                IN THE COURT OF APPEALS OF TENNESSEE
                            AT NASHVILLE
                                  March 24, 2011, Session

            CHERYL ANN GUNN v. NICHOLAS GRAHAM GUNN

               Appeal from the Chancery Court for Williamson County
                    No. 28709    Timothy L. Easter, Chancellor


                  No. M2010-00054-COA-R3-CV - Filed May 11, 2011


In this post-divorce proceeding, the mother appeals the trial court’s calculation of the father’s
child support obligation. The trial court found that residential lease and car lease payments
paid by father’s employer should be excluded from the calculation of father’s income for
child support purposes. Finding that the trial court erred in excluding the payments from the
calculation of the father’s income, the judgment is vacated in part and the case remanded for
reconsideration of the father’s support obligation.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Vacated in
                              part; Case Remanded

R ICHARD H. D INKINS, J., delivered the opinion of the court, in which P ATRICIA J. C OTTRELL,
P.J., M.S., and A NDY D. B ENNETT, J., joined.

James D. R. Roberts, Jr. and Janet L. Layman, Nashville, Tennessee, for the appellant, Cheryl
Ann Gunn.

E. Covington Johnston, Jr., Franklin, Tennessee, for the appellee, Nicholas Graham Gunn.
                                   MEMORANDUM OPINION 1

I. Background2

       The parties to this proceeding were divorced in 2002; the child of the marriage, born
in 2000, resides with Mother. The original divorce decree required Father to pay $2,200.00
per month in child support, carry medical insurance on the child, and maintain a $500,000.00
life insurance policy payable to Mother. In 2004, the court modified the support obligation
to $473.75 per month, based on Father’s representations that his income was $26,000.00 per
year. On June 24, 2008, Mother filed a Petition to Set Child Support and a petition seeking
to have Father held in contempt for failing to comply with orders requiring him to respond
to various discovery requests seeking information regarding his income. A hearing was held
on the petition on November 12, and on December 11 the trial court entered an order (“the
2008 order”) stating in pertinent part:

       2.        That for purposes of child support determination, Cheryl Gunn’s
                 income is $30,000.00 per year;
       3.        That for purposes of child support determination, Nicholas Gunn’s
                 income average for the past two years is $80,000.00 per year;
       4.        The Gemini Sun Records’ direct payment of $8,750.00 monthly
                 ($105,000.00 annually) for Nicholas Gunn’s residential lease at the
                 Villa Malibu Nicholas shall not be imputed to his income;
       5.        That Gemini Sun Records’ lease payment of $650.00 per month
                 ($7,800.00 annually) for a 2006 BMX X3 shall not be imputed to his
                 income;
       6.        That based on the Tennessee Child Support Guidelines, Nicholas
                 Gunn’s child support obligation for Annabelle Gunn is $1,250.00 per
                 month, retroactive to July 1, 2008; . . .




       1
           Tenn. R. Ct. App. 10 states:

       This Court, with the concurrence of all judges participating in the case, may affirm, reverse
       or modify the actions of the trial court by memorandum opinion when a formal opinion
       would have no precedential value. When a case is decided by memorandum opinion it shall
       be designated “MEMORANDUM OPINION,” shall not be published, and shall not be cited
       or relied on for any reason in any unrelated case.
       2
           The factual and procedural history is derived from the pleadings in the record and from the
appellate briefs of the parties.

                                                   -2-
Mother filed a motion to reconsider, which resulted in a hearing on October 2, 2009.3

        At the October 2 hearing, Mother attempted to show that Father had income which
was not correctly reported on either his personal return or on the return of the corporation.4
Ms. Susan Curtis-Spinney, a tax professional who owned an H&R Block franchise, was
proferred as an expert witness “in tax law as it applies to individuals, to partnerships, s corps
- - things of that nature - - and the proper accounting for home office expenses and other
proper and improper deductions”; she was permitted to testify in that regard. In her report,
which was introduced as an exhibit, she computed Father’s income to be $292,944.00 based
on a review of, among other things, Father’s W-2, Schedule E, and K-1 received from
Gemini Sun Records, Inc., the S Corporation which employed him and of which he owned
67%.5 After discussing at length the proper reporting of items of income and expense on
individual, business, and corporate tax returns and schedules, Ms. Curtis-Spinney’s report
concluded:

        Mr. Gunn’s tax returns are questionable in their aggressive form. A forensic
        accounting with receipts should be required to verify his excessive write-offs
        including meals and entertainment (50% = $19,278), travel ($34,610),
        subcontractors ($228,864), petty cash ($5,651), etc. Based on those findings,
        more income could be discovered and attributable to his personal income.

        On October 16, 2009 the court entered an order (“the 2009 order”) denying Mother’s
motion to alter or amend the prior ruling setting Father’s gross income at $80,000.00 per
year, stating :



        3
          The initial motion to reconsider was denied following a hearing on May 4, 2009, with leave
granted Mother to amend the motion. On May 29 she filed a motion to alter or amend the 2008 order. On
August 3 the court entered an order granting Mother’s motion to reopen the proof and setting a hearing to
allow Mother the opportunity to put on evidence that the home office expenses and luxury vehicle expenses
“should be included in Mr. Gunn’s income for child support determination.”
        4
           As noted at footnote 3, supra, the October 2, 2009 hearing was held to allow Mother an
opportunity to offer evidence obtained from discovery responses received from Father on the morning of the
November 12, 2008 hearing. The record on appeal does not contain a transcript of the November 12, 2008
hearing; however, excerpts from the deposition of Father were attached as an exhibit to her petition to set
child support. It is apparent from the opening statements of counsel for both parties at the October 2, 2009
hearing, that Mother’s proof on November 12, 2008 consisted primarily of Father’s deposition testimony.
        5
          According to the corporate tax return, the remainder of Gemini Sun Records, Inc., was owned by
Father’s parents. In his deposition Father testified that his father was “a silent partner; he has no active role
and he’s not on payroll, he’s just an investor.”

                                                      -3-
              Upon testimony of witnesses, introduction of Exhibits, and statement
       of counsel, the Court has considered the additional evidence submitted by the
       Plaintiff regarding the home office expenses and reimbursement of
       automobile expenses paid on behalf of the Defendant, and the Court is of the
       opinion that nothing in the evidence presented indicates that the Defendant
       has manipulated expenses to reduce his child support obligation.

              Therefore, after considering all evidence submitted by the Plaintiff
       regarding reimbursement to the Defendant for home office expense and for
       automobile payments and expense, the Court is of the opinion that the best
       evidence indicates, that the Court was correct in setting the Defendant’s
       annual income at the sum of Eighty Thousand and 00/100ths Dollars
       ($80,000.00) for child support purposes in this case.

       Mother appeals, contending that the trial court erred in its application of the Child
Support Guidelines and asserting that direct payments for Father’s residential and
automobile leases should be included in the calculation of his income for child support
purposes. The sole issue presented is whether the trial court erred in its calculation of
Father’s income for child support purposes.

II. Discussion

       In the 2008 order the trial court did not discuss how it determined Father’s income
for child support purposes to be $80,000.006 ; likewise, in the 2009 order the trial court did
not discuss the evidence introduced at the October 2 hearing and why that evidence did not
move the court to modify its earlier determination of Father’s income. The 2008 order,
however, does indicate that the court imputed income of $24,439.00 to Father ($80,000.00 -
$55,561.00), but that the residential and automobile lease payments were not a part of the
imputed income.

      In accordance with Tenn. Code Ann. § 36-5-101(e)(2), the Tennessee Department of
Human Services promulgated Child Support Guidelines at Tenn. Comp. R. & Regs. 1240-02-
04. Relevant to the issue in this appeal is the regulation governing determination of gross

       6
          An indication of the basis of the court’s ruling can be gleaned from the opening statement of
Father’s counsel at the October 2009 hearing:

       The proof that Your Honor heard before and that was introduced is that Mr. Gunn’s income
       on his 2007 tax return was about $55,561. And the income that Your Honor set for child
       support purposes was $80,000.


                                                  -4-
income at Tenn. Comp. R. & Regs. 1240-02-04-.04(3). Based on our review of the record
in this case, the relevant portion of that regulation provides:

      (3) Gross income.

      (a) Determination of Gross Income.

      1. Gross income of each parent shall be determined in the process of setting
      the presumptive child support order and shall include all income from any
      source (before deductions for taxes and other deductions such as credits for
      other qualified children), whether earned or unearned, and includes, but is not
      limited to, the following:
      (i) Wages;
      ***
      2. Imputed Income.
      (i) Imputing additional gross income to a parent is appropriate in the following
      situations:
      ***
              (II) When there is no reliable evidence of income; or
      ***
      (iv) Imputing Income When There is No Reliable Evidence of Income.
      ***
              (II) When Modifying an Existing Order
                      I. If a parent fails to produce reliable evidence of income (such
      as tax returns for prior years, check stubs, or other information for determining
      current ability to support); and
                      II. The tribunal has no reliable evidence of that parent's income
      or income potential;
                      III. After increasing the gross income of the parent failing or
      refusing to produce evidence of income by an increment not to exceed ten
      percent (10%) per year for each year since the support order was entered or last
      modified, the tribunal shall calculate the basic child support obligation using
      the increased income amount as that parent's gross income.
      ***
      4. Fringe Benefits.
      (i) Fringe benefits for inclusion as income or “in-kind” remuneration received
      by a parent in the course of employment, or operation of a trade or business,
      shall be counted as income if they reduce personal living expenses.




                                             -5-
        (ii) Such fringe benefits might include, but are not limited to, company car,
        housing, or room and board.

        Tenn. Comp. R. & Regs. 1240-02-04-.04(3)(a)1, 2 and 4.

       We have reviewed the transcript of the October 2, 2009 hearing. It is apparent from
the language of both orders as well as the court’s comments at the hearing that the court
focused on whether Father was using the corporation to manipulate the income which he
reported on his individual return; it does not appear that the court considered whether the
residential and automobile lease payments were “fringe benefits” within the meaning of the
guidelines. While the possible manipulation of income is an appropriate area of inquiry for
determining whether additional income should be imputed to Father, see Taylor v. Fezell,
158 S.W.3d 352 (2005), the guidelines also require that fringe benefits such as housing and
an automobile be included as part of gross income “if they reduce personal living expenses.”

III. Conclusion

       The record does not show that the court made a determination of whether the
residential lease and car payments reduced Father’s living expenses and were, therefore,
includable in the determination of his gross income as fringe benefits. We, therefore, vacate
the court’s holding that the payments should be excluded from the determination of Father’s
income and remand the case for reconsideration in accordance with this opinion.7 Pending
further action of the trial court, Father’s monthly support obligation shall remain $1,250.00.




                                                  ___________________________________
                                                  RICHARD H. DINKINS, JUDGE




        7
            As noted previously, the record does not show the basis upon which the trial court imputed
$24,439.00 in income to Father, which Father does not contest. Consequently, the inquiry before the trial
court will be whether and the extent to which the residential and car lease payments should increase Father’s
income above the $80,000.00 found by the court.

                                                    -6-
