Imputation of Income for Child Support & Spousal Support – Los Angeles, CA
What is Imputation or Attribution of Income
Imputation of income, or attribution of income, means that income is calculated against a party to a divorce or child-related matter even though they do not earn that income.
Imputation of Income based on Earning Capacity – FAQs
Imputation of income based on a party’s earning capacity is an interesting subject and is often utilized by seasoned family law practitioners in divorce, legal separation and paternity cases when child support, spousal support, and even attorney fees are at issue. This page examines the fundamentals of imputation of income in family law proceedings using Frequently Asked Questions.
What does Imputation of Income mean?
Imputation of income in the context of an alimony or child support case refers to the court prescribing an income to one party based on his or her earning capacity (i.e. what they are capable of earning under the given circumstances) even though they aren’t working or they are underemployed. The trial courts in California have the ability to impute income when a spouse or parent doesn’t earn the money that they should earn. The court can impute income in the following circumstances:
- When a “supported” spouse refuses to work in order to receive more alimony;
- When a parent refuses to work or chooses to remain underemployed so that they don’t have the pay child support;
- When a “supporting” party for spousal support remains unemployed in order to avoid his or her alimony obligation;
- When either party is not working at their capacity when attorney fees are at issue.
What Evidence Needs to be Proven before the Court will Impute Income?
Follow these 2 primary steps to show that a person should be imputed income:
- Introduce evidence that the person has the ability to become gainfully employed; and
- Introduce evidence that the person has the opportunity to become gainfully employed.
Will the Court Impute Income when my Spouse was working 90 Hours per Week and now only Works 40 Hours per Week?
This situation is a common issue in family law, where a supporting spouse was working very long hours during marriage or during the early stages of the parties’ separation, and then decides to work a “normal” 40 hour week. The court will likely read the Simpson case to see whether the spouse is working a “reasonable work regimen”. If a 40 hour work week is not reasonable under the circumstances, and the supporting spouse is clearly shirking his or her obligation to pay support, the court may impute income.
What Evidence is Required to Show that a Party has the “Opportunity” to Work?
In the LaBass case, the Court relied on one Los Angeles Times classified ad for a job opening to find that there was sufficient evidence that the spouse could work, and that the advertisement was an “offer” of employment. The Hinman case also discusses the sufficiency of evidence needed for the court to have the authority to impute income. Thus, it appears that not much evidence is required.
Can the Court Impute Income to a Party that is in Prison?
No. The Vargas case stands for the presumption that a party that is in prison has no opportunity to work and therefore attributing an imputed income to that spouse would be reversible error.
Will the Court Impute Income if one Spouse has Lots of Assets and Doesn’t Need to Work?
The Court has the authority under the Dacumos case to asses a “reasonable” rate of return on assets, which would become income for that party for purposes of calculating child support or alimony. The court will need evidence in the form of expert testimony or some other reliable financial evidence to determine what a “reasonable” rate of return is on assets. The analysis is also case specific as some assets are much easier to determine a rate of return than others. For example, certain investment real property may not generate much income in the short term but are held to be “long term” investments. Alternatively, cash in a savings account is fairly easy to assess because there is a set interest rate (and the question would be whether a higher rate of return should be assessed). Under Destein, the court has the ability to prescribe a rate of return even on “non-income producing” assets.
How does the Court Treat Rental Income for Imputing Purposes?
Rental income received by a party is income for support purposes, even if from a person subleasing space. In an interesting case called Smith, the court found that rental income paid by a person renting a room from a father (the child support obligor) directly to the landlord (not even paid to the father), was income to the father for purposes of calculating child support.
Is Stock Considered Income Available for Support?
It depends on the nature of the stock and whether it was liquidated. Stock that is kept as stock and not liquidated is likely not going to invoke an imputation of income, except to the extent the court wishes to assess a rate of return for other reasons. Stock that is liquidated and spent may be considered income.
Can the Court Impute Income for Attorney Fees?
Yes, the court has the ability to assess an earning capacity for a party when attorney fees are an issue. Family Code 2030 and Family Code 2032 reference Family Code 4320, which one factor states that the court will continue a party’s earning abilities when attorney fees are at issue.
What if the Other Party is Self-Employed, can the Court Impute Income?
Under the concepts noted above, yes, the Los Angeles Family Court judge is permitted to attribute or impute income to a party that is self-employed. The circumstances in which the court might impute income to a self-employed person might include the following:
- Where the self-employed person is hiding income through businesses
- Where the self-employed person is under-employed; or
- Where the self-employed person could become gainfully employed instead of running their own business.
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For more information about imputation of income and earning capacity for alimony, child support and attorney fees, contact our office today.