Imputed Income: Case Summaries

                  Missouri law presumes that both parents have a duty to support their own children and therefore each parent must work a reasonably appropriate job commensurate with their education or skill level if they are capable. In some circumstances, one or both parents may be unemployed at the time of the child support (or maintenance) determination.  When this occurs a Missouri family court will employ a process known as imputation of income, where evidence of experience, education, past earnings and work history are used to determine what that spouse could earn if appropriately employed. Below we will discuss two separate cases involving imputed income which were decided in the past few months by the Missouri Court of Appeals.

                  In the first case, Joy McVean vs. Anthony McVean, out of the Circuit Court of St. Louis County, the husband quit his career job at McDonald’s and withdrew $200,000 from his 401K without his wife’s knowledge, to start a restaurant with some friends. The McVean’s were married in the year 2000 and separated after over twenty years of marriage in 2021. The couple had two children, one of which was over eighteen and thus emancipated, the other had special needs and could not function independently or support himself.

                  During the McVean divorce trial, the husband acknowledged he chose not to consult with his wife prior to leaving McDonald’s after twenty-eight years of employment, leaving behind health insurance for the family, 401(k) benefits, and the income that supported his family; and then withdrew $200,000 from his 401K to open the restaurant Old Town Smokehouse. He testified he was tired of McDonald’s and he didn’t ask his wife before he acted because he knew she wouldn’t agree with his decisions.

                  The evidence presented at trial showed that Husband’s 2019 gross income was $72,662, his 2020 gross income was $68,713 and that his 2022 income from self-employment (the restaurant) was $2000 per month. In the dissolution judgment, the Court ordered the first $100,000 from Husband’s 401K be awarded to wife (her half of the 200K he took out for the restaurant), then the remainder was split evenly between the two parties.  Despite husband’s claims he only made $2000 per month, the Court imputed his income at $70,688 or $5891 per month. Furthermore, the Court ordered Dad to pay Mom $1000 in maintenance and $699 per month in child support.  

                  Husband appealed the Court’s ruling claiming there was no evidence that he could earn $5891 per month because he quit McDonald’s and there was no evidence he could get his job back or earn a similar amount of money at another position. He alleged he was working more than full time at his own restaurant and there was nothing to suggest he was underemployed or seeking to avoid his financial responsibilities to his ex-wife or his child. Husband claimed there was no way he could pay his own monthly bills, $1000 per month in maintenance and $699 per month in child support because he only made $2000 per month.

                  Husband appealed the Court’s decision to impute his income at $5891 per month.  The appellate court noted that Missouri law has long recognized a trial court’s discretion to impute income in family law cases.  Two important Missouri cases held, “In proper circumstances, a court may impute income of what that parent could earn by use of his best efforts to obtain employment suitable to his capabilities.” and “Courts may impute a higher income to a noncustodial parent that he or she actually earns, if evidence suggests that the parent has the capacity to earn more but voluntarily refuses to do so.”

                  The Court of Appeals was not impressed with any of husband’s arguments as to why his income should not be imputed at $5891 per month. They found that husband’s personal preference to work for himself was not a substantial enough reason to lower his support obligations to his family, that he was "financially speaking" underemployed, and that the evidence presented to the trial court overwhelmingly supported an imputation of income.  Sorry Dad, I guess you couldn’t have it your way once you left the golden arches.

                  Our second imputed income case, Jennifer McKenna vs. Steven McKenna, comes to us out of KCMO decided by the Honorable Marty W. Seaton in Jackson County, downtown courthouse. In this motion to modify child custody, parenting time and child support (“modification judgment”) the father appeals, yes you guessed it, the imputation of his income.

                  The McKenna’s were divorced in 2015 and the modification of that divorce judgment that is the subject of this blog, was filed on November 4, 2021. The Mother’s Motion to Modify asked the Court for sole custody and to limit Father’s parenting time to supervised visitation only. At the same time, she filed a motion for a temporary restraining order against Dad citing allegations of disparaging her to the children, removing the children from therapy, threatening to remove the children from their school and activities, getting drunk during his parenting time and verbally abusing the children.

                  Immediately prior to the Mother’s filing of the motion to modify the judgment, the Father quit his job as a managing engineer at a large engineering and construction firm where he averaged over $270,000 in annual income over the previous few years.  The Father testified at the trial that he quit his job because it required him to work up to eighty hours per week as well as significant travel which took away from the time he could spend with his children. He further testified he could find a job that did not require travel but that the pay would likely only be $80,000 per year. Mother of course wanted his income imputed at the $370,000 level he was paid at the position he voluntarily left. More importantly, during the final day of trial, the Father indicated that in over two years he had not submitted a single job application and had actually declined interviews from recruiters because the positions required travel.

                  The trial court concluded that the Father did not provide credible evidence justifying his sudden and voluntary departure from employment, and had a stellar reputation among colleagues after more than thirty years in his engineering field.  Therefore, the trial court, to the Father’s dismay, imputed his income at $273,758 resulting in a presumed child support amount of $3175 per month. As you may have guessed, Father appealed the Trial Court’s Judgment of Modification regarding imputation of his income to the amount he earned while previously employed as an engineer.

                  The Father argues on appeal that the trial court errored because it lacked evidence to support the allegation that he intentionally quit his job to avoid paying child support and argues that his income should be imputed at a lower level given his inability to find a job without travel to allow him to exercise his desire to spend more time with his children.  The appellate court determined that the Father’s decision to quit his job at the same time his ex-wife filed her motion to modify constituted a “narcissistic effort” to decrease the amount he would have to pay her, in a power move.  The Court’s view was substantiated by the Father’s testimony that he had not only refused to search for employment, but had actually turned down interview requests for positions of employment.

Missouri Form 14 is the document used by Missouri Courts to determine child support obligations. Comment H to Line 1 of Form 14 states,

“Imputed Income: When determining whether to include imputed income and, if so, the amount to include in a parent’s “gross income,” a court or administrative agency shall consider all relevant factors, including:

(1)            The parent’s probably earnings based on the parent’s work history during the

three years, or such time period as may be appropriate, immediately before beginning of the proceeding and during any other relevant time periods; and

(2)            The parent’s assets, residence, age, and health; and

(3)            The parent’s occupational qualifications, employment potential, educational

attainments, and record of seeking work; and

(4)             The parent’s criminal record or other employment barriers; and

(5)             The available work or employment opportunities in the community and the

                 prevailing earnings level in the local community; and

(6)              Whether the parent is the custodian of a child whose condition or circumstances make it appropriate that the parent not be required to seek employment outside the home; and

(7)              Other relevant background factors in the case.

The appellate court found, based on the above factors, and because testimony showed that the Father was voluntarily unemployed, the trial court did not error in imputing his income at the 270K + level based on the average of his three previous year’s tax returns.

The concept of imputed income is actually encountered quite often in family law matters. Yes, some parents do voluntarily quit working or become underemployed for the sole purpose of reducing the amount payable to their ex via child support or maintenance. Yet, imputed income is also used in more benign circumstances such as when a spouse has never worked and has no plans to work, but their refusal isn’t based on an intention to financially harm the other party. If you are involved in a divorce or child custody matter where you believe the other parent is intentionally decreasing their income to distort the finances of the breakup in their favor, call attorney Robert Davis at the Men’s Center for Domestic Resolution in Pleasant Hill, Missouri at (816) 287-1530.