              IN THE SUPREME COURT OF IOWA
                              No. 11–0445

                           Filed March 1, 2013


IN RE THE MARRIAGE OF RACHEL A. McDERMOTT
AND STEPHEN J. McDERMOTT

Upon the Petition of
RACHEL A. McDERMOTT,

      Appellee,

And Concerning
STEPHEN J. McDERMOTT,

      Appellant.


      On review from the Iowa Court of Appeals.



      Appeal from the Iowa District Court for Dubuque County,

Monica L. Ackley, Judge.



      A spouse seeks further review of a court of appeals opinion

modifying a decree of dissolution.    COURT OF APPEALS DECISION

VACATED; DISTRICT COURT JUDGMENT AFFIRMED AS MODIFIED

AND REMANDED WITH DIRECTIONS.



      Jennifer A. Clemens-Conlon of Clemens, Walters, Conlon & Meyer,

L.L.P., Dubuque, for appellant.



      Susan M. Hess of Hammer, Simon & Jensen, P.C., Dubuque, for

appellee.
                                     2

WIGGINS, Justice.

      In this case, we consider whether the district court’s award of an

equalization payment totaling over one million dollars in a divorce action

was equitable, where most of the underlying assets were associated with

a farming operation. We also consider the child support and attorney

fees award. The court of appeals reduced the equalization payment to

$250,000. The court of appeals did not alter the child support obligation

regarding income and health insurance costs, but did modify the

provision dealing with the children’s extracurricular expenses.         We
granted further review.

      We find the district court was correct in its calculation of the

equalization payment, its order fixing the amount of child support, and

its decision regarding the extracurricular activities. However, we agree

with Stephen that he should be allowed to deduct one-half of the health

insurance payments.       As to attorney fees, we find that neither party

should pay the other’s appellate attorney fees. Therefore, we vacate the

court of appeals decision and affirm the district court judgment as

modified.

      I. Issues.

      The issues on appeal are whether the district court’s property

distribution was equitable and whether the child support obligations

were correct. Both parties ask for appellate attorney fees, so we will also

address this issue.

      II. Standard of Review.

      In this equity action involving the dissolution of a marriage, our

review is de novo. In re Marriage of Schenkelberg, 824 N.W.2d 481, 484
(Iowa 2012); see also Iowa Code § 598.3 (2009); Iowa R. App. P. 6.907.

Accordingly, we examine the entire record and adjudicate anew the issue
                                     3

of the property distribution.   In re Marriage of Steenhoek, 305 N.W.2d

448, 452 (Iowa 1981). We give weight to the findings of the district court,

particularly concerning the credibility of witnesses; however, those

findings are not binding upon us. Schenkelberg, 824 N.W.2d at 484; see

also Iowa R. App. P. 6.904(3)(g).     We will disturb the district court’s

“ ‘ruling only when there has been a failure to do equity.’ ” In re Marriage

of Schriner, 695 N.W.2d 493, 496 (Iowa 2005) (quoting In re Marriage of

Romanelli, 570 N.W.2d 761, 763 (Iowa 1997)).
      III. Factual and Procedural Background.
      Under our de novo review, we find the relevant facts to be as

follows. On June 7, 1997, Stephen and Rachel McDermott married in

Epworth. Stephen was thirty-three, and Rachel was twenty-two.

      At the time of the marriage, Stephen lived and worked on the farm

owned by his parents, Irwin and Joanell.         This three-hundred-acre

property, referred to as the Irwin farm, has been in the McDermott family

since 1943.   Stephen was also working on the adjacent farm, which

totaled over two hundred acres and belonged to his uncle, Patrick

McDermott. The McDermott family has owned Patrick’s farm since 1888,

making it a century farm. Stephen had premarital assets he valued at

$657,885. These assets included bank accounts, real estate, vehicles,

farm equipment, crops, and livestock.

      Rachel is a physical therapist. She worked in that capacity prior to

and, for a time, during the marriage. Rachel brought into the marriage a

savings account containing approximately $34,808.

      After their marriage, Stephen and Rachel lived on the Irwin farm.

Rachel stopped working as a physical therapist when their first child was
born in January 1999. The couple later had five more children. Rachel

was their primary caregiver.
                                     4

         Stephen supported the family with income generated from the

farming operation, which initially included raising hogs and cattle, as

well as planting and harvesting crops.        To maintain the operation,

Stephen received assistance from his father, uncle, brother, and other

relatives. None of the family members received compensation for their

labor.

         Stephen also obtained support from his family in the form of

favorable purchase agreements.       When his brother, Thomas, entered

seminary school in 1992, Stephen received seven thousand bushels of
corn, several thousand bales of straw, a herd of cattle, and a herd of

swine.     Stephen agreed to pay his brother for the farm products and

livestock with no interest accumulating.

         Additionally, Stephen’s father and uncle allowed him to use their

farm equipment and buildings.            Stephen agreed to purchase the

equipment and buildings, as he could afford to, for their value upon the

date of his first use.

         In 1998, Stephen’s parents sold their farm to Stephen and Rachel

for $200,000—half the farm’s market value. The sale occurred with the

consent of Stephen’s siblings and the understanding Stephen would

inherit nothing further from his parents. The biannual payment was set

at $5000, with an interest rate of four percent. Stephen and Rachel paid

off the balance and received a special warranty deed in January 2009.

         In 2002, Stephen and Rachel purchased Patrick’s farm for

$100,000.      The annual obligation was $10,000.    Stephen and Rachel

made two payments before Patrick passed away in 2004. At that time,

Patrick’s farm was worth approximately $427,000. In his will, Patrick
                                           5

forgave Stephen and Rachel’s outstanding debt on the farm. Stephen’s

aunt, Rita, paid the $45,0501 inheritance tax due on Patrick’s farm.

       After returning to school and obtaining recertification, Rachel filed

for divorce on July 9, 2009.         At that time, the parties had a total net

worth of approximately $2.5 million, most of which was attributable to

the farmland acquired from the McDermott family.

       In the dissolution proceedings, the parties stipulated to: (1) joint

custody, with shared physical care of the children; (2) no alimony award;

(3) attorney fees assigned to each party, with each paying half the court
costs; (4) the value of certain assets; (5) the value of farm equipment

owned by Stephen before the marriage; (6) provisions for the children’s

health insurance and medical expenses; and (7) the division of the

dependency exemptions for the children on federal and state income tax

returns. Issues not agreed to by the parties included: (1) the division of

marital assets and debts, (2) tax consequences resulting from the decree,

and (3) the amount of child support.

       The district court determined Stephen’s income is $55,000, while

Rachel’s earnings total $65,520. Accordingly, the court ordered Rachel

to pay child support of $219 per month for the six children. The support

payment decreases as children no longer qualify for support, ultimately

amounting to only ninety dollars per month when the last child is

eligible. She is also required to pay half the children’s activities fees.

       The district court subsequently filed an addendum to the

dissolution decree.        The court awarded Stephen sole ownership of

       1In  his brief, Stephen argues his aunt, Rita, paid $53,000 in inheritance taxes
resulting from Patrick’s bequest of his farm. However, the record reflects that the full
amount of the inheritance taxes was $53,050, of which Rita actually paid only $45,050.
Rita testified that Stephen paid $8000 of the inheritance taxes. The variance in the
amount of taxes paid is not relevant to our final decision.
                                      6

property, valued at $657,885, which the court previously divided

between the parties.   The court then distributed the marital property,

awarding most of the property to Stephen and assigning all debts to

Rachel.    Stephen’s share of the marital assets was in excess of

$2.1 million, but Rachel’s was less than $150,000.         The court then

ordered Stephen to make an equalization payment to Rachel for

$1,087,716. The court calculated the equalization payment by dividing

the value of the land, the crops, and the farm equipment in half. The

court gave Stephen two options for making the equalization payment.
First, he could pay equal installments for three years at $362,572

annually. Alternatively, he could make an initial payment of $500,000,

and then pay the remaining balance of $587,716 over a five-year period,

with annual installments of $117,543.         Neither alternative required

Stephen to pay interest on the equalization payment.

      Stephen chose to make the equalization payment in three equal

annual installments. On March 7, 2011, Rachel acknowledged receipt of

Stephen’s first payment for $362,572. On March 14, the district court

denied Stephen’s motion to enlarge, amend, or modify the judgment on

the most significant issues.

      Stephen appealed.        The court of appeals modified the property

division award by decreasing the equalization payment to $250,000. In

reaching this decision, the court of appeals found the district court failed

to consider the tax consequences of the property division, and thus,

substantially overvalued the assets allocated to Stephen. Furthermore,

the court of appeals found inequity would result from awarding Rachel

the entire value of the property received from the McDermott family.
      Rachel sought further review, which we granted.
                                        7

      IV. Discussion.

      A.     Introduction. Iowa is an equitable distribution state. In re

Marriage of Hansen, 733 N.W.2d 683, 702 (Iowa 2007). “In dissolution-

of-marriage cases, marital property is to be divided equitably, considering

the factors outlined in Iowa Code section 598.21[(5)].” Id. The factors

applicable in this case include:

           a. The length of the marriage.

           b. The property brought to the marriage by each party.

        c. The contribution of each party to the marriage, giving
      appropriate economic value to each party’s contribution in
      homemaking and child care services.

        d. The age and physical and emotional health of the
      parties.

         e. The contribution by one party to the education,
      training, or increased earning power of the other.

           f. The earning capacity of each party . . . .


           ....

           i. Other economic circumstances of each party . . . .

           j. The tax consequences to each party.

           ....

        m. Other factors the court may determine to be relevant in
      an individual case.

Iowa Code § 598.21(5).

      B. Classification of Assets. The district court’s first task was to

identify and value all the assets subject to division.     In re Marriage of

Keener, 728 N.W.2d 188, 193 (Iowa 2007). To identify divisible property,

the district court looks for all marital assets that exist at the time of the
divorce, with the exception of gifts and inheritances to one spouse.
                                     8

Schriner, 695 N.W.2d at 496; see also Iowa Code § 598.21(6). Premarital

property may be included in the divisible estate. Schriner, 695 N.W.2d at

496. The district court may assign varying weight to premarital property,

but should not automatically award it to the spouse who owned the

property prior to the marriage. In re Marriage of Sullins, 715 N.W.2d 242,

247 (Iowa 2006). As this court has recognized,

      Property brought into the marriage by a party is merely a
      factor to consider by the court, together with all other
      factors, in exercising its role as an architect of an equitable
      distribution of property at the end of the marriage.

Id. (citations and internal quotation marks omitted); see also Iowa Code §

598.21(5)(b).

      Regarding inherited property and gifts, the Code provides:

      Property inherited by either party or gifts received by either
      party prior to or during the course of the marriage is the
      property of that party and is not subject to a property
      division under this section except upon a finding that refusal
      to divide the property is inequitable to the other party or to
      the children of the marriage.

Iowa Code § 598.21(6).       The donor’s intent and the circumstances

surrounding the inheritance or gift are the controlling factors used to

determine whether inherited property is subject to division as marital
property. In re Marriage of Liebich, 547 N.W.2d 844, 850 (Iowa Ct. App.

1996). The court of appeals has also previously applied these two factors

to determine whether the donor intended a party “to be the sole recipient

of the inherited property.” Id. at 851.

      Notwithstanding the classification of property as inherited or

gifted, the court may still divide such an asset as marital property, where

awarding the gift or inheritance to one spouse would be unjust. See In re
Marriage of Muelhaupt, 439 N.W.2d 656, 659 (Iowa 1989). We consider
                                     9

the following factors when deciding whether it would be inequitable to

exempt a spouse’s gift or inheritance from division:

             (1) contributions of the parties toward the property,
      its care, preservation or improvement[ ];

           (2) the existence of any independent close relationship
      between the donor or testator and the spouse of the one to
      whom the property was given or devised;

            (3) separate contributions by the parties to their
      economic welfare to whatever extent those contributions
      preserve the property for either of them;

            (4) any special needs of either party;

            (5) any other matter[,] which would render it plainly
      unfair to a spouse or child to have the property set aside for
      the exclusive enjoyment of the donee or devisee.

In re Marriage of Goodwin, 606 N.W.2d 315, 319 (Iowa 2000) (citations

and internal quotation marks omitted).

      To value the property, we refer to the parties’ stipulated value of

most assets. The district court adopted those valuations. We refuse to

disturb the district court’s valuation of the assets included in the marital

estate because it is within the range of permissible evidence. Hansen,

733 N.W.2d at 703.

      Here, the district court concluded the Irwin and Patrick farms were

marital assets, subject to distribution. The court of appeals concurred,

finding the gifted and inherited farms transferred to Stephen and Rachel

jointly as husband and wife. However, the court of appeals concluded it

would be inequitable to award Rachel half the value of the gifted and

inherited property because Stephen knows only farming and would be

unable to support himself and the children without the farmland.

      Stephen asserts it was unjust, inequitable, and unfair to include
the farms and farm assets in the divisible marital estate. According to
                                    10

Stephen, his receipt of the farming operation for well below market value

constituted an inheritance or gift. He argues it was the donative intent of

Irwin, Patrick, and the entire McDermott family for the farming operation

to stay in the family and for Stephen to farm the land to support the

family. Therefore, Stephen contends the trial court should have credited

him for: (1) $200,000, which is the market value of the Irwin farm, less

the amount Stephen and Rachel paid his parents; (2) $407,000, which is

the value of Patrick’s farm, less the $20,000 Stephen and Rachel paid

before his uncle died; (3) $45,050 for the inheritance taxes Stephen’s
aunt paid on Patrick’s farm; (4) the undefined value of equipment and

buildings owned by Stephen’s brother and father; and (5) $780,000 for

Irwin and Patrick’s unpaid labor during the marriage.

      The court of appeals has rejected similar arguments. In one case,

a husband argued that $582,328 of the marital assets came from

livestock, crops, machinery, rent reduction, use of certain equipment,

and wages given to him by his family.       In re Marriage of Miller, 552

N.W.2d 460, 463 (Iowa Ct. App. 1996). He also argued the court should

take the value of these gifts out of the property distribution and award

them to him. Id. The court rejected this argument and concluded these

gratuitous transfers did “not truly represent gifts, or gifts to [the

husband] alone. No gift taxes were paid in any of the years in which the

alleged gifts were made.” Id. Furthermore, the court held that even if

the gratuitous transfers were gifts, the record lacked evidence showing

the husband was the sole recipient.       Id.   Thus, the court properly

classified them as marital assets. Id.

      Another decision involved a husband who unsuccessfully argued
his parents’ forgiveness of a $29,000 loan for a down payment on the

marital home was “an advancement on his inheritance.” In re Marriage of
                                    11

Byall, 353 N.W.2d 103, 105 (Iowa Ct. App. 1984).        In classifying the

$29,000 as a gift to both spouses, the court stated:

             We recognize that it is unlikely that [the wife] would
      have received the gifts had she not been married to [her
      husband], that the gifts were motivated by estate tax
      considerations, and that [the husband’s] inheritance may be
      reduced by the gifts made to himself and [his wife]. We do
      not find, however, that the trial court’s refusal, under these
      circumstances, to credit the entire amount of the gifts from
      [the husband’s] parents to [the husband], was inequitable.
      We reject [the husband’s] argument that the trial court’s
      treatment of the parental gifts was inequitable.

Id. at 106.

      Adopting this analytical framework, the record here does not show

the donations by Irwin, Patrick, and Thomas of farm equipment,

buildings, and unpaid labor constituted gifts.    There is nothing in the

record to indicate gift taxes were paid during the years of these alleged

gifts. See Miller, 552 N.W.2d at 463. Furthermore, the evidence suggests

the value of this generosity was intended to inure to the family, not to

Stephen alone.   Consequently, Stephen does not persuade us that he

should receive credit for the gratuitous use of these buildings, goods, and

services.
      We also reject Stephen’s argument that the property transfers were

an advancement of his inheritance. The record reflects that Irwin and

Joanell sold their farm to Stephen and Rachel for $200,000, half its

market value.     To support his claim that this generous transfer

constituted an advancement on his inheritance, Stephen points to Irwin’s

testimony, which indicates Irwin did not intend for Rachel to “receive the

benefit of [his] generosity individually as a single person, and not as a

spouse of Ste[phen].”
      This testimony does not establish that the $200,000 difference

between the sale price and the market value of the Irwin farm constituted
                                    12

a gift to Stephen individually. Rather, it supports Rachel’s claim that the

property transferred to both parties jointly as husband and wife, albeit

with the expectation they would not divorce. Rachel’s position is further

supported by the terms of the 1998 real estate contract, which transfers

the Irwin farm to “Stephen J. McDermott and Rachel A. McDermott,

husband and wife as joint tenants with full rights of survivorship and not

as tenants in common.”

      Similarly, Patrick’s will clearly bequeathed the balance owed on the

real estate contract to both Stephen and Rachel. Article II of Patrick’s
will states:

      If, at the time of my death, there is owed to me a sum of
      money under a real estate contract that I entered into on
      November 19, 2002, between, as a seller, and Stephen J.
      McDermott and Rachel A. McDermott, husband and wife, as
      joint tenants with full rights of survivorship and not as
      tenants in common, as buyers, said real estate contract
      having been recorded on November 19, 2002, in the office of
      the Recorder for Dubuque County, Iowa, as Instrument No.
      22265–02, and if at the time of my death, there is still a
      balance unpaid to me under the terms and conditions of that
      real estate contract, then I give to Stephen J. McDermott and
      Rachel A. McDermott, or the survivor of them if one is
      deceased, any balance owed to me under the terms of that
      real estate contract, and said real estate contract shall be
      considered paid in full as a result of this bequest.

(Emphasis added.)

      Well-settled principles guide our interpretation of wills:

      (1) the intent of the testator is the polestar and must prevail;
      (2) this intent, however, must be derived from (a) all of the
      language contained within the four corners of the will, (b) the
      scheme of distribution, (c) the surrounding circumstances at
      the time of the will’s execution and (d) the existing facts; (3)
      we resort to technical rules or canons of construction only
      when the will is ambiguous or conflicting or the testator’s
      intent is uncertain. In determining intent, the question is
      not what the testator meant to say, but rather what is the
      meaning of what the testator did say.
                                     13

In re Estate of Rogers, 473 N.W.2d 36, 39 (Iowa 1991) (citation omitted).

As the express terms in his will indicate, Patrick clearly intended to

forgive both Stephen and Rachel of the debt owed on the farm—not to

make a gift to Stephen individually.

       Irwin testified that when Patrick died, Stephen did not inherit

under Patrick’s will, because the transfer of Patrick’s farm to Stephen

constituted the entirety of his inheritance. Irwin further testified that the

sale of the Irwin farm to Stephen at a price below market value was an

advance on his inheritance. Stephen’s brother, Thomas, confirmed there
was an understanding between Irwin and Joanell and their children that

the transfer of the Irwin farm to Stephen on exceedingly generous terms

would constitute the entirety of Stephen’s inheritance.             Thomas

explained that the siblings understood this would result in Stephen

receiving a much larger share of Irwin and Patrick’s respective estates.

However, the family justified this disparity by the fact that Stephen

would farm the land to provide for his family and then pass the property

to the next generation of McDermotts.

       This testimony suggests the donative intent of Irwin, Joanell, and

Patrick was to provide Stephen, in advance, with his share of the

McDermott family inheritance. To support this conclusion, we turn to In

re Marriage of Johnson, 455 N.W.2d 281 (Iowa Ct. App. 1990). In that

case, a husband and wife contracted to buy a one-hundred-sixty-acre

farm from the wife’s mother. Johnson, 455 N.W.2d at 282. When the

mother died, the estate forgave the outstanding balance of over $91,000.

Id.   On appeal from the dissolution proceedings, the court of appeals

held that “$90,000 of the 160-acre farm w[as] the inherited property of
[the wife]” and “must be taken out of the marital property bin and placed

exclusively with” her. Id. at 283. However, the Johnson decision is silent
                                         14

on the specific terms of the mother’s will and does not indicate whether

the will mentioned both parties, or only the wife, when forgiving the

contract balance. Here, the record is clear that Patrick’s will specifically

identified both spouses as beneficiaries.

      Furthermore, Stephen’s aunt, Rita, testified that when Patrick

drafted     his   will,   their   attorney    briefly   discussed   the   potential

consequences of forgiving the balance owed on the contract if Stephen

and Rachel divorced.        According to Rita, Patrick disregarded this risk,

based upon his complete trust the couple would stay together forever.
The attorney, Douglas Pearce, confirmed this in his testimony. Based on

this evidence, Patrick intentionally made a joint bequest. Patrick’s belief

that the parties would never divorce does not change the bequest’s

character.

      The record also demonstrates that the transfer of the McDermott

farms to Stephen and Rachel constituted the entirety of Stephen’s

inheritance.      However, like the court of appeals in Byall, we believe

Stephen and Rachel received the gifts jointly as husband and wife. 353

N.W.2d at 106. Therefore, we refuse to identify as Stephen’s separate

property the $200,000 difference between the sale price and market

value of the Irwin farm, and the $387,000 debt, which Patrick forgave in

his will.     Similarly, the $45,050 Stephen’s aunt paid to cover the

inheritance taxes resulting from Patrick’s bequest was at best a gift to

both parties. Nonetheless, as in Miller, no gift taxes were paid in 2004,

the year of the alleged gift. 552 N.W.2d at 463. Even if we classify Rita’s

payment of the inheritance taxes as a gift, there is no evidence she

intended only Stephen to benefit therefrom. Rita testified that she made
the payment so Stephen and Rachel would not have to pay the taxes.
                                    15

      We find the gifted or inherited property identified by Stephen was

neither a gift nor inheritance to him alone.     Instead, it transferred to

Stephen and Rachel jointly.    Therefore, the value of this property was

properly included in the marital estate, and we need not apply the

equitable factors to determine whether it would be unjust to exclude

from the marital estate property gifted to one spouse. See In re Marriage

of Thomas, 319 N.W.2d 209, 211 (Iowa 1982).

      We have also reviewed the other valuations, marital property

determinations, and nonmarital property determinations made by the
district court. We find the district court properly classified and valued

the property.    Accordingly, we will not disturb the district court’s

findings.

      C. Distribution of Marital Assets and Debts. We now turn to

the distribution of the marital assets.     “An equitable distribution of

marital property, based upon the factors in 598.21(5), does not require

an equal division of assets.” In re Marriage of Kimbro, 826 N.W.2d 696,

703 (Iowa 2013). Equality is, however, often most equitable; therefore,

we have repeatedly insisted upon the equal or nearly equal division of

marital assets. Id.

      To achieve an equitable division, we apply the factors contained in

section 598.21(5), keeping in mind there are no hard and fast rules

governing economic issues in dissolution actions.       In re Marriage of

Vrban, 359 N.W.2d 420, 423 (Iowa 1984). Because precedent is of little

value when framing a distribution, our decision must ultimately depend

on the particular facts relevant to each case. Id.

      As the district court determined and we affirm, the farmland and
some of the farm equipment is marital property. The Code requires the

court to divide marital property between the parties.          Iowa Code
                                    16

§ 598.21(1). Nonetheless, Stephen testified that he wanted to continue to

farm the land and keep it in his family. Rachel agrees Stephen should

continue to farm the land but wants her fair share of the assets. Here,

however, there is no cash or other liquid asset to award Rachel to offset

the farmland and other farm assets Stephen wants to retain. Thus, the

court required Stephen to make an equalization payment.

      An equalization payment is preferable when the court cannot

divide an asset easily and there are not enough liquid assets in the

marital estate to achieve an equitable distribution. The easiest way for a
court to divide property is to order the parties to sell the land and split

the proceeds. In that instance, each party is then responsible for any tax

consequences arising from the sale.        However, a forced sale is not a

preferable method to divide marital assets, because such a sale tends to

bring lower prices, and, as in this case, a party usually wants to keep the

property rather than sell it.

      Additionally, our precedent acknowledges the public policy in favor

of preserving family farming operations:

      We have previously recognized the reasonableness of a trial
      court awarding a farm to the spouse who operated it and in
      fixing the awards and schedule of payments to the other
      spouse without reaching equality so the farmer-spouse might
      retain ownership of the farm.

In re Marriage of Callenius, 309 N.W.2d 510, 515 (Iowa 1981) (citing In re

Marriage of Andersen, 243 N.W.2d 562, 564 (Iowa 1976)) (emphasis

added); see also In re Marriage of Briggs, 225 N.W.2d 911, 913 (Iowa

1975). We find such a consideration particularly relevant in this case.

See Iowa Code § 598.21(5)(m) (allowing the court to consider other

relevant factors when dividing assets).     Thus, when one of the parties
                                    17

expresses a strong interest in preserving the farm, the court should do

everything possible to respect that desire.

      However, a party’s interest in preserving the farm should not work

to the detriment of the other spouse in determining an equitable

settlement.   We find the division of marital property in nearly equal

shares is equitable under all the factors listed in Iowa Code section

598.21(5). One factor supporting our conclusion, as well as the district

court’s decision, is that Stephen will receive nonmarital assets that he

valued in his exhibit at $657,885. See id. 598.21(5)(b) (determining an
equitable property settlement involves consideration of “[t]he property

brought to the marriage by each party”).

      Stephen argues such a property settlement is unfair. To make the

equalization payments, the dissolution decree forces him to take a

mortgage on the property. He further alleges that the farming operation’s

cash flow cannot support the mortgage payments. In order to avoid this

inequity, he argues the farm should be valued in light of the tax

consequences he will incur upon selling the farmland.

      The district court considered this argument and rejected it. So do

we.   In making its award, the district court must have believed the

property would generate sufficient cash flow to allow Stephen both to

make the necessary mortgage payments and to satisfy the equalization

payment. Our review of the record confirms this fact.     First, Stephen

investigated the possibility of taking out a mortgage on the farmland for

fifty percent of its value. The bank told Stephen it would make the loan,

based upon the information supplied by Stephen. We must assume a

bank would not make a loan if the borrower did not have the resources
to repay the loan.
                                    18

      Second, Stephen’s tax returns show a number of deductions that

do not affect his cash flow.    Depreciation is an example of one such

deduction.    Moreover, Stephen and his accountant met and made

spending decisions to avoid income taxes. By spending money to avoid

income tax liability, Stephen artificially lowered his cash flow. Third, any

mortgage payment is deductible against any income tax liability. Finally,

experience shows the farms generate substantial cash flow.         Stephen

paid off the debt to his parents for the Irwin farm nine years early, while

at the same time making two payments on the Patrick farm.
      Considering all of this, we agree with the district court’s findings

that Stephen has the ability to borrow against the farm property and

make the equalization payment, without taking into consideration the tax

consequences of any future sale of the farmland.

      This area of law is well settled. The Code requires us to consider

the tax consequences in making a property settlement. Id. § 598.21(5)(j).

We have interpreted this section to mean “where there is no evidence to

support a discounting based on a sale and the trial court has not ordered

a sale, the effect of considering income tax consequences on a sale”

diminishes the value of the asset to the nonowning spouse.            In re

Marriage of Friedman, 466 N.W.2d 689, 691 (Iowa 1991). Thus, if the

court orders the sale of an asset, the court may consider the tax

consequences of the sale in making its property settlement. The court of

appeals has held that where a spouse makes a court-ordered, lump-sum

payment of cash to the other spouse that will, in all probability, require

the liquidation of capital assets, consideration of the tax consequences is

appropriate in making an award. In re Marriage of Hogeland, 448 N.W.2d
678, 680–81 (Iowa Ct. App. 1989). Here, the court did not require the

sale of the farmland.   The record further supports the district court’s
                                    19

finding that Stephen did not intend to sell the property and that he had

the financial ability to take a mortgage out on the property to pay the

equalization payment. Therefore, we affirm the district court’s property

distribution.

       D. Child Support Obligations. The purpose of the child support

guidelines is to provide for the best interests of the children after

consideration of each parent’s proportional income.      In re Marriage of

Beecher, 582 N.W.2d 510, 513 (Iowa 1998).            Our legislature has

established a rebuttable presumption that our child support guidelines
yield the proper amount of monthly support. Iowa Code § 598.21B(2)(c);

see also In re Marriage of Powell, 474 N.W.2d 531, 533 (Iowa 1991). The

court may not deviate from the amount of the child support yielded by

the guidelines “without a written finding that the guidelines would be

unjust or inappropriate under specific criteria.” Powell, 474 N.W.2d at

533.

       Here, the district court accepted the parties’ stipulation to joint

physical care of their six children. Therefore, both parents have an equal

responsibility to maintain homes and provide routine care, with neither

party having superior rights or responsibilities with respect to the

children. See Iowa Code § 598.1(4). In Iowa, we use the offset method

for calculating child support in cases involving joint physical care. In re

Seay, 746 N.W.2d 833, 835 (Iowa 2008) (citing Iowa Ct. R. 9.14). “The

rule reflects the difference between joint physical care and other parental

arrangements.” Id. The offset approach requires the court to calculate

the amount each party would be required to pay if they were a

noncustodial parent and then base the child support upon the difference
between those two amounts. Id. at 834.
                                   20

      Stephen first complains the district court included a one-time gain

in 2008 of $9176 from the sale of timber when it calculated his income

for the purposes of applying the child support guidelines.      Thus, he

argues his income for his child support, as calculated by the district

court using the offset method, was higher than it should have been. We

disagree.

      In determining Stephen’s income for the purposes of applying the

guidelines, the court did not adjust his section 179 depreciation

expenses that averaged $11,204 per year. For purposes of determining
child support, we have previously recalculated the deduction for section

179 depreciation under a straight line method. In re Marriage of Gaer,

476 N.W.2d 324, 329 (Iowa 1991). We reaffirmed this principle in In re

Marriage of Knickerbocker, 601 N.W.2d 48, 52 (Iowa 1999), holding “it

was proper for the court of appeals to recalculate depreciation of [the

husband’s] personal property farming assets under a straight line

method of depreciation in order to do justice between the parties.”

Therefore, under these circumstances, where the district court added

funds from a one-time timber sale to Stephen’s income, but not the more

substantial sum by adjusting his annual section 179 depreciations, even

though the district court could have, we find the evidence supports and

equity favors the district court’s determination of Stephen’s annual

income for purposes of applying the guidelines.

      Second, the district court also ordered Rachel to maintain health

insurance for the children, but awarded her a deduction for that

expense. However, in the parties’ pretrial stipulation, which the district

court adopted, the parties agreed to share the cost of the children’s
health insurance equally, with Stephen issuing a monthly payment to

Rachel for one-half the cost.
                                       21

      The district court ruling grants Rachel a windfall by allowing her to

deduct the cost of the children’s health insurance and collect one-half

the health insurance from Stephen monthly.            Pursuant to the pretrial

stipulation adopted by the district court, Stephen should be required to

reimburse Rachel one-half the cost of insurance on a monthly basis and

both parties should receive a deduction for one-half the cost of the

children’s health insurance under the child support guidelines.

      Finally, Stephen contends the district court erred in allocating the

children’s extracurricular activity expenses.         The district court found
“Stephen is more of a saver than Rachel as he does not believe in many

extra-curricular activities, and the Court is convinced he will not pay any

share of these types of expenses if he deems the activity to be frivolous.”

The district court explicitly addressed Stephen’s viewpoint when

constructing   its   child   support    order.      The      court    ordered     that

“[e]xtracurricular   activity   fees   will   be   divided    in     half   and   not

unreasonably withheld due to the parents’ likes or dislikes about the

activity.” The court also ordered “the parties shall split the cost equally

for any activity or school[-]related fees, dues or athletic activities, and

each party shall provide an accounting to the other party on a monthly

basis of expenses to be reimbursed.” By doing so, Stephen argues the

district court improperly deviated from the child support guidelines. He

contends that each parent should have the discretion to pay for the

extracurricular activities that he or she elects to support.

      The child support guidelines are designed to calculate an amount

of funds that will “cover the normal and reasonable costs of supporting a

child.” In re Marriage of Okland, 699 N.W.2d 260, 268 (Iowa 2005); see
also Iowa Ct. R. 9.3 (recognizing the guidelines “will normally provide

reasonable support”). In fact, there is a presumption the guidelines will
                                      22

yield a support amount that will “encompass the normal needs of a child,

except for medical support and postsecondary education expenses.”

Okland, 699 N.W.2d at 268.

       We have already addressed the permissibility of deviating from the

child support guidelines to accommodate expenses from children’s

extracurricular activities. Id. at 268–69. However, our precedent only

addresses the award of such funds when one parent has sole custody of

the children and the other parent’s responsibility is limited to paying

child support payments, not the children’s additional expenses.             In
Okland, where the court awarded sole custody to the husband, we

considered whether it was proper for the court to award additional

support, requiring the parties to share expenses for “school-related

activities, extracurricular activities, clothes, and automobiles.”      Id. at

269.    We said it was improper to deviate from the child support

guidelines because these were not unique child expenses and the

guidelines contemplated such costs when one parent has sole custody of

the children. Id.

       The extracurricular activity expenses, school-related fees, and dues

for athletic activities addressed by the district court fall squarely within

the realm of childrearing expenses contemplated by our guidelines.

Thus, if the court awards sole custody, an application of the guidelines

necessarily factors these expenses into the child support determination.

Id. at 269 (citing In re Arabian, 855 A.2d 560, 562 (N.H. 2004)

(“ ‘ “Extracurricular activities fall into the same category of basic support

as food, shelter and recreation” . . . [and] are included in the parties’ total

support obligation.’ ” (Citations omitted.)). The activities for which the
district court ordered additional support are not “unique to the lives of

children, and the record in this case reveals no evidence that the
                                     23

expenses of these children were significantly different than normally

incurred by other children of their age.” Id.; see also In re Marriage of

Fite, 485 N.W.2d 662, 664–65 (Iowa 1992) (holding the child’s attendance

at a parochial school did not provide a basis for increasing the support

level above the guidelines); In re Marriage of Gordon, 540 N.W.2d 289,

292 (Iowa Ct. App. 1995) (“[E]xpenses for clothes, school supplies and

recreation activities are considered under the guidelines, and a separate

support order covering such expenses is improper absent a finding that

the guidelines amount would be unjust or inappropriate.”). Therefore,
deviation from the guidelines was not necessary to avoid injustice in a

case where the court awards physical custody to one spouse. See Powell,

474 N.W.2d at 533.

      Here, the court awarded both parties physical custody of the

children. In calculating the child support obligation, the court used the

offset method. In other words, the court established the child support

obligation based upon what each party should pay for the children’s

support.    By doing this, the support payment calculation already

includes the extracurricular fees.        Because both parties are paying

support under the offset method and both have an obligation to cover the

children’s expenses, the court was justified in requiring each party to pay

one-half the extracurricular expenses to make sure both spouses pay

their fair share.

      Therefore, we affirm the district court’s award of child support and

the   requirement    that   each   party    pay   one-half   the   children’s

extracurricular expenses. However, we remand the case for the district

court to enter the appropriate order, giving Stephen a deduction for one-
half the health insurance benefits he pays, as long as he is current in

that obligation.
                                     24

      E.   Attorney Fees.     Both parties request an award of appellate

attorney fees.    “Appellate attorney fees are not a matter of right, but

rather rest in this court’s discretion.” Okland, 699 N.W.2d at 270. In

determining whether to award appellate attorney fees, we consider “ ‘the

needs of the party seeking the award, the ability of the other party to

pay, and the relative merits of the appeal.’ ” Id. (quoting In re Marriage of

Geil, 509 N.W.2d 738, 743 (Iowa 1993)). After carefully considering each

of these factors, we find neither party is entitled to an award of attorney

fees in this appeal.    Both parties have the ability to pay their own
attorney fees. See Sullins, 715 N.W.2d at 255.

      V. Conclusion.

      We vacate the decision of the court of appeals.         We affirm the

district court’s property distribution, including the equalization payment

to Rachel. We also affirm the district court’s award of child support and

the   requirement    that   each   party   pay   one-half     the   children’s

extracurricular expenses. However, we remand the case for the district

court to enter the appropriate order giving Stephen a deduction for one-

half the health insurance benefits he pays, as long as he is current in

that obligation. Costs of this action are taxed to Stephen.

      COURT OF APPEALS DECISION VACATED; DISTRICT COURT

JUDGMENT         AFFIRMED    AS    MODIFIED      AND   REMANDED        WITH

DIRECTIONS.

      All justices concur except Appel and Hecht, JJ., who dissent.
                                    25

                                    #11–0445, In re Marriage of McDermott

APPEL, Justice (dissenting).

      I respectfully dissent. The result embraced by the majority forces

Stephen to face Hobson’s choices that will produce an inequitable result

in this case.

      The end result of the majority in this case is that Rachel, who

entered the twelve-year marriage with assets of $34,808, will leave the

marriage with a significant increase in her earning capacity because of

education and training she obtained during the course of the marriage
and an unencumbered award of $1,087,716.           Stephen, on the other

hand, will be left with a substantially impaired earning ability and assets

carrying a substantial tax liability. This inequity is demonstrated by an

exploration of the available options to Stephen to meet the $1,087,716

equalization payment imposed by the majority’s property division.

      First, Stephen can simply sell the family farm, pay Rachel

$1,087,716, and keep the balance for himself. There are two problems

with this option.   First, if he chooses this option, all the taxes and

transaction costs will be borne by Stephen. It was undisputed at trial

that the tax and transaction costs associated with sale of the farmland

would approach thirty percent of its property value. Clearly, it would be

inequitable for Stephen to bear the entire amount of the transactions

costs to meet the obligation of the divorce decree.        See Iowa Code

§ 598.21(5)(i)–(j) (2009) (specifically directing the court to take into

account the “economic circumstances” and “[t]he tax consequences to

each party”); see also In re Marriage of Hoak, 364 N.W.2d 185, 194 (Iowa

1985) (considering the tax burden to one party in dividing stock during
divorce proceeding); In re Marriage of Pittman, 346 N.W.2d 33, 36 (Iowa

1984) (affirming district court’s equitable division of marital assets where
                                     26

the court properly “considered that if [the divorced wife] sold the house a

7 percent realtor’s fee must be deducted from the net equity”); In re

Marriage of Hogeland, 448 N.W.2d 678, 680–81 (Iowa Ct. App. 1989)

(“[W]here . . . the payment of a lump sum of cash to a spouse will in all

probability require the liquidation of capital assets, the income tax

consequences of such a sale should be considered by the trial court

. . . .”); cf. In re Marriage of Hardy, 539 N.W.2d 729, 732 (Iowa Ct. App.

1995) (reducing district court’s alimony award where the evidence

demonstrated divorced husband’s income was insufficient to make
payment, additional borrowing was not possible, and liquidation of farm

assets would “decrease his income and result in considerable income tax

consequences”).

      Second, instead of complete liquidation, Stephen could sell a large

enough portion of the family farm to meet the obligation imposed by the

majority. If he chooses this option, he will still be forced to bear tax and

transaction costs, although the inequity would be less than that which

would result from complete liquidation of the farm. In addition, however,

liquidation of substantial farmland cannot help but impact the economic

viability of the family farm. By reducing economies of scale as well as the

land in production, the sale of substantial farm assets will significantly

impair Stephen’s ability to earn a living.

      The trial court found that the farm operation during the course of

the marriage netted Stephen and Rachel approximately $55,000 per year.

If Stephen is required to sell substantial farm assets, it is a virtual

certainty that Stephen’s income from operating the family farm,

assuming it remained economically viable after the sale of major assets,
would significantly decline. This result flies in the face of our caselaw,

which indicates that maintaining the life style of the participants of a
                                     27

marriage, to the extent possible, is a goal of property distribution. See In

re Marriage of Goodwin, 606 N.W.2d 315, 319–20 (Iowa 2000) (explaining

that gifted and inherited property should be divided when necessary to

allow each party to maintain an increased standard of living that

occurred during the marriage); In re Marriage of Muelhaupt, 439 N.W.2d

656, 659 (Iowa 1989) (same); In re Marriage of Steenhoek, 305 N.W.2d

448, 454 (Iowa 1981) (listing maintenance of standard of living as one of

the relevant considerations in the property distribution determination);

see also Iowa Code § 598.21(5)(f) (directing the court to consider the
ability of each party to “become self-supporting at a standard of living

reasonably comparable to that enjoyed during the marriage”).

      This significant decline in Stephen’s income if he sells substantial

farm assets will occur at a time when the income of Rachel, his spouse,

will dramatically increase.    During the marriage, Stephen supported

Rachel’s effort to obtain additional education in order to obtain licensure

as a physical therapist.   She now earns $65,520 per year.        Stephen’s

yearly income of $55,000 from farm operations will in all likelihood

significantly decline due to the steps he is forced to take to meet the

equalization payment in this case.

      A third option for Stephen is to mortgage the family farm and

attempt to continue farming operations.      Assuming Stephen obtains a

$1,087,716 loan, he will have substantial yearly service obligations. The

service obligations will lead to a decrease in farm income for Stephen.

Thus, as with the land sale approach, Stephen’s ability to earn income

from the family farm operation will decline as a result of the divorce,

while Rachel’s ability to earn income will materially increase.
      A fourth option might be to mortgage the farmland and rent it out

to a third party. Under this option, the rental income might be sufficient
                                     28

to service the loan required to meet the $1,087,716 obligation from the

district court’s divorce decree. Under this scenario, of course, Stephen

would no longer be farming the land and would need to earn income in

an off-the-farm job.     He has only a high school education and is

unskilled, however, and there is no substantial likelihood that Stephen

could earn $55,000 in an off-the-farm job.

       In effect, what the majority has done is force Stephen to sell the

family farm in its entirety and assume an inequitable share of

transaction costs or, in the alternative, pursue options other than sale of
assets which will almost certainly decrease his ability to maintain his

standard of living while the lifestyle of his former spouse increases. Both

results are contrary to our caselaw. The harsh Hobson’s choice faced by

Stephen requires some adjustment to the trial court’s award.

       Further, the majority places no value in preservation of the family

farm as an ongoing enterprise. Our caselaw is to the contrary. In In re

Marriage of Callenius, 309 N.W.2d 510, 515 (Iowa 1981), we upheld an

award that did not reach equality where farmland was the principle asset

of the parties, where one spouse’s vocation was farming, and where that

spouse brought considerable farm assets into the marriage.               We

endorsed the reasonableness of court orders “awarding a farm to the

spouse who operated it and in fixing the awards and schedule of

payments to the other spouse without reaching equality so the farmer-

spouse might retain ownership of the farm.” Callenius, 309 N.W.2d at

515.   Under the teaching of Callenius, the maintenance of the family

farm as a viable entity is a factor to consider in making an equitable

award, even if the result is that the division of assets is not equal.
       I disagree, however, with certain assertions made by Stephen. In

particular, like the majority, I disagree with Stephen’s assertion that
                                      29

because Rachel did not participate directly in farming operations, she

should not be considered an equal participant in the marriage. She was

primarily responsible for raising six children, and no one disputes that

she worked hard as part of the family unit even though she did not

generate outside income. The suggestion that Rachel was not an equal

partner   in   the    marriage   based     upon   the   allocation   of   family

responsibilities cuts nothing but air. See In re Marriage of Briggs, 225

N.W.2d 911, 913 (Iowa 1975) (“Husband and wife need not, during happy

days, keep a ledger to prove his or her economic value should the
marriage later founder.”). While I reject this overreach, Stephen should

not be penalized in the property distribution because he made a

completely unpersuasive argument.

      It seems to me at the end of the day, there are several propositions

that the majority does not dispute.

      1. Rachel’s postdivorce earning ability, based in part upon

education obtained during the marriage, is $65,520 per annum as a

physical therapist.

      2. Stephen’s earning ability arising from his farming operations of

$55,000 per year during the marriage cannot help but be adversely

affected by the steps he is forced to take as a result of the equalization

payment required by the court.

      3. Rachel will have an unencumbered asset of $1,087,716, while

the farm land retained by Stephen is subject to a major tax

encumbrance.

      4. Rachel’s future economic prospects are improved by the

dissolution, while Stephen’s future economic prospects are impaired.
      The majority finds these results equitable. I do not.
                                       30

      In the end, establishing an appropriate property division in this

case is a matter of art rather than science. While I reject the award of

$1,087,716 by the majority as inconsistent with the thrust of our

caselaw and too onerous on Stephen, I also reject the relatively low

award of $250,000 by the court of appeals. In my view, based on the

totality of equities, I would award Rachel $600,000 to be paid by Stephen

over a ten-year period in equal installments. This result will avoid the

potential tax inequities and will give Stephen a better chance of

continuing as an independent farm operator, while at the same time
providing Rachel with a substantial share of marital assets. As it stands

now, Rachel will have the financial ability to have a much improved

standard of living as a result of the dissolution, while Stephen’s ability to

generate income will be substantially reduced.

      Hecht, J., joins this dissent.
