MEMO TO:
Alexsei Demo US
RESEARCH ID:
#40005159b5b30a
JURISDICTION:
State
STATE/FORUM:
New York, United States of America
ANSWERED ON:
December 28, 2021
CLASSIFICATION:
Family law

Issue:

Under what circumstances will the court impute income to a spouse for the purposes of child support when there are allegations of intentional underemployment?

Facts:

Mother and Father both worked prior to separation but Mother worked full-time and Father chose to work part-time in order to be able to spend time enjoying his hobby (outdoor climbing). Mother earns approximately twice as much as Father. Father's hobby does not generate any income..

Conclusion:

Courts have considerable discretion to impute an annual income to a parent. Child support is determined by the parents' ability to provide for their child rather than by the parents' current economic situation. (Drake v. Drake, Siskind v. Siskind)

In determining a party's child support obligations, a court may impute income based upon the party's earning capacity. A court is not required to find that a party has deliberately reduced his income to avoid his support obligations in order to impute income to that party. (Bittner v. Bittner)

A court may impute income to a parent based on the parent's failure to seek more lucrative employment that is consistent with their education, skills, and experience. (Curley v. Klausen)

The decision to impute income to a party must be supported by a clear record of the source from which the income is imputed and the reasons for such imputation. (In the Matter of Helen v. Richard F.G., Jr., Curley v. Klausen)

In Curley v. Klausen, a mother chose to work reduced hours "out of loyalty to her employer". The Court imputed income to the mother based on her voluntary underemployment and her ability to earn.

In Spreitzer v. Spreitzer, the mother, a nurse practitioner, had worked part-time for the previous 9 years prior to the parties' separation. The mother claimed that she was unable to secure full-time employment. The trial judge rejected the mother's claim. The Appellate Division of the Supreme Court, Second Department affirmed the trial court's decision to impute income to the mother at the rate at which she would earn if she worked full-time.

In Drake v. Drakea mother had worked two part-time jobs for a combined full-time schedule. However, she later changed jobs and reduced her hours to a part-time schedule. The Supreme Court Appellate Division, Fourth Department affirmed the decision of the trial court in imputing income to the mother. The amount of imputed income represented the difference between the mother's part-time salary and the full-time salary that she was capable of earning. The Court noted that this imputation of income was a fair representation of the mother's demonstrated earning capacity.

Law:

In Siskind v. Siskind, 89 A.D.3d 832, 933 N.Y.S.2d 60, 2011 N.Y. Slip Op. 8139 (N.Y. App. Div. 2011), the Appellate Division of the Supreme Court, Second Department noted that courts may impute income to a parent based on their demonstrated earning potential (at 63):

Child support is determined by the parents' ability to provide for their child rather than their current economic situation (see [89 A.D.3d 834] Charap v. Willett, 84 A.D.3d at 1002, 924 N.Y.S.2d 433). The court is not required to rely on a party's account of his or her finances, and may instead impute income based on the party's past income or demonstrated earning potential. Courts are afforded considerable discretion in determining whether to impute income to a parent (see Charap v. Willett, 84 A.D.3d at 1002, 924 N.Y.S.2d 433).
 

The same principles were set out by the Supreme Court Appellate Division, Fourth Department in Drake v. Drake, 185 A.D.3d 1382 (N.Y. App. Div. 2020) ("Drake") (at 663-664):

Initially, we reject the contention of the mother that the Support Magistrate erred in imputing income to her for the purpose of calculating her child support obligation. It is well settled that "‘[c]ourts have considerable discretion to ... impute an annual income to a parent’ " (Lauzonis v. Lauzonis, 105 A.D.3d 1351 1351, 964 N.Y.S.2d 796 [4th Dept. 2013]; see Matter of Monroe County Support Collection Unit v. Wills, 21 A.D.3d 1331 1332, 801 N.Y.S.2d 650 [4th Dept. 2005], lv denied 6 N.Y.3d 705, 811 N.Y.S.2d 337, 844 N.E.2d 792 [2006] ). Furthermore, "child support is determined by the parents' ability to provide for their child rather than their current economic situation" (Irene v. Irene [Appeal No. 2], 41 A.D.3d 1179 1180, 837 N.Y.S.2d 797 [4th Dept. 2007] [internal quotation marks omitted]; see Matter of Bashir v. Brunner, 169 A.D.3d 1382 1383, 93 N.Y.S.3d 481 [4th Dept. 2019] ), and "a

[127 N.Y.S.3d 664]

court's imputation of income will not be disturbed so long as there is record support for its determination" (Lauzonis, 105 A.D.3d at 1351, 964 N.Y.S.2d 796 ).

In Bittner v. Bittner, 296 AD2d 516, 745 N.Y.S.2d 559 (N.Y. App. Div. 2002), the Appellate Division of the Supreme Court of New York, Second Department noted that in determining a party's child support obligation, a court may impute income based upon the party's earning capacity. A court is not required to find that a party has deliberately reduced their income to avoid their support obligations in order to impute income to that party (at 517):

The plaintiff contends that the Supreme Court erred in calculating child support based solely upon the weekly salary of $340 which the defendant was earning in 1999. We agree. "Child support is determined by the parents' ability to provide for their child rather than their current economic situation" (Kalish v Kalish, 289 AD2d 202 [internal quotation marks omitted]; see Matter of Zwick v Kulhan, 226 AD2d 734). Thus, in determining a party's child support obligation, a court may impute income based upon the party's past earnings and earning capacity (see Zabezhanskaya v Dinhofer, 274 AD2d 476, 477; McGrath v McGrath, 261 AD2d 369; Phillips v Phillips, 249 AD2d 527, 528; Matter of Zwick v Kulhan, supra). Moreover, the court is not required to find that a party has deliberately reduced his income to avoid his support obligations in order to impute income to that party (see Goddard v Goddard, 256 AD2d 545). Considering the defendant's past employment history and earning capacity, he has the capability of earning at least $700 per week, which should be imputed to him in determining his child support obligation (see Morrissey v Morrissey, 259 AD2d 472; Phillips v Phillips, supra). Based upon this figure, we modify the judgment appealed from to increase the defendant's weekly support obligation for the three children, pursuant to the Child Support Standards Act, from $88 per week to $203 per week.

In In the Matter of Helen v. Richard F.G., Jr., 17 A.D.3d 684, 794 N.Y.S.2d 92, 2005 NY Slip Op 3247 (N.Y. App. Div. 2005), the Appellate Division of the Supreme Court of New York, Second Department held that the decision to impute income to a party must be supported by a clear record of the source from which the income is imputed and the reasons for such imputation (at 684-685):

Upon review of the order and findings of fact of the Support Magistrate, it is evident that she imputed income to the father

[17 A.D.3d 685]

in calculating his basic support obligation pursuant to the Child Support Standards Act. A Support Magistrate is permitted to impute income in calculating a support obligation where it finds that a party's account of his or her finances is not credible (see Peri v Peri, 2 AD3d 425, 427 [2003]; Lilikakis v Lilikakis, 308 AD2d 435, 436 [2003]; Gleicher v Gleicher, 303 AD2d 549, 549-550 [2003]; Rohrs v Rohrs, 297 AD2d 317, 318 [2002]). However, in exercising the discretion to impute income to a party, a Support Magistrate is required to provide a clear record of the source from which the income is imputed and the reasons for such imputation (see Matter of Wienands v Hedlund, 305 AD2d 692, 693 [2003]; Rohrs v Rohrs, supra; Matter of Sweedan v Baglio, 269 AD2d 724, 725-726 [2000]). In the case at bar, the Support Magistrate failed to specify the sources of income imputed and the actual dollar amount assigned to each category. Accordingly, the record is not sufficiently developed to permit appellate review. The matter is remitted to the Support Magistrate to specify the sources of income imputed and the actual dollar amount assigned to each category, and the appeal is held in abeyance pending receipt of the report.

In Curley v. Klausen, 2013 NY Slip Op 6743, 110 A.D.3d 1156, 972 N.Y.S.2d 743 (N.Y. App. Div. 2013) ("Curley"), the Appellate Division of the Supreme Court, Third Department, held that a court may impute income to a parent based on that party's failure to seek more lucrative employment that is consistent with their education, skills, and experience. Courts may impute income as long as it articulates the basis for imputation and record evidence supports the calculations (at 746):

In determining child support or related expenses, a court may impute income to a parent based on that party's failure to seek more lucrative employment that is consistent with his or her education, skills and experience (see Matter of Bianchi v. Breakell, 48 A.D.3d 1000 1003, 852 N.Y.S.2d 454 [2008]; see also Matter of Rubley v. Longworth, 35 A.D.3d 1129 1130, 825 N.Y.S.2d 839 [2006], lv. denied8 N.Y.3d 811, 834 N.Y.S.2d 720, 866 N.E.2d 1049 [2007]). Imputed income more accurately reflects a party's earning capacity and, presumably, his or her ability to pay (see Matter of Kasabian v. Chichester, 72 A.D.3d 1141 1141, 898 N.Y.S.2d 293 [2010], lv. denied15 N.Y.3d 703, 2010 WL 2606035 [2010]). Thus, imputed income may be attributed to a party as long as the court articulates the basis for imputation and record evidence supports the calculations (see Pulver v. Pulver, 40 A.D.3d 1315 1318, 837 N.Y.S.2d 369 [2007]).

In Curley, a mother chose to work reduced hours "out of loyalty to her employer". The Court imputed income to the mother based on her voluntary underemployment and earning capacity (at 746-747):

Here, Family Court accepted the mother's income as $15,000, without imputing any income to her. She testified that

[972 N.Y.S.2d 747]

she earned approximately that amount at her part-time job as a tax preparer, but acknowledged that she has a Bachelor's degree in accounting and could work full time, yet chooses to work reduced hours out of loyalty to her employer. Because we are basing the college expenses on the parties' ability to pay rather than their actual income, we will impute income to the mother based on her underemployment and ability to earn more (compare Matter of Disidoro v. Disidoro, 81 A.D.3d 1228 1230, 917 N.Y.S.2d 436 [2011], lv. denied17 N.Y.3d 705, 2011 WL 2566536 [2011]). Using the mother's testimony that she earned approximately $15,000 working full time from January through April and two days per week for the remainder of the year, we can extrapolate a full-time salary for her at the same earning rate, resulting in an imputed income of $25,000.3

In Curleythe Appellate Division of the Supreme Court, Third Department contrasted the mother's intentional underemployment with the situation In re Disidoro, 917 N.Y.S.2d 436, 81 A.D.3d 1228 (N.Y. App. Div. 2011) ("Disidoro"), where the Appellate Division of the Supreme Court, Third Department, affirmed the lower court's decision not to impute income to the mother. The decision not to impute income to the mother in Disidoro was based on the mother's circumstances which included health issues, reliance on food stamps and family for loans, the mother's limited education, and her low-wage job. In Disidoro, the Court noted that the mother had searched for other positions, but the hours at those positions did not allow her to care for the children while they were in her custody (at 439):

Next, we perceive no reason to disturb Family Court's exercise of its "broad discretion" in declining to impute additional income to the mother (Matter of Mitchell v. Mitchell, 264 A.D.2d 535, 538, 693 N.Y.S.2d 351 [1999], lv. denied 94 N.Y.2d 754, 701 N.Y.S.2d 340, 723 N.E.2d 89 [1999]; see Family Ct. Act § 413[1][b][5][iv]). The mother testified that she has a high school education with one year of college, and is employed 29 hours per week as a cashier earning $7.45 per hour, resulting in a 2008 income of $9,643. She stated that she had applied for a few other similar positions but was either not hired or the hours offered did not enable her to care for the children when they were in her custody. She had recently sustained a work-related injury and had ongoing health problems. She lives in a rented trailer and uses a borrowed car, both owned by her brother, who she has not been able to pay on a regular basis; she relies heavily on family for loans and receives food stamps. The court found that she was "minimally capable of being self-supporting at the present time" and that, even if income were imputed to her at a higher level for 2009, she would still be earning below the self-support reserve, i.e., the federal poverty level (see Family Ct. Act § 413[1][b][6]). Given her limited employment history, education and earning potential, and the court's implicit finding that her account of her finances and limited ability to pay her expenses was credible, we cannot say that the court abused its discretion in declining to impute full time employment income to her (see Family Ct. Act 413[1][b][5][iv]; Matter of Gravenese v. Marchese, 57 A.D.3d 992, 993, 870 N.Y.S.2d 444 [2008]; Matter of Maharaj-Ellis v. Laroche, 54 A.D.3d 677, 677, 863 N.Y.S.2d 258 [2008]). We have reviewed the father's remaining arguments and determined that they do not warrant modification of the subject order.

In Spreitzer v. Spreitzer, 40 AD3d 840, 837 N.Y.S.2d 658, 2007 NY Slip Op 4281 (N.Y. App. Div. 2007), the mother, a nurse practitioner had worked part-time for the previous nine years. The mother claimed that she was unable to secure full-time employment but the trial judge rejected this claim. The Appellate Division of the Supreme Court, Second Department affirmed the trial court's decision to impute income to her at the rate at which she would earn if she worked full-time (at 841-842): 

The parties were married on September 25, 1982. The defendant, who was a registered nurse, graduated from Pace University in 1994, and acquired a Masters of Science Degree and a nurse practitioner license. She has held a part-time position as a nurse practitioner in a private medical office since 1998.

Trial courts are granted substantial discretion in determining the extent to which the distribution of marital property, including enhanced earnings attributable to a professional license, will be equitable (see Holterman v Holterman, 3 NY3d 1, 8 [2004]; Sebag v Sebag, 294 AD2d 560 [2002]). At bar, the trial court properly calculated the enhanced earning capacity conferred by the defendant's degree and license by comparing the expected lifetime earnings of a registered nurse with the expected lifetime earnings of a licensed nurse practitioner, and reducing this sum to its present value (see Duspiva v Duspiva, 181 AD2d 810 [1992]; McGowan v McGowan, 142 AD2d 355, 359 [1988]). Although the defendant had already embarked on her career and acquired a history of actual earnings (see Grunfeld v Grunfeld, 94 NY2d 696, 702 [2000]; McSparron v McSparron, 87 NY2d 275, 286 [1995]), the court providently exercised its discretion in rejecting her testimony that she was unable to secure full-time employment (see Thoma v Thoma, 21 AD3d 1080 [2005]; Ferraro v Ferraro, 257 AD2d 596, 598 [1999]).

[...]

The defendant's contention that the trial court erroneously imputed income to her for the purpose of calculating her child support obligation is without merit. In determining a party's child support obligation, "a court need not rely upon the party's... account of his or her finances, but may impute income based upon the party's past income or demonstrated earning potential" (DeVries v DeVries, 35 AD3d 794, 795 [2006], quoting Rocanello v Rocanello, 254 AD2d 269 [1998]; see Fruchter v Fruchter, 29 AD3d 942 [2006]). Here, the court properly imputed an annual income to the defendant since the evidence at trial demonstrated that she was capable of earning $78,000 a year based on her degree, her nurse practitioner license, the facts adduced at trial, and the testimony of the expert who valued her degree and license (see Chi-Yuan Hwang v Hwang, 308 AD2d 560, 561 [2003]; Walker v Walker, 289 AD2d 225, 226 [2001]). Given its opportunity to assess witness credibility, the court did not err in imputing that amount to the defendant (see Moffre v Moffre, 29 AD3d 1149, 1151 [2006]; Bernstein v Bernstein, 18 AD3d 683, 684 [2005]). The record supports the determination of the court that the defendant's earning potential exceeds her actual income reported on her 2004 income tax return.

In Drake, supra, a mother had worked two part-time jobs for a combined full-time schedule. However, she later changed jobs and reduced her hours to a part-time schedule. The Supreme Court Appellate Division, Fourth Department affirmed the decision of the trial court in imputing income to the mother. The amount of imputed income represented the difference between the mother's part-time salary and the full-time salary that she was capable of earning. The Court noted that this imputation of income was a fair representation of the mother's demonstrated earning capacity (at 664-665):

We reject the further contention of the mother that the Support Magistrate abused her discretion in imputing income to the mother based on her 2017 income. In 2017, the mother worked at two dental offices earning $31 and $32 per hour, respectively, for a combined full-time schedule and income. Although the mother took a job in Olean in October 2017 and "voluntarily reduced her income ... in an effort to be closer to her children," she was terminated from that job in 2018 and moved away from the children to live in Syracuse. Thus, the Support Magistrate's imputation of additional income to the mother at a rate of $30 per hour for eight hours per week, representing the difference between the mother's part-time salary and the full-time salary that she is

[127 N.Y.S.3d 665]

capable of earning, is a fair representation of the mother's demonstrated earning capacity (see Rohme, 92 A.D.3d at 947, 939 N.Y.S.2d 532; Wills, 21 A.D.3d at 1332, 801 N.Y.S.2d 650 ).

In M.L.M. v. R.G.M., 63 Misc.3d 1211(A), 114 N.Y.S.3d 582(Table) (N.Y. Sup. Ct. 2019), the mother had been offered full-time employment with a company with an annual salary of $85,000 but turned the offer down in favor of starting and growing her own business. The mother's business earned about $10,000 per year. The Supreme Court, Westchester County imputed income to the mother in the amount of her recent full-time employment offer:

2. Plaintiff Wife's Income. The determination of Plaintiff's base income also proves straightforward due to a recent employment offer to her by Rejuvenan, a company with which she maintains a working-consulting relationship. As Plaintiff's own testimony revealed and the trial exhibits reflect, in May 2017 Plaintiff was offered full time employment with Rejuvenan, a nutrition/health and wellness firm with which she has worked in the past and still maintains a consulting employment relationship. (See Deft. Exh. F). The offer, extended to her in May, 2017, was one for full time employment at an annual salary of $ 85,000 (See Deft. Exh. F). There is no indication that she could not obtain employment there now if she so chooses. Indeed, Rejuvenan thought so highly of Plaintiff that the company awarded her a stock bonus even after she rejected the full time employment offer (Deft. Exh.. G). Moreover, Lee Miller, the occupational expert called by Defendant, testified that Plaintiff could easily earn more than that amount - - $ 92,000 at minimum (Tr. at 388) - - as a full time nutritionist, testimony supported by his written report which the Court finds credible and persuasive in light of Plaintiff's educational background and experience as well the Rejuvenan offer (Miller Report, Exh W at 12-13).

As to what Plaintiff could possibly earn in her own limited liability company through which she now does consulting work (the "LLC") as a nutrition internet entrepreneur - - an opportunity that Plaintiff would prefer to pursue now in lieu of full time employment - - is far more speculative. Indeed, the flights of speculative fancy of both Defendant's expert on the one hand and Plaintiff on the other (see Tr. at 392, 398-400; Deft. Exh. I, Miller Report at 13-14) dovetail into a pie in the sky riches scenario if Plaintiff is simply allowed to earn little or nothing for now into the indefinite future, and instead devote her time to developing her business. (See Tr. at 396-402). Unfortunately, reality must intrude; Plaintiff needs to earn and earn now a significant salary to help support herself and the parties' Children - - which, all must concede, she is certainly capable of doing, both economically and personally. All three Children are of school age, and Plaintiff can and perhaps must do what many spouses with Children are constrained to do - - go to work full time.

Moreover, as Plaintiff herself proclaims, she has been devoting time to developing her LLC business but, exclusive of her income through Rejuvenan - - a potential full time employer - - she earned less than $ 10,000 in 2017 (Tr. at 313-315). Perhaps if her parents are inclined to indulge her and support her desired career path in the same manner in which they have supported her litigation proclivities - - spending, on her behalf, several hundred thousand dollars to date to prosecute this eminently settleable case (Tr. at 452-465) - - she can pursue her dream of business development. Failing that, Plaintiff can join the working world. Accordingly, as far as employment income is concerned, Plaintiff's annual income is imputed to be $ 85,000.

In Abruzzo v. Jackson, 137 A.D.3d 1017, 27 N.Y.S.3d 225 (N.Y. App. Div. 2016), the trial court imputed income to the father. In order to make this calculation, the Court extrapolated the father's previous hourly wage ($30/hour) over a 40-hour week. The Appellate Division of the Supreme Court, Second Department upheld the decision and the trial court's calculation even though the father argued that he had never earned a wage of $30/hour over a 40-hour week (at 225-226):

The mother filed a petition for an order directing the father to pay child support. Following a hearing, the Support Magistrate imputed an annual income of $62,400 to the father and directed him to pay child support in the sum of $173 per week. The Support Magistrate arrived at that annual income by extrapolating the father's previous hourly wage, $30 per hour, over a 40–hour work week. The father objected to the Support Magistrate's order on the basis that he was currently unemployed, had "never earned $30 per hour on a 40 hour

[27 N.Y.S.3d 226]

work week basis," and his income for the current tax year was $18,060. The Family Court denied the father's objections.

When determining a parent's child support obligation, "[a] court need not rely upon a party's own account of his or her finances, but may impute income based upon the party's past income or demonstrated future potential earnings" (Matter of Rohme v. Burns, 92 A.D.3d 946, 947, 939 N.Y.S.2d 532). The court may take into account what the parent is " ‘capable of earning by honest efforts, given his [or her] education and opportunities' " (Morille–Hinds v. Hinds, 87 A.D.3d 526, 528, 928 N.Y.S.2d 727, quoting Matter of Bibicoff v. Orfanakis, 48 A.D.3d 680, 681, 852 N.Y.S.2d 324). Courts are afforded considerable discretion in imputing income (see Morille–Hinds, 87 A.D.3d at 528, 928 N.Y.S.2d 727; Matter of Ambrose v. Felice, 45 A.D.3d 581, 582–583, 845 N.Y.S.2d 411), but the calculation of a parent's earning potential "must have some basis in law and fact" (Morille–Hinds, 87 A.D.3d at 528, 928 N.Y.S.2d 727, quoting Gezelter v. Shoshani, 283 A.D.2d 455, 456, 724 N.Y.S.2d 481). Here, the record supports the Support Magistrate's determination that the father had been intentionally underemployed (see Spencer v. Spencer, 298 A.D.2d 680, 681, 748 N.Y.S.2d 809; cf. Matter of Cordero v. Olivera, 40 A.D.3d 852, 852–853, 837 N.Y.S.2d 172 ), and that annual income of $62,400 should be imputed to him.

Authorities:
Siskind v. Siskind, 89 A.D.3d 832, 933 N.Y.S.2d 60, 2011 N.Y. Slip Op. 8139 (N.Y. App. Div. 2011)
Drake v. Drake, 185 A.D.3d 1382, 127 N.Y.S.3d 661 (N.Y. App. Div. 2020)
Bittner v. Bittner, 296 AD2d 516, 745 N.Y.S.2d 559 (N.Y. App. Div. 2002)
In the Matter of Helen v. Richard F.G., Jr., 17 A.D.3d 684, 794 N.Y.S.2d 92, 2005 NY Slip Op 3247 (N.Y. App. Div. 2005)
Curley v. Klausen, 2013 NY Slip Op 6743, 110 A.D.3d 1156, 972 N.Y.S.2d 743 (N.Y. App. Div. 2013)
In re Disidoro, 917 N.Y.S.2d 436, 81 A.D.3d 1228 (N.Y. App. Div. 2011)
Spreitzer v. Spreitzer, 40 AD3d 840, 837 N.Y.S.2d 658, 2007 NY Slip Op 4281 (N.Y. App. Div. 2007)
M.L.M. v. R.G.M., 63 Misc.3d 1211(A), 114 N.Y.S.3d 582(Table) (N.Y. Sup. Ct. 2019)
Abruzzo v. Jackson, 137 A.D.3d 1017, 27 N.Y.S.3d 225 (N.Y. App. Div. 2016)