Whether the issue arises in Minnesota or Wisconsin, the calculation of income for self-employed parents can be difficult. On September 10, 2014, the Court of Appeals for the State of Wisconsin upheld a Circuit Court calculation of a farmer’s income that was relevant to calculating his child support obligation. Here are the facts:
Sharon and Richard were married in 1990 and separated in 2009. Richard was a farmer prior to his marriage to Sharon and he continued to farm throughout their marriage. In addition to farming, Richard owns and receives income from rental properties. During the marriage, Sharon was primarily a homemaker. In the judgment of divorce, the circuit court awarded Sharon and Richard joint custody of their two minor children, with Sharon receiving primary placement. The circuit court found Richard’s annual income to be $91,820 and set Richard’s child support obligation at $1,132.54 per month.
The $91,820 figure arrived at by the court includes $66,981 in farm income. The court calculated the farm income by averaging Richard’s gross farm income, less his business expenses, as expressed on the previous eight years of his tax returns (2005-12), plus a 50% “add back” to make up for tax deductions taken on the depreciation of farm equipment. The court’s general approach was a proper method of calculating Richard’s income. See Wis. Admin. Code § DCF 150.03(1) and (2).
Sharon challenges only one aspect of the court’s determination of Richard’s income, namely, its decision to rely on a look back period of eight years, which she submits was too long.
Sharon’s argument focuses on the court’s use of an average of the previous eight years of income, which she argues should have been the previous three years. Sharon’s primary argument on this issue is that using an eight-year look back artificially reflects a lowered farm income because it includes Richard’s “unprofitable beef cattle operation,” which was terminated in 2010.
The Court of Appeals found that this argument fails, first, because the record illustrates that part of Richard’s financial success in 2010 and 2011 was attributable to the fact that Richard sold off his remaining cattle in those years.
Thus, there was a reasonable basis for the circuit court to have concluded that Sharon’s approach would distort the income picture by excluding years in which the cattle operation was more of a drain on Richard’s income and including years in which it was more profitable, instead of capturing both the gains and losses.
In addition to the fact that using a three-year average would not adequately reflect his gains and losses from livestock, the circuit court determined that using a longer term average “most accurately reflects [Richard’s] farm income” as a whole, including his grain production. This conclusion was based on explicit findings of the circuit court that Richard’s farm income “varies widely from year to year,” in part because Richard has “considerable leeway regarding the timing of sales of grain and livestock raised.” These findings are supported by facts in the record illustrating that income from grain, as well as cattle, fluctuated between 2005 and 2012. For example, Richard testified that his income from grain sales was negative in 2007 because he “didn’t sell … corn that year. We held it over into the next year because I thought prices were going up.”
The standard for the issues raised on appeal rests within the sound discretion of the circuit court and will not be overturned unless the circuit court improperly exercised its discretion. See LeMere v. LeMere, 2003 WI 67, ¶13, 262 Wis. 2d 426, 663 N.W.2d 789; see also Kastelic v. Kastelic, 119 Wis. 2d 280, 289-90, 350 N.W.2d 714 (Ct. App. 1984). A circuit court properly exercises its discretion when it reaches a rational decision based on application of the proper legal standards to the facts in the record. Weiler v. Boerner, 2005 WI App 64, ¶11, 280 Wis. 2d 519, 695 N.W.2d 833. A circuit court’s findings of fact will be upheld unless clearly erroneous. Wis. Stat. § 805.17(2) (2011-12).
Hence whereas other options were no doubt open to it, the circuit court made a rational decision on this issue by applying proper legal standards to the facts. The Court of Appeals found that simply because other look back periods might also have been justified does not render the eight-year period “arbitrary,” as Sharon argued.
In Court Of Appeals, District IV, Appeal No. 2013AP2046
In Re The Marriage Of: Sharon Lynn Larsen, Petitioner-Appellant, V. Richard John Larsen, Respondent-Respondent.
Appeal From A Judgment Of The Circuit Court For Crawford County: Jame P. Czajkowski, Judge. Affirmed.