        SUPREME COURT OF THE STATE OF NEW YORK
           Appellate Division, Fourth Judicial Department

1385
CAF 11-00903
PRESENT: SCUDDER, P.J., CENTRA, CARNI, LINDLEY, AND MARTOCHE, JJ.


IN THE MATTER OF KRISTINE GROSSO,
PETITIONER-RESPONDENT-APPELLANT,

                    V                             MEMORANDUM AND ORDER

ROCCO GROSSO, RESPONDENT-APPELLANT-RESPONDENT.


MACHT, BRENIZER & GINGOLD, P.C., SYRACUSE (JON W. BRENIZER OF
COUNSEL), FOR RESPONDENT-APPELLANT-RESPONDENT.

FINOCCHIO & ENGLISH, SYRACUSE (MARK J. ENGLISH OF COUNSEL), FOR
PETITIONER-RESPONDENT-APPELLANT.

KAREN J. DOCTER, ATTORNEY FOR THE CHILDREN, FAYETTEVILLE, FOR JOANNA
G. AND JACLYN G.


     Appeal and cross appeal from an order of the Family Court,
Onondaga County (Martha E. Mulroy, J.), entered July 20, 2010 in a
proceeding pursuant to Family Court Act article 4. The order, among
other things, denied the parties’ objections to an order modifying
support issued by the Support Magistrate.

     It is hereby ORDERED that the order so appealed from is
unanimously reversed on the law without costs and the matter is
remitted to Family Court, Onondaga County, for further proceedings to
recalculate the father’s income and child support obligation in
accordance with the following Memorandum: Petitioner mother commenced
this proceeding seeking, inter alia, an upward modification of the
child support obligation of respondent father. The Support Magistrate
increased the father’s support obligation, and Family Court
thereafter, inter alia, denied the father’s objections to the order of
the Support Magistrate. The father contends that the Support
Magistrate’s finding with respect to his income is inconsistent with
the definition of income in the Child Support Standards Act ([CSSA]
Family Ct Act § 413). We agree with the father that his total income,
and thus his child support obligation, must be recalculated in
compliance with Family Court Act § 413.

     The father, who is the sole shareholder of Syracuse Haulers, a
subchapter S corporation, contends that the Support Magistrate erred
in determining that his 2008 adjusted gross income from the business
of his subchapter S corporation was $707,510.82, including $109,196 in
capital gains, $5,238 in entertainment expenses, and $562,112.66 in
imputed income based on increased depreciation.
                                 -2-                          1385
                                                         CAF 11-00903

     We reject at the outset the father’s contention that he is not
“self-employed” within the meaning of the CSSA. Generally, a sole
shareholder of a subchapter S corporation, such as the father, is
considered to be self-employed because the corporation’s income is in
essence the sole shareholder’s income (see generally Matter of Fowler
v Rivera, 40 AD3d 1093, 1094; Terrell v Terrell, 299 AD2d 810, 812;
Matter of Smith v Smith, 197 AD2d 830, 831). Capital gains from the
“subchapter S corporation[] in which [the father] has an interest is
income for the purpose of determining child support” (Matter of
Gianniny v Gianniny, 256 AD2d 1079, 1081; see generally Matter of
Mitchell v Mitchell, 264 AD2d 535, 539, lv denied 94 NY2d 754;
McFarland v McFarland, 221 AD2d 983, 984). Here, contrary to the
father’s contention, the Support Magistrate properly included $109,196
in capital gains in his 2008 income, which the Support Magistrate
derived from his 2008 individual income tax return.

     With respect to the Support Magistrate’s addition of
entertainment expenses in the father’s 2008 adjusted gross income, we
note that, under the CSSA, income includes self-employment deductions,
less certain expenditures that encompass “unreimbursed employee
business expenses except to the extent said expenses reduce personal
expenditures” (Family Ct Act § 413 [1] [b] [5] [vii] [A]). For a
parent who is self-employed, income is the parent’s “gross income less
allowable business expenses” (Haas v Haas, 265 AD2d 887, 887 [internal
quotation marks omitted]). The court thus may include in income
“entertainment and travel allowances deducted from business income to
the extent said allowances reduce personal expenditures” (§ 413 [1]
[b] [5] [vi] [B]).

     Here, the Support Magistrate included $5,238 in entertainment
expenses in the father’s income that were listed as deductions on the
2008 tax return of his subchapter S corporation. The Support
Magistrate described those expenses as “items not found to be expenses
properly deducted from the corporation income for political
contributions, travel and entertainment, and unexplained penalties.”
There is, however, no testimony or other evidence in the record
regarding whether those expenses were exclusively business expenses
rather than personal expenses, nor is there testimony or other
evidence regarding whether those expenses in fact reduced the father’s
personal expenses (see Matter of Barber v Cahill, 240 AD2d 887, 889).
Because the mother failed to meet her burden of establishing that the
expenses were personal in nature, or at least partially so, we
conclude that the Support Magistrate abused her discretion in
including the entertainment expenses in the amount of $5,238 in the
father’s income.

     Finally, we agree with the father that the Support Magistrate
erred in imputing income to him in the amount of $562,112.66 based on
increased depreciation. As the father properly contends, on the
record before us that amount was improperly imputed to his income
because the Support Magistrate failed to make any calculation as to
what the straight-line depreciation would have been within the meaning
of Family Court Act § 413. Although the father’s income for child
support purposes may ultimately include imputed depreciation income,
                                 -3-                          1385
                                                         CAF 11-00903

the manner in which the Support Magistrate calculated the amount was
not in accordance with Family Court Act § 413 (1) (b) (5) (vi) (A)
because she did not calculate it as depreciation “greater than
depreciation calculated on a straight-line basis for the purpose of
determining business income.” We therefore reverse the order and
remit the matter to Family Court to recalculate the father’s income
and child support obligation in accordance with Family Court Act §
413.

     We have considered the contention of the mother raised on her
cross appeal and conclude that it is without merit.




Entered:   December 30, 2011                    Frances E. Cafarell
                                                Clerk of the Court
