A relatively recent case came down that discussed this very issue. In IRMO Sorge (2012), father sold a lucrative business for which support was previously based. Father took the proceeds from the sale of the business and invested them into a start up company. The start up company required substantial investment of capitol to open it's doors. Father wanted to use these expenses to offset his income for a modification of child support. The court found that it was not an abuse of discretion to disregard operating expenses (losses) and to base a child support order on earning capacity and assets rather than a self-employed parent's "actual income." However, there are some unique exceptions to this ruling that merit a closer examination. If you are self-employed or considering starting your own business and have an existing child support order, contact Covina Family Law Attorney, Paul Eads today and we can help you develop a strategy for growth or the development of a new business.
Are all business expenses deductible from a parent's self-employment income in calculating child support?