Tennessee law case summary on income determination. Absent a showing that the retained earnings were excessive or that an obligor was actually manipulating his or her income, the retained earnings of an S corporation should not be imputed as income to the sole or majority shareholder in calculating a child support obligation. Tennessee child support law from the Tennessee Court of Appeals.
Taylor v. Fezell – Tennessee child support case summary on retained earnings as income.
Douglas Fezell and Angela Daniels were married in 1986, and had two children. The couple divorced in 1999. In their Marital Dissolution Agreement (MDA), Mrs. Fezell was designated as the primary residential custodian of the two minor children. The MDA also provided that Mr. Fezell was to have visitation time greater than the standard amount contemplated by the Tennessee Child Support Guidelines (guidelines). In consideration of Mr. Fezell’s additional visitation and the establishment of a trust fund for the children, the parties agreed that Mr. Fezell would pay child support in the amount of $1,000 per month until July 31, 1999; after that it would increase to $1,300. The MDA also provided a method to calculate Mr. Fezell’s contribution to the trust.
Mr. Fezell’s child support obligation was based, in part, on his income from Professional Vending Services (PVS). At the time of the divorce, Mr. and Mrs. Fezell were the sole shareholders of the company, each owning a 50% interest. The Fezells agreed in the MDA that Mr. Fezell would continue to run PVS as the sole shareholder and president, and that he would pay his ex-wife $310,000 in exchange for her half of the company. Mr. Fezell completed the purchase of this stock and was the sole shareholder of the corporation at the time of the appeal to the Tennessee Supreme Court. Continue reading