child support 101/102 - The Gitlin Law Firm

the Supreme Court’s decision stated:
“The Supreme Court could have easily decided to refuse to take cert
on this case. They probably accepted cert knowing that there was a
division among the districts and wanting to clear up the issue.
Unfortunately, after accepting cert and reviewing the record, they
learned that there was nothing to state the nature of the depreciation
expense. Being a conservative judiciary, the court did the proper
thing and refused to suggest by way of broad dictum that had the
expense been justified as reasonable and necessary that the expense
would have been allowed.”
By way of example, Nelson held that the child support payor was not allowed to deduct farm
equipment depreciation from his net income because he failed to show the expense was an
"expenditure for the repayment of debt." It further held that the child support payor was not allowed
to deduct payments toward farm operating loan principal from his net income because allowing the
deduction would have permitted the payor use of the same deduction twice.
2. Quantification: Attached are two spreadsheets analyzing certain issues according
to the relevant factors in the statutory and case law. The first spreadsheet analyzes
the depreciation elements of the cases and the significant factors. The second
spreadsheet analyzes the business expense cases (non-depreciation cases) and the
significant factors.
One opinion, Gay on Behalf of Gay v. Dunlap, is divided into two parts because the determination
of one expense was remanded to the trial court. The remainder of the expenses were not allowed.
The column regarding "Expense Allowed" refers to those cases in which the expense was ultimately
allowed as a deductible reasonable and necessary business expense as an end result. This includes
cases where the expense was allowed at the trial court level and the result was affirmed, and cases
where the trial court did not allow the expense but there was a reversal.
The taxpayer type is not always clear from the opinion. Where it appears relatively clear, the
taxpayer type is set forth. It is clear from the spreadsheet that in most cases the taxpayer is a
Schedule C taxpayer. In only one case was the business incorporated: IRMO Heil. It is probably
not coincidental that this is one of the few cases where at least a portion of the expense was allowed
as a reasonable and necessary business expense.
3. Flowchart re Depreciation Cases: The IRMO Davis case presents what can be
illustrated via a flow chart regarding depreciation cases. Note, however, that
especially in light of the Illinois Supreme Court’s Minear case as well as the recent
Worrall case, it appears that the law is not at all fixed as to whether there is an
emphasis on proof of a debt repayment schedule.
a. Debt Repayment Schedule: First determine if there is a debt
repayment schedule.
a. If no Generally non-deductible (but issue not
definitely resolved per Minear/ Worrall)
b. If yes Go to step b.
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