The treatment of Sub-S retained earnings that pass-through to the parent-shareholder’s tax return has long vexed mediators and lawyers in support cases.  When calculating support, do we include the income which is taxable to the recipient but undistributed to him ?   In a case of first impression, the Supreme Judicial Court has weighed in with some useful guidance.  Courts must now determine, on a case-by-case basis, “what portion (if any) of that pass-through income realistically and fairly is or should be deemed available to the shareholder for purposes of paying child support.”  Courts must (1) consider “a shareholder’s level of corporate distributions;” (2) “evaluate the legitimate business interests justifying retaining corporate earnings;” (3) “weigh affirmative evidence of attempts to shield income by means of retained earnings . . . In that regard, the corporation’s history of retained earnings and distributions may be relevant.”   J.S. v. C.C., 454 Mass. 652 (9/10/09).

Timing is everything.  Mother could not be held in contempt for threatening not to allow the children to visit father for Christmas, according to the Appeals Court.  Rejecting the father’s claim of “anticipatory breach,” the Appeals Court made clear that a contempt judgment cannot enter until “after the time for the mother’s performance had come and gone.” Pederson v. Klare, 74 Mass.App.Ct. 692 (July 23, 2009).

An unmarried child does not become emancipated as a matter of law by giving birth, the Appeals Court held in a case of first impression.  The trial court had granted summary judgment for the father, holding that the child was emancipated because “she has a child, receives child support [for him], and has a family of her own.”  The Appeals Court pointed out that there were disputed facts that made such a judgment inappropriate – chief among them, whether the child was a full-time student and whether the child was still principally dependent on her mother for support. In other words: for questions about emancipation, look to the statute, G.L. c.208 §28.  LaBrecque v. Parsons, 74 Mass.App.Ct. 766 (August 4, 2009).

A self-employed father brought a modification action seeking a reduction in child support.   In calculating support, the Probate Court deducted from his gross income amounts for pension, profit sharing, and taxes.  The Appeals Court vacated the support award.   Gross income for child-support purposes, the Court noted, is not necessarily equivalent to a parent’s taxable income.  In determining self-employment income, “a judge must determine whether claimed business deductions are reasonable and necessary to the production of income, without regard to whether those deductions” are appropriate for income-tax purposes.  Although the current Guidelines did not apply in this case, the Court observed that these Guidelines now explicitly address self-employment, where the prior Guidelines did not.  Specifically, the current Guidelines urge self-employment income to be “carefully reviewed [in order] to determine the appropriate level of gross income   .  .  .  [which] in many cases .  .  . will differ from a determination of business income for tax purposes.”  Guidelines I-C (2009).   Whelan v. Whelan, 74 Mass.App.Ct. 616 (July 6, 2009).

A merged provision in a separation agreement purportedly required each parent to pay one-half of college education expenses.   Under the agreement, mother had physical custody and the parties had shared legal custody of their daughter.  Years later, the daughter, without input from the father, enrolled at a private university where the cost of her first year, after grants, was $34,000.  Mother looked to father for $17,000, father refused to pay, and mother brought a contempt action.  The Probate Court held the father responsible for $7,800 — finding that the school was financially “out of reach” for the father.  On mother’s appeal, the appellate court construed the agreement to require each party to pay half of the “reasonable” college expenses, implying a limiting condition not explicit in the agreement.  Further, in remanding the case to the Probate Court for a determination of “reasonable college expenses,” the Appeals Court set forth several factors for the court to consider; among them, financial resources, cost, programs at the school, and the child’s scholastic aptitude.  Also relevant, according to the Court, is “the extent to which [a party] .  .  .  may have been excluded from the college decision-making process.”  The court would also consider the extent to which a parent has “sat on his or her right to intervene  .  .  .  until the college selection process has been completed.”  Perhaps most interesting in this case was the road not taken.  The Appeals Court could have held college expenses at the level of a public university to be presumptively reasonable.  The court, however, did not.  Mandel v. Mandel, 74 Mass.App.Ct. 348 (June 3, 2009).

The Appeals Court affirmed a Probate Court judgment attributing income to the husband in a divorce case.  The case reminds practitioners that courts may consider the earning capacity of a party in appropriate circumstances.  Where a party is voluntarily earning beneath his/her capacity, such attribution is “particularly appropriate,” according to the Appeals Court.  Similarly, such attribution may also be appropriate where a judge determines that a career change is voluntary.  Where a judge attributes income, however, the Appeals Court noted that a specific amount of income ought to be attributed.  C.D.L. v. M.M.L., 72 Mass.App.Ct. 146 (June 27, 2008).

Where paternity is not disputed, a Probate Court judge has the authority to enter an initial award of child support for a non-marital child after the death of the obligor-parent, the Supreme Judicial Court decided.  The Probate judge, however, must consider, by means of a credit to the obligor-parent’s estate, Social Security survivor benefits, life insurance proceeds and any other benefits the child will receive.  L.M. v. R.L.R. 451 Mass. 682 (June 19, 2008).

Parties entered into a separation agreement which provided that the husband was to pay $275.00 per week in alimony.  The agreement did not mention merger or survival.  The judgment nisi, however, stated that the agreement survived.  Years later, when the ex-husband sought a modification, the ex-wife moved to dismiss his complaint on the grounds that the agreement survived and that the ex-husband could not meet the “countervailing equities” standard necessary to modify a survived agreement.  The Probate Court judge allowed the motion to dismiss and the Appeals Court affirmed. The case reminds practitioners of the general rule regarding survival – that is, unless the parties expressly provide otherwise, an agreement will be held to survive.  Another reminder is that when the judgment nisi arrives in the mail, read it.  If you don’t agree with it, avail yourself of the applicable post-judgment remedies before it is too late.  Thomas v. Thomas, 71 Mass.App.Ct. 1126 (May 30, 2008).