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In re Marriage of Drake

Court of Appeals of Iowa

July 3, 2019

IN RE THE MARRIAGE OF CHAD E. DRAKE AND LAURA A. DRAKE Upon the Petition of CHAD E. DRAKE, Petitioner-Appellant, And Concerning LAURA A. DRAKE, Respondent-Appellee.

          Appeal from the Iowa District Court for Ringgold County, Thomas P. Murphy, Judge.

         Chad Drake appeals the district court's decree dissolving his marriage to Laura Drake.

          Karen A. Taylor of Taylor Law Offices, P.C., Des Moines, for appellant.

          Lisa M. Noble of Noble Law Office, Des Moines, for appellee.

          Considered by Potterfield, P.J., and Doyle and Bower, JJ.

          DOYLE, JUDGE.

         Chad Drake appeals the district court's decree dissolving his marriage to Laura Drake. He contends the court erred in calculating his income for purposes of determining his child support obligation. He also challenges the amount of the equalization payment the district court determined Laura was due. Upon our review, we affirm as modified and remand to the district court with instructions.

         I. Standard of Review.

         We review dissolution actions de novo. See In re Marriage of Larsen, 912 N.W.2d 444, 448 (Iowa 2018); see also Iowa R. App. P. 6.907. Although we examine the entire record and adjudicate the issues anew, we give weight to the district court's factual findings, especially with respect to the credibility of the witnesses. See In re Marriage of McDermott, 827 N.W.2d 671, 676 (Iowa 2013); see also Iowa R. App. P. 6.904(3)(g). This is because the district court, in making its credibility assessment, has the distinct advantage of listening and observing each witness's demeanor firsthand, while we must rely on a cold transcript. See Albert v. Conger, 886 N.W.2d 877, 880 (Iowa Ct. App. 2016); In re Marriage of Udelhofen, 444 N.W.2d 473, 474 (Iowa 1989); In re Marriage of Vrban, 359 N.W.2d 420, 423 (Iowa 1984).

         II. Child Support.

         "In Iowa, child support is calculated using the child support guidelines." In re Marriage of Erpelding, 917 N.W.2d 235, 245 (Iowa 2018); see also Iowa Code § 598.21B(1) (2018); Iowa Ct. R. 9.2. "The purpose of the guidelines is to provide for the best interests of the children by recognizing the duty of both parents to provide adequate support for their children in proportion to their respective incomes." Iowa Ct. R. 9.3(1). Moreover, there is "a rebuttable presumption that the amount of child support which would result from the application of the guidelines prescribed by the supreme court is the correct amount of child support to be awarded." Iowa Code § 598.21B(2)(c).

         "To compute the guideline amount of child support," the district court must first compute the adjusted net monthly income of each parent. Iowa Ct. R. 9.14. That amount is determined by first determining each parent's gross monthly income. See Iowa Ct. R. 9.14(1). Under the guidelines, "'gross monthly income' means reasonably expected income from all sources." Iowa Ct. R. 9.5(1). The court must determine a parent's income from the most reliable evidence presented. See In re Marriage of Powell, 474 N.W.2d 531, 534 (Iowa 1991).

         On appeal, Chad insists the court erred when it determined he made an additional $45, 000 annually through his farming operation. At trial, Chad testified that, in addition to his full-time job managing two pig nurseries for Iowa Select Farms, he also does "a little farming on the side," explaining:

I have twenty-seven cows; and I do sixty-three crop acres of my mom's ground. So it doesn't take up a lot of time. The fall and the spring are a little bit busier than the rest of the year. It's more of a hobby anymore than it really is a job.

         Chad claimed that "he carrie[d] about $150, 000 worth of farming debt each year" and that debt and other expenses dissipated any farm income. Laura testified she did not believe Chad's farm was just a hobby because "he's in it to make money."

         After reviewing the evidence and hearing the parties' testimony, the court did not find Chad to be particularly credible, noting, among other things, that "Chad played a bit fast and loose with his financial affidavit." It found "[m]uch of Chad's testimony was self-serving." Although the court acknowledged it was within its discretion to deduct depreciation and expenses from Chad's farm income, the court did not believe the expenses should be deducted. The court found the expenses claimed on tax returns primarily consisted of depreciation and did not show any other significant expenses. Additionally, the court noted Chad's exhibits showed Chad as having a running checking account balance of around $4000; however, "Laura's exhibits showed Chad consistently ran a much higher balance, anywhere from $17-$40, 000." "Given Chad's rolling bank account balance, and what appeared to the court to be his business savvy and drive regarding farming," the court found Chad's claimed farm expenses should not be deducted from his farming income" and determined Chad earned $45, 000 annually through his farm operation. The district court further noted that it believed the amount of the child support award was the correct one, even if it calculated Chad's income incorrectly, "based on what it perceives to be a hardship" and that "a deviation would otherwise be in order."

         While we cannot disagree with the district court's assessment that Chad played fast and loose with his financial affidavit, we do disagree with the court's observation that Chad's farming expenses consisted of primarily depreciation and that his tax schedules did not show significant other expenses. In computing Chad's child support obligation, the court did not subtract any farm expenses from Chad's farming income. Chad's Schedule F's for the years 2013 through 2017 showed significant expenses other than depreciation. To be sure, the depreciation figures are stunning and, except for one year, depreciation significantly exceeded farm income each year. Just deducting the farm expenses from farm income show Chad's farming operation was essentially a break-even proposition. Chad's farm income averaged about $43, 800 per year over five years, and the farm expenses averaged about $40, 700 per year. So, over a five-year period, Chad's annual net farm profit averaged about $3100 sans depreciation.

         The child support guidelines define "net monthly income" as gross monthly income less specifically enumerated deductions. See Iowa Ct. R. 9.5. The guidelines do not specifically provide for a deduction for depreciation expenses, but the Iowa Supreme Court has determined "depreciation should not categorically either be deducted as an expense or treated as income, but rather that the extent of its inclusion, if any, should depend on the particular circumstances of each case." In re Marriage of Gaer, 476 N.W.2d 324, 328 (Iowa 1991). As the court observed:

Depreciation is a mere book figure which does not either reduce the actual dollar income of the defendant or involve an actual cash expenditure when taken. On the contrary, it represents additional cash available to the defendant by permitting substantial tax deductions and, ultimately, tax savings. The fact that the defendant may use some or all of the cash represented by depreciation to pay off principal indebtedness on the property is of ...

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