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Issue: Under Florida law, will a husband’s reported but unrealized income from a family’s limited partnership be included in determining husband’s income for the purposes of calculating child support and alimony?
| Area of Law: | Family Law |
| Keywords: | Income from a closely held business; Calculating child support and alimony |
| Jurisdiction: | Florida |
| Cited Cases: | 657 So. 2d 41; 567 So. 2d 916; 520 So. 2d 299; 463 So. 2d 218; 702 So. 2d 639 |
| Cited Statutes: | Fla. Stat. § 61.046(4); Fla. Stat. § 61.046(7), 61.08(2)(g) |
| Date: | 07/01/2000 |
In several cases, Florida appellate courts have considered claims involving income from a closely held business that is reported as earned by a shareholder but is actually retained by the business. See, e.g., Martinez v. Martinez, (Fla. App. 3 Dist. May 31, 2000); McHugh v. McHugh, 702 So. 2d 639 (Fla. App. 4 Dist. 1997); Sohacki v. Sohacki, 657 So. 2d 41 (Fla. App. 1 Dist. 1995); Zipperer v. Zipperer, 567 So. 2d 916 (Fla. App. 1 Dist 1990). In most of those cases, the income was attributed to the shareholder. However, the court in McHugh did not attribute the corporation’s income in calculating child support. McHugh, 702 So. 2d 639.
In McHugh, the husband was a ten percent shareholder in the corporation which employed him. Id. The corporation retained earnings, but for taxation purposes those earnings were passed through to the shareholders, including Mr. McHugh, and reported on K-1 income tax forms. The corporation paid the IRS the tax due on Mr. McHugh’s earnings. Id. In computing the husband’s income for the purposes of child support, the trial court did not include the K-1 earnings or the amount which the corporation had paid to the IRS for taxes on those earnings. The appellate court upheld the trial court’s determination. The appellate court noted that “[t]he wife offered no proof that the husband, being only a 10% shareholder of […]