includes potential income of parent who is voluntarily
under employed), I believe there should be a presumption to impute a
reasonable rate of return on underearning investments in child support
cases. (FN3) As recommended by the American Law Institute, I would employ
a presumption that could
be rebutted where the parent can show that there is a purpose for investing
in the underearning assets that benefits the children. ALI, Principles of
the Law of Family Dissolution: Analysis and Recommendation, Part II §
3.12(4)(b) at 90 (Tentative Draft No. 3) (April 8, 1998) (adopted at the
1998 Annual Meeting). In addition, I would include in the parent's gross
income the income potential of an underearning trust where the parent has
control over the assets of the trust. To do otherwise creates a shelter
for parents to insulate their true wealth from our consideration in
determining child support obligations. Cf. Murray v. Murray, 716 N.E.2d 288, 294 (Ohio Ct. App. 1999) (if court excluded stock options from gross
income, parent "receiving such options would be able to shield a
signiificant portion of his income from the courts, and deprive his
children of the standard of living they would otherwise enjoy").
III
The next issue is to consider the rate of return that courts should
impute to underearning assets. I would reject father's proposal to
impute income to mother from the trusts at the 13 percent rate - the rate
the trusts have been earning in income and capital over the past
thirty-eight months - for the same reason that the Miller court rejected a
proposal to impute income to underearning investment at "the average
annual twelve percent growth rate of stocks." 734 A.2d at 761. As the
Miller court concluded, it would not be equitable to do so "because of the
inherent risks involved in stock market investments." Id. Indeed, father
essentially conceded, before the family court, that
the treasury-bill rate was the preferable rate because it was the
middle-of-the-road approach and because it provides a clear rule for
courts and litigants to follow.
While jurisdictions differ on this issue, I believe that the Vermont
Legislature has already determined the treasury-bill rate is the
appropriate balance between investment risk and investment return for
purposes of imputing income to underearning investments in Vermont. Under
15 V.S.A. § 653(5)(A)(i) courts are required to impute income to a parent
on nonincome producing assets at the rate of return for long-term United
States Treasury Bills. Thus, our Legislature has concluded that the rate
of return for long-term United States Treasury Bills is the reasonable rate
of return to impute to underearning assets. Further, I agree with father
that the benefit of imputing income at this this rate is that it provides
clear rule for courts and litigants to follow that is consistent with our
statutory scheme. Finally, this is a fair and reasonable method for
imputing income to a parent who chooses to invest in growth, rather than
income generating assets, thus becoming 'equity rich' while remaining
'child support poor.' See Miller, 734 A.2d at 759 (ex-wife argues that
ex-husband's investments in growth stock make him equity rich but alimony
poor). While parents may freely choose their investments, courts must
develop a method that fairly characterizes a parent's actual means so that
the other parent and the children are not burdened as a result of
individual choices to invest for future rather than current benefit.
IV.
The majority rejects my proposal to impute income to underearning
assets at the treasury-bill rate for three reasons. First, the majority
concludes that it is constrained by the language of 15 V.S.A. §
653(5)(A)(i) from imputing income to assets that are income producing
regardless of how little the assets are earning. See ante, at 4-5.
Section 653(5)(A)(i) provides in part, "Income at the
current rate for long-term United States Treasury Bills shall be imputed to
nonincome producing assets with an aggregate fair market value of $10,000
or more." (Emphasis added.) Because mother's growth stocks provide some
income, albeit only a 4 percent return, they are not "nonincome producing
assets." The majority concludes, therefore, that the statutory language
prohibits the Court from imputing income to her on these assets at the
treasury-bill rate. I disagree.
The statute does not explicitly address how to consider underearning
assets. Nonetheless, it is clear from the statute as a whole, and this
provision specifically, that the intent of the Legislature is to capture
the actual means of parents regardless of how they receive their income or
how they hold their assets. See 15 V.S.A. § 653(5). The definition of
"gross income" is broadly written and attempts to capture income in
whatever form. It begins by defining "gross income" as "income from any
source" and then provides a nonexclusive list of sources of income that are
included in gross income. Id. § 653(5)(A)(i) ("income from any source,
including, but not limited to, income from salaries, wages, commissions,
royalties, bonuses, dividends, severance pay, pensions, interest, trust
income, annuities, capital gains, social security benefits, workers'
compensation benefits, unemployment insurance benefits, disability
insurance benefits, gifts, prizes, and spousal support actually received")
(emphasis added).
The statute attempts to capture potential income by (1) requiring
courts to impute income at the current treasury-bill rate "to nonincome
producing assets with an aggregate fair market value of $10,000 or more;"
and (2) requiring courts to impute income to "a parent who is voluntarily
unemployed or underemployed." Id. § 653(5)(A)(i) & (iii). It also allows
courts to look beyond the formality of parties' tax returns by allowing
them (1) to include in income "amounts allowable by the Internal Revenue
Service for the accelerated component of [business] depreciation expenses;"
and (2) to disregard other business expenses as "inappropriate for
determining gross income for purposes of calculating child support." Id.
§ 653(5)(A)(iv). The statute clearly tries to capture income and
potential income in whatever form to allow courts to calculate the actual
means of parents. The distinction the majority makes between nonincome
producing assets and underearning assets is not required by the language
of the statute, nor consistent with the overall statutory scheme.
Further, one of the primary purposes of the child support guidelines
is to standardize child support orders so that they are predictable.
Grimes v. Grimes, 159 Vt. 399, 403, 621 A.2d 211, 213 (1992). Thus, no
matter how parents hold their assets, similarly situated parents should be
treated similarly. Under the majority's construction, parents of similar
means would be treated differently. For example, a parent holding 2
million dollars invested in growth stock with a minimal 1.0 percent annual
return would be treated as having $20,000 in annual income, while a parent
with 2 million dollars invested in a growth stock with no income would
have income imputed at the treasury-bill rate and treated as having about
$140,000 in annual income, although both parents have the ability to earn
the same income and therefore should be treated similarly. The majority
provides no rationale for treating nonincome producing assets differently
from other underincome producing assets.
The majority's construction is also flawed because it treats wage
earners differently from assets owners. While the majority would impute
income to an underemployed parent, it would not impute income to a parent
from underearning assets. Thus, those who work but not to their full
capacity will have income imputed to them as though they worked to their
full capacity, while those with assets invested in underearning assets,
increasing their capital value, will not have income imputed to them
although their assets are not earning income to their full capacity. I can
conceive
of no reason that the Legislature would choose to treat these two groups
differently for the purposes of child support, much less any reason that
the Legislature would favor parents who own assets over parents who earn
wages.
"The fundamental rule of statutory interpretation is to give effect to
the intent of the Legislature." Roddy v. Roddy, 168 Vt. 343, 348, 721 A.2d 124, 128 (1998). "This Court construes statutes to avoid absurd
results manifestly unintended by the Legislature." Id. at 347, 721 A.2d at
128. The majority construes § 653(5)(A)(i) so narrowly that it conflicts
with the intent of the Legislature to treat similarly situated parents
similarly by imputing income to underemployed parents and imputing income
to their underearning assets. Nothing in the language of § 653(5)(A)(i)
requires us to create a rule in conflict with the statutory purpose and the
related, child-support case law. Indeed, in determining the Legislature's
intent, "this Court analyzes not only a statute's language, but also the
'subject matter, its effects and consequences, and the reason and spirit of
the law.'" Id. at 348, 721 A.2d at 128 (quoting In re R.S. Audley, Inc.,
151 Vt. 513, 517, 562 A.2d 1046, 1049 (1989). Taking these further
factors into consideration requires imputing income to all underearning
assets, not just nonincome producing assets.
Second, the majority rejects father's argument that a reasonable rate
of return should be imputed to mother's investment assets because "[i]t is
not the role of the judiciary to second guess personal investment
decisions or to micromanage investment portfolios." Ante, at 5. I do not
suggest that we tell parents how to invest their money. To the contrary,
parents may choose to invest their capital as they see fit. Nor do I
criticize mother's choice to invest in growth stock to improve her
situation in the future. Nonetheless, while a parent may choose to invest
primarily in growth stock for her own future benefit, the children and the
other parent should not be required to pay now
for that benefit. See Merrill, 587 N.E.2d at 191 (while father's choice to
roll over profits into business may be sound business practice, court will
nonetheless impute the profit as income for child support purposes);
Miller, 734 A.2d at 761 (emphasizing that holding does not require
ex-husband to actually invest all capital in long-term corporate bonds;
court does not intend to control investment options but to require
imputation of a more reasonable income from investments); Kay, 339 N.E.2d
at 146 (husband is not required to finance support by investing in assets
with reasonable return if he is able to meet it by other means but court
is not obliged to honor his decision to invest in growth assets for his
own future benefit); see also Murray, 716 N.E.2d at 293, 299 (choice not to
exercise stock options is investment choice father may make but court will
impute income because father may not benefit by depriving child of
substantial growth in option values).
Third, the majority concludes that it would be overly burdensome for
courts to carefully examine investment accounts to determine whether
various stocks are income producing or not and whether they are yielding a
reasonable rate of return. See Ante, at 6. The ex-husband in Miller
similarly argued that computing the potential yield of his investments was
an overly complicated task that should not be undertaken by the courts.
734 A.2d at 757. The court rejected this claim, stating that courts often
impute income from different occupations for unemployed or underemployed
supporting spouses and that "[t]he calculation of imputed income from
investments is equally within our courts' capabilities." Id. at 760. I
agree. The task is certainly no more complicated than imputing income to
an underemployed parent. In any event, the mere difficulty of the
calculation should not be reason to ignore earning potential of parents in
child support cases. Cf. id. at 760-61 (difficulty in determining value
of party's claim is no reason to bar claim). The majority abdicates its
responsibility simply because it finds it "an overly burdensome task."
Ante, at 6.
Moreover, our courts already examine investment accounts to determine
the actual annual yield to determine the parents' income. All the
difficult determinations are made at this point: (1) which assets produce
income and which do not, and (2) how much income do the income-producing
assets yield? Having determined the actual yield, the court must simply
decide whether the yield is less than or greater than the long-term United
States Treasury Bill rate, a rate of return that the court already uses to
impute income to nonincome producing assets under our statutory scheme. If
the investments yield a greater return, there is no further calculation to
do. If the investments yield a lesser return, then the court must
multiply the total value of the assets by the treasury-bill rate. Having
valued closely-held corporations, imputed income from nonincome producing
assets and imputed income to underemployed parents, with the help of
experts if necessary, Vermont courts are up to the tasks necessary to
ensure fairness in child support orders.
I briefly address three additional issues addressed by the majority.
Because I would adopt father's second method for calculating mother's
income, I would reject father's third method of imputing income to mother
from only nonincome producing stocks and imputing the $32,000 in
administrative fees to mother. Father's second method - imputing income
from the trusts based on the treasury-bill rate of return on the total
value of the two trusts - is a fairer way to calculate mother's income
because it captures the income potential of all underearning assets. It is
also easier to apply in future cases; the issue is simply whether the rate
of return on the total value of all assets reaches the treasury-bill rate,
and if not, the same rate of return is imputed to all underearning assets.
Nonetheless, I address the nonincome-producing-stock and the
administrative-fees issues raised by father's third method because the
majority is wrong to fail to take into account in any way the potential
income from these two sources.
First, the majority holds that it will not impute income from $643,000
worth of nonincome producing stock in mother's portfolio, despite the
statutory mandate to do so, because it is commingled in one investment
account. The majority reasons that it "would be an overly burdensome task"
for courts "to carefully examine an investment account and determine which
stocks are producing income and which are not." Ante, at 6. This holding
conflicts with the plain language of § 653(5)(A)(i), which requires the
courts to impute income to nonincome producing assets with a value over
$10,000. It also conflicts with the purpose of the child support statute
by creating a loop-hole for parents to shield their nonincome producing
assets from the courts' consideration by commingling them in an account or
portfolio with income producing assets. The result is that parents may
insulate the bulk of their assets from consideration in a child support
proceeding by combining them into one investment portfolio that yields
minimal returns, as long as it provides some income, no matter how little.
The task of determining whether a stock produces income is no more
burdensome than other tasks that the court undertakes. The income in
cases like this - where the parents have income and assets in forms other
than simply wages - is often disputed. Frequently, expert testimony is
presented, and the court must determine the parents' income as a question
of fact, like any other question of fact. Reducing the burden imposed
upon the courts to do such fact finding certainly does not justify the
inequitable result that the majority proposes here, which is to simply
ignore $643,000 worth of stock because it is too difficult to determine
whether the stock was producing income or not, even with the help of the
expert testimony in this case. I doubt the Legislature intended such a
result.
Second, the majority holds that it cannot impute the $32,000 of
administrative fees to mother
because (1) § 653(5)(A)(i) allows the court to include only the"trust
income" to mother, (2) mother receives the net income from the trust after
the $32,000 for administrative fees is paid, and (3) it is within the
trustees' sole discretion whether to pay these fees from the capital or
from the income of the trust. Ante, at 7-8. Section 653(5)(A)(i),
however, in no way limits our consideration to "trust income," as the
majority concludes. Ante, at 7. Indeed, the subsection begins by stating
that "[g]ross income shall include: (i) income from any source, including,
but not limited to . . . trust income." 15 V.S.A. § 653(5)(A)(i)
(emphasis added). Thus, the plain, ordinary meaning of the subsection does
not limit us to considering the "trust income."
Father argues that the administrative fees should be imputed as income
to mother because they are unnecessary and excessive. He contends that
they are unnecessary because the stocks are all "garden variety" held in
accounts with well-known brokerage firms. According to father, mother
could maintain the same stocks in the same accounts without incurring the
$32,000 administrative fees she pays to maintain the trusts. He also
contends that the fees are excessive because they are equal to about 28%
of mother's income of $113,584 as calculated by the magistrate. Piercing
the veil of the trusts, I recognize that mother chooses to keep her assets
in these trusts and thus chooses to pay $32,000 for the trustees to manage
it. Thus, I agree with father that the magistrate had discretion to
impute the $32,000 as income to mother if he found the expense deduction
"inappropriate for determining gross income for purposes of child
support." Id. § 653(5)(A)(iv). Although not technically a business
expense under this statutory subsection, mother pays these fees to the
trustees to generate income and capital for her; thus, they are analogous
to business expenses - as mother concedes in her brief - and should be
treated similarly.
Thus, the real issue is whether the fees are reasonable for mother to
pay in view of the return
that the trustees have generated for her on her capital assets. The answer
to this question depends in part on whether mother's annual income is
determined to be $113,584, $191,988 or $356,276. While $32,000 appears
excessive to generate $113,584 from a trust of over two million dollars, it
is somewhat more reasonable to generate $356,276. In any event, father
presented no evidence on the reasonableness of the fees. His expert
testified that she had no direct knowledge of what a brokerage firm or
investment house would charge to manage a portfolio the size of mother's.
Consequently, I would hold that in this case, it was not appropriate to
impute the $32,000 in administrative fees to mother. Nonetheless, upon a
proper showing, I believe it is within the magistrate's discretion to find
the fees unreasonable and to therefore impute that fee to mother as income,
just as other unreasonable expenses may be disregarded by the court.
Finally, the majority holds that father waived the issue of whether
the increase in the corpus of the trusts should be considered a "capital
gain" to mother because father "failed to raise the issue when he appealed
to the family court." Ante, at 9. Mother raised this issue at trial in
response to father's contention that the court should consider both the
income and the capital growth of mother's trusts to accurately determine
her rate of return on the trusts. (FN4) Both parties' expert witnesses
were
cross-examined on whether their analysis of mother's income was based on
taxable transactions or capital growth that was not taxable. In his
proposed findings and conclusions, father argued, based on his expert's
testimony, that mother's actual rate of return on the trust was 13 percent.
He argued that the magistrate should impute a 13 percent rate of return on
the corpus of the trust to calculate mother's income. In the alternative,
he argued for the court to apply the treasury-bill rate. These issues
were clearly addressed at trial.
They were also addressed on appeal to the family court. In his brief,
father argued that the court should impute income to mother because her
tax returns did not accurately reflect her means. To support this
contention, father listed six factors, including (1) based on her tax
returns, mother is earning only 4 percent per year return on a trust
valued at over $2,600,000, which is far less than the treasury-bill rate
of 6.96 percent, and (2) the actual corpus of the trust is growing at a
rate of 19 percent per year. Father maintained that, because the decision
not to purchase investments that generate interest and dividends rests
entirely within mother's discretion, it was unfair to father not to impute
income based on the corpus of the trust. He then argued for the
"middle-of-the-road" approach and requested that the court impute income
from the trust at the treasury-bill rate.
I agree with the majority that father waived the claim that the court
should impute income at a 13 percent rate of return. But the majority
confuses two issues: (1) whether income should be imputed to the trust
corpus, and (2) if so, at what rate. Father never waived the issue of
whether income should be imputed to mother based on the corpus of the
trust. This issue is clearly addressed in his brief. He waived only his
claim that the stock-market rate of return is the rate that should be
imputed, arguing instead for the treasury-bill rate. The majority is wrong
in concluding that father waived his claim that "the court erred by
refusing to impute income to mother based on the increase in the corpus,
or 'capital gain' as he characterizes the increase in the corpus, of the
trust." Ante, at
8-9.
As a result, the majority decision never directly addresses father's
main contention here and at trial that the child support order in this
case fails to reflect the actual means of mother because it does not take
into consideration the substantial capital growth of her two trusts over
the past thirty-eight months. Construing § 653(5)(A)(i), the majority
concludes that (1) only "trust income" may be included in mother's gross
income, (2) the trusts are income producing assets so no income may be
imputed from them as "nonincome producing assets," (2) father waived the
issue of whether the capital growth should be considered by failing to
raise it before the family court. Essentially, the majority reads the
list in § 653(5)(A)(i) as an exclusive list. It finds nothing in the list
that covers "capital growth of a trust;" therefore, it concludes that the
capital growth of a trust cannot be considered for child support purposes.
This strict construction is completely contrary to the statute; the §
653(5)(A)(i) list is nonexclusive. See 15 V.S.A. § 653(5)(A)(i)
("including, but not limited to"). Thus, it should be read broadly to
include unlisted sources of income that would be consistent with the
purpose of the statute. The majority never undertakes this analysis.
Because the majority construes the child support statute to conflict
with both its plain language and its purpose, and thereby creates a
shelter for parents - especially wealthy parents - to insulate their
income potential from child support calculations, I respectfully dissent.
I am authorized to state that Justice Dooley joins in this dissent.
FOR THE COURT:
_______________________________________
Associate Justice
------------------------------------------------------------------------------
Footnotes
FN1. The magistrate disregarded some capital losses claimed by mother;
thus, the magistrate's finding on mother's income was slightly higher than
mother contended at trial.
FN2. The majority contends that Miller, Kay and Pagar are distinguishable
because in those cases the supporting parent was deliberately attempting
to conceal assets. See Ante, at 5 n.2. This fact is simply not relevant
to a child support calculation. A child support obligation is based on the
actual means of the parents, not on whether the parent is attempting to
conceal assets. The amount of the child support obligation is not
affected by the parent's failed attempt to conceal assets. The point is
to determine the actual means of the parent.
FN3. My proposal is consistent with the American Law Institute's
recommendation to "[i]mpute an ordinary rate of return to an asset that
yields less than an ordinary rate of return" in child support cases. ALI,
Principles of the Law of Family Dissolution: Analysis and Recommendation,
Part II § 3.12(4)(b) at 90 (Tentative Draft No. 3) (April 8, 1998)
(adopted at the 1998 Annual Meeting). Under the Institute's
recommendations "[a]n ordinary rate of return is the prevailing rate of
return for secure investments." Id. The Institute explains that the
trier of fact should generally impute an ordinary rate of return to a
portfolio of growth equities, which produces little or no current income.
See id. § 3.12 illus. 3. Where, however, the parent owns nonincome
producing stock in a closely-held corporation for which she works as a
manager, and owning the stock is necessary to maintain her position and
influence the business, the trier of fact should not impute income from the
stock. Id. In such an instance, the mother can rebut the presumption
because her investment in the underearning assets benefits the children by
improving her employment situation.
FN4. To the extent that father addresses the statutory issue of whether
capital growth may be considered as a "capital gain," an item listed in §
653(5)(A)(i), he is responding to mother's claim that capital growth
cannot be considered in determining mother's income because § 653(5)(A)(i)
includes only a realized "capital gain," not capital growth. According to
mother, "capital gain" in § 653(5)(A)(i) must be construed consistently
with the tax code, and therefore, includes only realized capital gains not
capital growth. But see 15 V.S.A. § 653(5)(A) (allowing court to disregard
business expenses allowed by tax code); Miller, 734 A.2d at 759 (rejecting
contention that court consider only realized capital gains, as defined by
tax code, for alimony purposes); Murray, 716 N.E.2d at 299 (holding that
magistrate must consider as gross income appreciation in value of stock
options that father received from employer although capital gains were not
realized); L. Morgan, Child Support Guidelines: Interpretation and
Application § 2.03[e][8], at 2-28 (2000) (recent trend is for courts to
"treat unexercised stock options, that is unrealized capital gains, as
income").
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