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                             Nebraska Court of Appeals Advance Sheets
                                  28 Nebraska Appellate Reports
                                          BORNHORST v. BORNHORST
                                            Cite as 28 Neb. App. 182




                  Jennifer E. Bornhorst, appellant and cross-appellee,
                           v. Matthew D. Bornhorst, appellee
                                  and cross-appellant.
                                                   ___ N.W.2d ___

                                        Filed April 14, 2020.    No. A-18-903.

                 1. Divorce: Child Custody: Child Support: Property Division: Alimony:
                    Attorney Fees: Appeal and Error. In an action for the dissolution of
                    marriage, an appellate court reviews de novo on the record the trial
                    court’s determinations of custody, child support, property division,
                    alimony, and attorney fees; these determinations, however, are initially
                    entrusted to the trial court’s discretion and will normally be affirmed
                    absent an abuse of that discretion.
                 2. Visitation: Appeal and Error. Parenting time determinations are mat-
                    ters initially entrusted to the discretion of the trial court, and although
                    reviewed de novo on the record, the trial court’s determination will nor-
                    mally be affirmed absent an abuse of discretion.
                 3. Judgments: Words and Phrases. An abuse of discretion occurs when
                    a trial court bases its decision upon reasons that are untenable or unrea-
                    sonable or if its action is clearly against justice or conscience, reason,
                    and evidence.
                 4. Evidence: Appeal and Error. When evidence is in conflict, an appel-
                    late court considers, and may give weight to, the fact that the trial judge
                    heard and observed the witnesses and accepted one version of the facts
                    rather than another.
                 5. Child Custody. When deciding custody issues, the court’s paramount
                    concern is the child’s best interests.
                 6. ____. In determining the best interests of a child in a custody determina-
                    tion, a court must consider pertinent factors, such as the moral fitness of
                    the child’s parents, including sexual conduct; respective environments
                    offered by each parent; the age, sex, and health of the child and parents;
                    the effect on the child as a result of continuing or disrupting an existing
                    relationship; the attitude and stability of each parent’s character; and
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           Nebraska Court of Appeals Advance Sheets
                28 Nebraska Appellate Reports
                         BORNHORST v. BORNHORST
                           Cite as 28 Neb. App. 182

      parental capacity to provide physical care and satisfy educational needs
      of the child.
 7.   ____. A trial court’s decision to award joint legal or physical custody
      can be made without parental agreement or consent so long as it is in the
      child’s best interests.
 8.   Divorce: Property Division. The active appreciation rule sets forth the
      relevant test to determine to what extent marital efforts caused any part
      of the appreciation or income.
 9.   Divorce: Property Division: Words and Phrases. Appreciation caused
      by marital contributions is known as active appreciation, and it consti-
      tutes marital property.
10.   ____: ____: ____. Passive appreciation is appreciation caused by sepa-
      rate contributions and nonmarital forces.
11.   Divorce: Property Division: Presumptions. Accrued investment earn-
      ings or appreciation of nonmarital assets during the marriage are pre-
      sumed marital unless the party seeking the classification of the growth
      as nonmarital proves: (1) The growth is readily identifiable and trace-
      able to the nonmarital portion of the account and (2) the growth is not
      due to the active efforts of either spouse.
12.   Divorce: Property Division: Proof. The burden is on the owning
      spouse to prove the extent to which marital contributions did not cause
      the appreciation or income.
13.   Corporations: Employer and Employee. Despite the importance of
      each employee in a company, a company’s value for purposes of active
      appreciation is attributable only to the efforts of first-tier management or
      similar persons with control over the asset’s value.
14.   ____: ____. Courts have uniformly rejected arguments by the owning
      spouse that the universe of persons in a company that effect its value is
      so large that no one person has any significant effect.
15.   Child Support: Rules of the Supreme Court. The Nebraska Child
      Support Guidelines provide that in calculating the amount of child sup-
      port to be paid, the court must consider the total monthly income, which
      is defined as income of both parties derived from all sources, except
      all means-tested public assistance benefits which includes any earned
      income tax credit and payments received for children of prior marriages
      and includes income that could be acquired by the parties through rea-
      sonable efforts.
16.   Modification of Decree: Child Support. The paramount concern in
      child support cases, whether in the original proceeding or subsequent
      modification, remains the best interests of the child.
17.   Child Support: Corporations: Taxes: Evidence: Proof. Distributions
      made to a shareholder of a subchapter S corporation, as reported on
      a schedule K-1, should not be included as income for purposes of
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         Nebraska Court of Appeals Advance Sheets
              28 Nebraska Appellate Reports
                       BORNHORST v. BORNHORST
                         Cite as 28 Neb. App. 182

    calculating child support for those portions of the distribution intended
    to offset the shareholder’s personal tax liability on his or her proportion-
    ate share of the S corporation’s pass-through earnings. However, if the
    evidence establishes that the total distribution exceeds the shareholder’s
    tax liability on his or her proportionate share of the S corporation’s
    pass-through earnings, such excess portions of the distribution may
    be included as income for child support purposes unless the evidence
    demonstrates that such excess amounts are reasonably expected to be
    applied to future tax liabilities.

  Appeal from the District Court for Washington County:
Paul J. Vaughan, Judge. Affirmed.
  Shane J. Placek, of Sidner Law, for appellant.
  Philip B. Katz and Steven J. Riekes, of Marks, Clare &
Richards, L.L.C., for appellee.
  Moore, Chief Judge, and Pirtle and Bishop, Judges.
  Bishop, Judge.
                      I. INTRODUCTION
   In this dissolution action, the Washington County District
Court awarded Jennifer E. Bornhorst and Matthew D. Bornhorst
joint legal and physical custody of their children. Jennifer was
ordered to pay child support. The district court also found that
Jennifer’s nonmarital stock in her family’s subchapter S cor-
poration increased in value during the marriage and that the
increase was therefore a marital asset for purposes of dividing
the marital estate.
   Jennifer appeals, challenging the district court’s decision to
award joint legal and physical custody and its determination
that the growth in value of her nonmarital stock was a marital
asset. Matthew cross-appeals, challenging the district court’s
decision to not include as income for child support purposes
the distributions Jennifer received from her family’s busi-
ness, which Jennifer claimed were intended only to offset her
personal tax liability on her share of the S corporation’s pass-
through income. We affirm.
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        Nebraska Court of Appeals Advance Sheets
             28 Nebraska Appellate Reports
                   BORNHORST v. BORNHORST
                     Cite as 28 Neb. App. 182

                      II. BACKGROUND
   Jennifer and Matthew were married in 2010, and they have
two children, one born in 2013 and the other born in 2014. The
parties separated in December 2016.
   Jennifer filed for divorce in February 2017. She origi-
nally asked that the parties be awarded joint legal custody of
their two children, but that she be awarded physical custody.
However, in her amended complaint, she asked the district
court to award the legal and physical custody of the children
to her, subject to Matthew’s reasonable rights of parenting
time, but “[i]n the event full custody” was not awarded to her,
Jennifer asked the court to award the parties joint legal and
physical custody. Matthew’s responsive pleading and counter-
claim requested joint legal and physical custody.
   Both parties filed motions for temporary relief, and the
district court entered a temporary order on June 29, 2017,
awarding the parties joint legal custody of the children, but
awarding “primary physical care” to Jennifer. The temporary
order awarded Matthew parenting time every other weekend
from Friday at 5 p.m. until Monday at 8 a.m., and every week
on Wednesday at 5 p.m. until Thursday at 8 a.m.; a holiday
schedule was also included. Pursuant to the temporary order,
Matthew was to pay $974 per month to Jennifer for child sup-
port, commencing July 1.
   On October 27, 2017, Jennifer filed a motion for further
temporary allowances, asking the district court for an order
modifying the previous temporary order to provide for “‘joint
legal custody with tie-breaking authority to [Jennifer].’” She
also asked for an order authorizing her to enroll the children
in activities, childcare, and schooling in Blair, Nebraska. In
an order filed on November 29, the court denied Jennifer’s
request “for the tiebreaker in relation to joint legal custody,”
granted her request to change the children’s childcare and
schooling to Blair, and ordered that “each party is free to
enroll the children in activities and participate in same during
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        Nebraska Court of Appeals Advance Sheets
             28 Nebraska Appellate Reports
                   BORNHORST v. BORNHORST
                     Cite as 28 Neb. App. 182

their respective parenting time without the permission of the
other party.”
   Trial took place on April 19 and 20, 2018. We will dis-
cuss the trial evidence relevant to the errors assigned in our
analysis below. A decree dissolving the marriage was entered
by the district court on July 11 and amended on July 16 and
August 28.
   Relevant to this appeal, the district court awarded the par-
ties joint legal and physical custody of their two minor chil-
dren and adopted a 50-50 parenting time schedule. The court
ordered Jennifer to pay Matthew child support in the amount
of $283 per month for two children. When determining income
for child support purposes, the district court did not include
Jennifer’s schedule K-1 (K-1) distribution related to her
8.30565-percent ownership interest in her family’s company
(Eriksen Construction), because it found the income was spec-
ulative and Jennifer had no control over the timing or amount
of the distributions.
   With regard to the parties’ property, the district court
awarded Jennifer the entirety of her stock and ownership inter-
est in Eriksen Construction as her separate property. However,
the court found that Jennifer’s nonmarital stock grew in value
in an amount “at least equivalent to the total retained earnings”
and that the growth in value was a marital asset for purposes
of dividing the marital estate. After valuing and dividing the
marital assets and debts, the court ordered Matthew to pay
Jennifer an equalization payment of $79,348, which included a
reimbursement to Jennifer of her $50,000 premarital contribu-
tion toward the purchase of the marital residence which was
awarded to Matthew.
   On July 19, 2018, Jennifer filed a motion for new trial or,
in the alternative, to alter or amend. After a hearing on the
motion, the district court entered an order on August 28 grant-
ing Jennifer’s motion in part; the court amended the parenting
plan to provide that Jennifer would have “tiebreaking author-
ity” for nonemergency medical issues regarding the children
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        Nebraska Court of Appeals Advance Sheets
             28 Nebraska Appellate Reports
                   BORNHORST v. BORNHORST
                     Cite as 28 Neb. App. 182

“as [Matthew] had consented to that during his testimony at
trial.” All other requested relief was denied.
   Jennifer appeals and Matthew cross-appeals from the mar-
riage dissolution decree, as amended by the district court.
               III. ASSIGNMENTS OF ERROR
   Jennifer assigns, summarized and reordered, that the district
court abused its discretion by (1) allowing certain expert tes-
timony, (2) awarding joint legal and physical custody, and (3)
applying the active appreciation rule in determining that the
retained earnings of Jennifer’s gifted nonmarital asset were
part of the marital estate and should be equitably divided.
   On cross-appeal, Matthew claims the district court abused
its discretion by not including the distributions received by
Jennifer from Eriksen Construction for purposes of determin-
ing her child support obligation.
                  IV. STANDARD OF REVIEW
   [1] In an action for the dissolution of marriage, an appellate
court reviews de novo on the record the trial court’s determi-
nations of custody, child support, property division, alimony,
and attorney fees; these determinations, however, are initially
entrusted to the trial court’s discretion and will normally be
affirmed absent an abuse of that discretion. Donald v. Donald,
296 Neb. 123, 892 N.W.2d 100 (2017).
   [2] Parenting time determinations are also matters initially
entrusted to the discretion of the trial court, and although
reviewed de novo on the record, the trial court’s determina-
tion will normally be affirmed absent an abuse of discretion.
Aguilar v. Schulte, 22 Neb. App. 80, 848 N.W.2d 644 (2014),
disapproved on other grounds, State on behalf of Kaaden S. v.
Jeffrey T., 303 Neb. 933, 932 N.W.2d 692 (2019).
   [3] An abuse of discretion occurs when a trial court bases
its decision upon reasons that are untenable or unreasonable
or if its action is clearly against justice or conscience, reason,
and evidence. Flores v. Flores-Guerrero, 290 Neb. 248, 859
N.W.2d 578 (2015).
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        Nebraska Court of Appeals Advance Sheets
             28 Nebraska Appellate Reports
                    BORNHORST v. BORNHORST
                      Cite as 28 Neb. App. 182

   [4] When evidence is in conflict, an appellate court consid-
ers, and may give weight to, the fact that the trial judge heard
and observed the witnesses and accepted one version of the
facts rather than another. Donald v. Donald, supra.
                          V. ANALYSIS
                      1. Jennifer’s Appeal
                  (a) Expert Witness Testimony
   Jennifer contends the district court erred in allowing
Matthew’s expert witness, Dr. Glenda Cottam, to provide
testimony about a custody evaluation when she was court
ordered to perform a parenting assessment only. Jennifer
also argues the court erred in allowing Dr. Cottam to refer
to published articles and in allowing another of Matthew’s
expert witnesses, a certified public accountant, to provide his
opinion and interpretation of Nebraska case law on retained
earnings. However, to the extent either witness testified to
matters which may have been inappropriate or otherwise inad-
missible, we note that in all cases, the district court, as the
trier of fact in a bench trial, is presumed to have considered
only the appropriate evidence. See, e.g., Tapia-Reyes v. Excel
Corp., 281 Neb. 15, 793 N.W.2d 319 (2011) (it is presumed
that judges disregard evidence which should not have been
admitted); In re Interest of Ty M. & Devon M., 265 Neb.
150, 655 N.W.2d 672 (2003) (absent showing to contrary, it
is presumed that trial court disregarded all incompetent and
irrelevant evidence).
                         (b) Custody
  Jennifer argues the district court’s award of joint legal and
physical custody was contrary to the evidence.
                       (i) Evidence at Trial
   Jennifer testified that at the time of the parties’ separation in
December 2016, they had been living in their marital residence
in Bennington, Nebraska. In December, Jennifer moved into
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        Nebraska Court of Appeals Advance Sheets
             28 Nebraska Appellate Reports
                   BORNHORST v. BORNHORST
                     Cite as 28 Neb. App. 182

her father’s house in Blair, and then in April 2017, she moved
into a rental property in Blair. She had plans to purchase a
home in a particular subdivision in Blair after the divorce,
because “a lot of [her] equity that [she] would need to pur-
chase a home [was] tied up” in the marital residence. Matthew
agreed that the children would attend school in Blair and that
their activities would be in Blair. Jennifer had a “huge support
network” with her family and friends in Blair; Matthew’s par-
ents lived in Iowa, about 2 hours away, and his siblings lived
out of state.
   According to Jennifer, from the time of the parties’ separa-
tion in December 2016 until the time of the temporary order in
June 2017, they had a “kind of confusing” parenting schedule.
Jennifer said she “was getting a lot of issues from the girls
with being angry, being upset, clinginess, and the biggest
issue was when we had that extended five-day period every
other week that they were away from me.” The younger child
was having nightmares, and the older child was crying a lot.
Matthew testified that he did not experience those same things
when the children were with him. According to Jennifer, com-
munication between her and Matthew was not going very
well—they would email and text, but were not talking on the
telephone much because “there was a lot of anger and aggres-
sion happening.”
   Jennifer and Matthew testified that at the time of trial,
Jennifer’s communication with Matthew was by “email only.”
Jennifer received an email from Matthew one day stating that
going forward communication was to happen via email only,
and he set up a new email account. Matthew informed her
that she was not allowed to text or call unless it was an emer-
gency. However, Jennifer stated that Matthew’s email was
“not linked to his phone” and that Matthew told her he did not
check this email as often. Jennifer’s testimony about the new
communication protocol was corroborated by emails received
into evidence; particularly emails from early February 2018.
Matthew testified that the separate email communication
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        Nebraska Court of Appeals Advance Sheets
             28 Nebraska Appellate Reports
                    BORNHORST v. BORNHORST
                      Cite as 28 Neb. App. 182

method was suggested by Dr. Cottam and his individual thera-
pist; he acknowledged that he did not explain that to Jennifer.
Jennifer said that if she communicated with Matthew through
some form other than email, she would not get a response
or would “get an angered email back.” Since the separation,
Jennifer and Matthew “haven’t agreed on anything[,] even as
small as me taking the girls to swimming lessons on a night
I have them, we had to bring that to the Court.” Jennifer did
not believe that she and Matthew communicated effectively
enough to exercise joint legal custody. However, she later
acknowledged that she was willing to continue to do joint
legal custody, but was asking for a “tiebreaker” where she
would have the final say; this legal custody arrangement
was also reflected in her proposed parenting plan which was
received into evidence.
   Matthew testified that as of the time of trial, there was no
disagreement between him and Jennifer regarding the chil-
dren’s religion, daycare, schooling, or location of activities.
During the marriage, he and Jennifer were able to make medi-
cal decisions together, but there were disagreements once they
decided to get a divorce. He believed they would be able to
coparent going forward. If the parties were awarded joint legal
custody, Matthew “would be agreeable” to giving Jennifer final
decisionmaking authority on medical decisions if the parties
reached an impasse after discussion.
   Jennifer was seeking physical custody of the children, con-
sistent with the temporary order that had been in place since
June 2017. Jennifer testified that during the marriage, she did all
of the paperwork and communication for their younger child’s
adoption, she set up all of the “well-check appointments” for
the children and would take them to those appointments, and
she would usually take them to “sick appointments.” Matthew
attended only a few appointments.
   According to Jennifer, the girls have missed various activi-
ties during Matthew’s parenting time. During the fall of 2017,
the girls missed three out of eight soccer games. Matthew
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        Nebraska Court of Appeals Advance Sheets
             28 Nebraska Appellate Reports
                   BORNHORST v. BORNHORST
                     Cite as 28 Neb. App. 182

brought them to only one game during his parenting time; they
missed the other three games during his parenting time because
of “scheduling conflicts” even though the schedule was sent
out “well in advance.” Matthew testified that he “immedi-
ately” agreed that the girls could play soccer, but also told
Jennifer that they had plans for the fall schedule, so as long
as the games did not interfere with plans, they would attend.
Matthew’s testimony was corroborated by emails received into
evidence. According to Jennifer, the girls have also missed
numerous friends’ birthday parties during Matthew’s parenting
time. Matthew acknowledged that the girls have missed some
birthday parties during his parenting time because there were
conflicts with scheduled plans.
   According to Jennifer, the girls have witnessed Matthew
yelling at her. For example, in February 2017, “[w]e had just
flown back from Florida from visiting my parents and Matt
got off the escalator and started approaching me, yelling, and
saying, ‘You’ve been F’ing lying to me for F’ing months.
You’ve been F’ing plotting against me.’” Jennifer said that
“both girls instantly just kind of went behind me and grabbed
my legs, and I think all three of us were caught off guard.”
Matthew said he “won’t deny” that there was an incident,
but said “[i]t’s been overexaggerated.” It was the week after
Jennifer delivered the divorce paperwork. He said, “I walked
up to her, the girls were not hiding behind her. I did not pub-
licly yell at her. We had a conversation about things. I did use
some foul language in that conversation.” He said he regrets
his “choice of words” and would have liked to have handled
it differently.
   Jennifer has also witnessed Matthew treat the girls with
aggression. In March 2017, Jennifer was sorting clothes in a
room at Matthew’s house (he and the girls were in another
room), when Jennifer heard screaming and crying. She testi-
fied that “[our older child] comes in, screaming to me ‘Daddy
hurt me. Daddy hurt me,’” and that she had “his handprint on
her arm and she’s screaming so hysterically she’s shaking.”
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        Nebraska Court of Appeals Advance Sheets
             28 Nebraska Appellate Reports
                   BORNHORST v. BORNHORST
                     Cite as 28 Neb. App. 182

Jennifer said that Matthew then came in the room yelling,
“‘You’ve been with your mom long enough. God blank. It’s
time to be with me.’” Jennifer said she spent about 45 min-
utes calming the child down. Matthew testified that the child
wiggled out of his arms when he was carrying her downstairs
for lunch and that she was crying at that point when she went
in and saw Jennifer. Jennifer did not think Matthew was as
“emotionally supportive” as she thought he should be for
the girls. Matthew was “short” with them and told them they
needed to “grow up,” despite their young age. Jennifer thought
she was “more patient” with the girls. Matthew acknowledged
that both parties have been frustrated with the children from
time to time.
   Matthew was seeking 50-50 parenting time, with a “tradi-
tional 5-2-2-[5] schedule,” but was open as to how parenting
time would be structured. However, Matthew “would like to
maintain as much routine structure” for the children as possi-
ble. Matthew believed both parties “[c]ertainly” have different
parenting styles. He described Jennifer as “very nurturing . . .
and supportive, and a loving mother.” He described himself as
“much more ridged,” but said that he “provides the girls more
structure.” Matthew believed he also has nurturing and loving
qualities with his children; they like to play games and go to
the children’s museum or the zoo and they have nicknames for
each other. Their parenting styles “complimented each other”
during the marriage. He acknowledged that each of them
assumed different aspects of parenting during the marriage, but
said that they were “equal parents” and shared in the raising of
their children.
   Numerous other witnesses, including friends and family,
testified regarding the parties’ parenting of their children.
The witnesses generally described Jennifer as patient and lov-
ing, whereas they described Matthew as a little more short-
tempered. However, the witnesses generally stated that both
parties loved their children.
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        Nebraska Court of Appeals Advance Sheets
             28 Nebraska Appellate Reports
                   BORNHORST v. BORNHORST
                     Cite as 28 Neb. App. 182

   Dr. Cottam is a licensed clinical psychologist, has a law
degree, and is also a mediator. Dr. Cottam stated that Jennifer
and Matthew “are good individuals” and that “[t]hey have
delightful children.” When Dr. Cottam was behind an observa-
tion mirror, she observed each parent with the children for 1
hour; she observed both to have “excellent parenting skills.”
The children “were bonded, relaxed, [and] comfortable” with
both Jennifer and Matthew. There is “no evidence of actual
domestic violence, of CPS involvement, anything like that.”
She said, “Ideally, this should be a situation where the chil-
dren have the benefit of having as much time as possible with
each parent.” Although both parties reported communication
problems to her, Dr. Cottam believed that after the “court stuff
goes away” “life is going to get better” for the parties and their
communications and interactions will improve.

                   (ii) District Court’s Ruling
   The district court awarded the parties joint legal and physi-
cal custody of the children. Jennifer was awarded “tiebreaking
authority” for nonemergency medical issues regarding the chil-
dren “as [Matthew] had consented to that during his testimony
at trial.” The court accepted and adopted Matthew’s proposed
50-50 parenting plan, which was attached to the decree and
incorporated therein. The parenting plan established “routine
parenting time” on a “5-2/2-5 schedule,” awarding parenting
time to Matthew every Monday and Tuesday and to Jennifer
every Wednesday and Thursday, with the weekend parenting
time alternating between them. Also, each parent was awarded
2 weeks of “vacation parenting time” each year, which was to
“only be taken as two (2) separate one-week periods of seven
(7) consecutive days.” A holiday parenting time schedule was
also established.

                    (iii) Applicable Law
   [5,6] Keeping the evidence and the district court’s find-
ings in mind, we now consider the legal principles governing
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                   BORNHORST v. BORNHORST
                     Cite as 28 Neb. App. 182

custody and parenting time matters. When deciding custody
issues, the court’s paramount concern is the child’s best inter-
ests. Kashyap v. Kashyap, 26 Neb. App. 511, 921 N.W.2d 835
(2018). Neb. Rev. Stat. § 43-2923(6) (Reissue 2016) states, in
pertinent part:
      In determining custody and parenting arrangements, the
      court shall consider the best interests of the minor child,
      which shall include, but not be limited to, consideration
      of the foregoing factors and:
         (a) The relationship of the minor child to each parent
      prior to the commencement of the action or any subse-
      quent hearing;
         (b) The desires and wishes of the minor child, if
      of an age of comprehension but regardless of chrono-
      logical age, when such desires and wishes are based on
      sound reasoning;
         (c) The general health, welfare, and social behavior of
      the minor child;
         (d) Credible evidence of abuse inflicted on any family
      or household member. . . . ; and
         (e) Credible evidence of child abuse or neglect or
      domestic intimate partner abuse.
Other pertinent factors include the moral fitness of the child’s
parents, including sexual conduct; respective environments
offered by each parent; the age, sex, and health of the child
and parents; the effect on the child as a result of continuing or
disrupting an existing relationship; the attitude and stability of
each parent’s character; and parental capacity to provide physi-
cal care and satisfy educational needs of the child. Kashyap v.
Kashyap, supra.
   [7] The Parenting Act defines “[j]oint legal custody” as
“mutual authority and responsibility of the parents for making
mutual fundamental decisions regarding the child’s welfare,
including choices regarding education and health.” Neb. Rev.
Stat. § 43-2922(11) (Reissue 2016). Courts typically do not
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                   BORNHORST v. BORNHORST
                     Cite as 28 Neb. App. 182

award joint legal custody when the parties are unable to com-
municate effectively. See, Kamal v. Imroz, 277 Neb. 116, 759
N.W.2d 914 (2009) (joint decisionmaking by parents not in
child’s best interests when parents are unable to communicate
face-to-face and there is level of distrust); Klimek v. Klimek,
18 Neb. App. 82, 775 N.W.2d 444 (2009) (no abuse of discre-
tion by district court’s failure to award joint custody when
minor child was confused by temporary joint legal and physi-
cal custody arrangement and parents had hard time commu-
nicating with one another). However, a trial court’s decision
to award joint legal or physical custody can be made without
parental agreement or consent so long as it is in the child’s
best interests. See Neb. Rev. Stat. § 42-364(3)(b) (Cum. Supp.
2018). See, also, Leners v. Leners, 302 Neb. 904, 925 N.W.2d
704 (2019), disapproved on other grounds, State on behalf
of Kaaden S. v. Jeffrey T., 303 Neb. 933, 932 N.W.2d 692
(2019). And appellate courts have in some instances declined
to reverse trial court decisions where joint custody has been
awarded or maintained even when the evidence demonstrates
a lack of communication or cooperation between parents. See,
State on behalf of Jakai C. v. Tiffany M., 292 Neb. 68, 871
N.W.2d 230 (2015) (Nebraska Supreme Court affirmed district
court’s denial of father’s request to modify custody of child
from joint legal custody—mother with physical custody—to
sole legal and physical custody despite apparent inability
of parties to parent cooperatively with one another); Kay v.
Ludwig, 12 Neb. App. 868, 686 N.W.2d 619 (2004) (this court
affirmed district court’s award of joint legal custody, with
physical custody of parties’ minor child awarded to mother,
despite failure of parties to agree on joint legal custody
and mother’s testimony that communication between herself
and father had been nearly nonexistent and that they have
had number of confrontations since separation). However, the
key to all of the cases cited above was the appellate court’s
deference to the trial judge who had heard and observed
the witnesses.
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                   BORNHORST v. BORNHORST
                     Cite as 28 Neb. App. 182

                  (iv) Did District Court Abuse
                          Its Discretion?
   In light of the evidence presented as described above, and
giving deference, as we must, to the district court, which heard
and observed the witnesses, we find the district court did not
abuse its discretion in awarding joint legal and physical cus-
tody of the minor children to the parties.

                     (c) Active Appreciation
   Jennifer claims the district court erred by applying the active
appreciation rule in determining that the retained earnings
of Jennifer’s gifted nonmarital asset were part of the marital
estate and should be equitably divided.

                       (i) Applicable Law
   [8-10] The appreciation or income of a nonmarital asset
during the marriage is marital insofar as it was caused by the
efforts of either spouse or both spouses. White v. White, 304
Neb. 945, 937 N.W.2d 838 (2020); Stephens v. Stephens, 297
Neb. 188, 899 N.W.2d 582 (2017). The active appreciation
rule sets forth the relevant test to determine to what extent
marital efforts caused any part of the appreciation or income.
Id. Appreciation caused by marital contributions is known
as active appreciation, and it constitutes marital property
in the first instance. Id. In contrast, passive appreciation is
appreciation caused by separate contributions and nonmarital
forces. Id.
   [11-14] Accrued investment earnings or appreciation of
nonmarital assets during the marriage are presumed marital
unless the party seeking the classification of the growth as
nonmarital proves: (1) The growth is readily identifiable and
traceable to the nonmarital portion of the account and (2) the
growth is not due to the active efforts of either spouse. Id.
The burden is on the owning spouse to prove the extent to
which marital contributions did not cause the appreciation or
income. Id.
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        Despite the importance of each employee in a com-
     pany, a company’s value for purposes of active appre-
     ciation is attributable only to the efforts of first-tier
     management or similar persons with control over the
     asset’s value. First-tier management is responsible for
     ensuring the policy, direction, and good will that con-
     tributes most directly to the value of a company’s stock.
     Courts have uniformly rejected arguments by the owning
     spouse that the universe of persons in a company that
     effect its value is so large that no one person has any
     significant effect.
        Even favorable market conditions are not passive inas-
     much as they create merely the opportunity that the
     skilled, owning spouse detects and seizes. Nor does
     an argument that the “‘ground work’” for growth was
     laid before the marriage preclude as a marital asset
     substantial appreciation of a company’s value during
     the marriage. No person wears all hats in a complex
     business operation, but it is nevertheless possible for
     one person to be critical to such operation’s growth and
     development. The appreciation of a company’s stock
     may be due not just to a first-tier manager’s direct
     efforts, but to his or her mere presence, when the indi-
     vidual is identified with the business entity and tied to its
     good will.
Stephens v. Stephens, 297 Neb. at 207-08, 899 N.W.2d at
596.
                     (ii) Evidence From Trial
   Jennifer testified that she works for her family’s businesses,
including Eriksen Construction. She is also part owner of
Eriksen Construction, owning 8.30565 (hereafter 8.3) per-
cent of the company; she and her three siblings were each
gifted shares by her father and stepmother in 2014 and 2015.
Jennifer has been an officer at Eriksen Construction since 2011
and has been otherwise involved since 2010. She is the vice
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                     Cite as 28 Neb. App. 182

president of Eriksen Construction, and as such, she handles the
administrative side of the day-to-day operations, e.g., human
resources. Her job “is to oversee a lot of the business func-
tions, all of the insurances, the health and medical plans, the
401k. [She] oversee[s] all of the safety. [She does] a lot of
oversight with the project managers.” She said that someone
else handles the construction side of the project managers and
that she “handle[s] their vacation when they take vacation
requests, [she] make[s] sure they get information out to the
jobsites, and so forth.” Jennifer has not signed any loans or
cosigned any notes on behalf of the company.
   Jennifer earns a salary of approximately $87,000 per year,
and she receives a yearly bonus, but that fluctuates; in 2017,
her bonus was $8,000. Jennifer denied deferring any salary in
exchange for increasing the earnings of Eriksen Construction.
She was not aware of any efforts she made to increase the
value of the company, other than what her job duty was (and
for which she was paid). Jennifer stated:
      I guess my job duty is more of the administration side
      of the company. I’m the one that people tell me I spend
      too much of the company’s money, whereas the growth
      of the company would come from [the chairman of the
      company], and [the president of the company], and the
      construction duties and those types of things.
Jennifer’s father testified that he is the chairman of Eriksen
Construction and oversees the running of the company.
   Edward Schroeder is a certified public accountant. He has
done tax preparation for Jennifer and Eriksen Construction
for the past 5 years. Schroeder was aware that Jennifer is an
8.3-percent minority owner of Eriksen Construction, which is
a subchapter S, pass-through corporation. He explained that
the income or loss recorded in pass-through entities each year
is “passed through to the shareholders, according to their pro-
portionate ownership, and they have to pay taxes then on that
percentage of the income that has been reported.” Schroeder
prepared Jennifer’s K-1’s for 2015, 2016, and 2017 (exhibits
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                     Cite as 28 Neb. App. 182

31, 30, and 29, respectively). Box 1 on each K-1 reflects the
ordinary business income of the S corporation based upon
Jennifer’s percentage of ownership; however, Jennifer does
not receive that pass-through income. According to Schroeder,
“[E]ven though you’re an owner of a pass-through entity,
that does not necessarily mean that you took any assets or
cash out of that entity, or that you have any rights to have
any cash or property distributed out.” He further stated, “At
an 8 percent ownership level, you would not have the power
to say ‘If this company made money, I want some of it.’”
When asked what happens to the ordinary business income for
Eriksen Construction if it is not distributed to the sharehold-
ers, Schroeder responded, “It would normally go into an accu-
mulation of equity.” The chairman of Eriksen Construction
testified that if there are earnings that are not distributed,
they stay in the corporation. According to Schroeder, Eriksen
Construction is a bonded company, which means, “When you
do larger construction projects, the people that you do them
for want you to make sure you’re going to finish that proj-
ect,” they require “bonding” where “an insurance company,
of sorts, will actually insure you to complete that project and
pay the people you’re working for to get it done, if you don’t
do it.” The insurance companies “have requirements of certain
amounts of liquidity and equity for you to get a certain amount
of bonding.” So, “the equity in a corporation that has bonding
is very critical to the size or the amount of jobs that they can
actually do.”
   Regarding the increase in value of the company, the fol-
lowing colloquy was had between Matthew’s counsel and
Schroeder.
         Q. Now, but you said that the retained earnings go into
      the coffer towards equity, correct? That’s what you said
      earlier.
         A. Retained earnings is one of the categories under
      equity.
         Q. Okay.
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   A. Like common stock, that’s part of your equity.
Retained earnings is part of your equity.
   Q. . . .
   And is it — is it a pretty fair assumption that if your —
let’s say there is, just hypothetically, $500,000 of retained
earnings in one year the company kept. . . .
   A. Of — of earnings, you mean?
   Q. Uh-huh.
   A. And they didn’t do — do any distributions of it?
   Q. Correct.
   A. Okay.
   Q. Can we assume that, at a base minimum, the
company has increased by the value of those . . .
retained earnings?
   A. Nope.
   Q. Why is that?
   A. Because the — it’s all based on what a willing
buyer would pay for it.
   Just because you increase the retained earnings by
some kind of profit — you could have sold a building,
made a half million dollars on it, added that to retained
earnings, and you would have not had any more value
at all.
   Q. Okay.
   A. So no. Those two things are totally unrelated.
   Q. The stock was granted at — at book value in the gift
returns, correct?
   A. No. It was based on an appraisal.
   Q. It was based on an appraisal.
   So it was based on fair market value at that —
   A. Yes.
   Q. — time?
   A. Uh-huh.
   Q. So even though the stock was gifted at fair market
value, and even though you said that retained earnings go
to equity — increasing the equity in a company —
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                     Cite as 28 Neb. App. 182

       A. Yes.
       Q. — we can’t assume that, at a base minimum, that
    the increase in value of the company goes up dollar for
    dollar with the retained earnings?
       A. A bad assumption.
       Q. Okay. Well, wouldn’t . . . taking that approach be
    more in accordance with what we call a book valuation
    of the company?
       A. The approach you’re talking about?
       Q. Uh-huh.
       If we just took assets, minus liabilities, that’s your
    book value?
       A. Yes.
       Q. And in the span of the way you value businesses,
    can we agree that the book valuation would usually pro-
    duce your low-end value as opposed to other forms?
       A. I wouldn’t start with that value in valuing any
    business.
       Q. Okay. Just to be clear again . . . you said that the
    stock was granted at fair market value to [Jennifer], based
    on the appraisal at that time?
       A. That’s what’s required by the 706.
Then, on redirect examination, the following colloquy was had
between Jennifer’s counsel and Schroeder.
       Q. Are you aware if Eriksen Construction . . . had
    shown any growth, since [Jennifer] was gifted those
    shares, in 2014 and 2015?
       A. So growth is a little bit tough to define. You’re talk-
    ing about sales growth? You’re talking profit growth? Or
    are you talking about —
       Q. Sure. . . . I’ll rephrase it.
       A. I — I haven’t done a new appraisal, so I don’t know
    if it’s worth more or less —
       Q. If —
       A. — if that’s what you’re asking.
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         Q. If these K-1s show some income — Ordinary busi-
      ness income on box 1 for every year since she was gifted
      those shares, would it be fair to say it’s likely seen some
      appreciation in the asset, or is that not fair to say?
         A. There’s lawsuits — I mean, you know, there’s all
      kinds of factors that change the picture on what some-
      thing is worth. I just cannot testify to you that necessarily
      that means that it’s going to go up. It’s just not all the
      things that you have to look at.
   Bradley Larson is a certified public accountant. He is
accredited in business valuation and is certified in financial
forensics. Larson stated he does “income tax returns, corpo-
ration, individual — retirement plan — type of tax returns”
and “consulting with small businesses, individuals, [and]
professional practices.” He also does “litigation support”
which “encompasses a lot of various areas, such as business
valuation, forensic accounting, business interruption calcu-
lations, economic loss calculations, those types of things.”
The district court found that Larson was an expert for busi-
ness valuation.
   Larson testified that there are three “main approaches” to
business valuation:
      There’s asset approach, and what you’re doing there is
      you’re looking at the hard assets of the company, you’re
      looking at the liabilities of the company and you’re really
      just subtracting off those liabilities from the assets and
      coming up with what the value is. That’s kind of the
      asset approach.
         There’s a market approach. Most people would be
      familiar with that from a real estate perspective. It’s —
      you know, when you’re do [sic] real estate you look at
      a house — if you can find a house across the street that
      sold and it’s the same as your house, it’s a good indica-
      tion of what your house is. The same thing with business
      valuation. If you can find the sale of another business like
      your business that you’re valuing, it’s a good indication
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     of what your business is worth. So that’s kind of the mar-
     ket approach.
        And then the last approach is the income approach.
     Again, you’re looking at the financial benefits of the
     company, the income of the company and you’re trans-
     lating that into a value. You’re converting that income
     stream to a value and that’s the income approach.
Larson added that in an income approach, there is “[g]enerally”
an intangible goodwill value involved.
   Larson explained that the book value approach would be
one method within the asset approach: “[Y]ou take the assets,
whatever that value is, you subtract off what the liabilities are,
and the resulting value is the equity.” He continued:
     [I]f you’re just using the asset approach, you’re looking
     at — or the book value, you’re looking at those assets at
     a historical cost or a historical-depreciated cost. So if you
     bought — for example, if you bought a building 30 years
     ago and it depreciated over 30 years, on that approach,
     that building isn’t worth what its appraised value is, under
     the book value. It’s worth — it’s depreciated cost, which
     might be close to zero.
He then further continued by saying:
     So when you’re talking about book value, you’ve got to
     remember it’s a historical-cost basis, not what you paid
     for that particular asset.
        But it does relate to what you paid for it on the other
     item, such as cash, and that’s a dollar-for-dollar value. So,
     again, you’re looking what the cost — depreciated-cost
     basis of those assets, subtracting off the liabilities, result-
     ing in an equity value, which is book value. And what that
     book value really represents is the accumulation of the
     money you put into the company, the money you took out
     of the company, and then either the earnings or loss that
     had been generated by the company.
According to Larson, of the three business valuation approaches,
the book value is usually going to produce the lowest value.
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                     Cite as 28 Neb. App. 182

   Larson did not know the parties prior to this case, but he
prepared Matthew’s personal taxes in 2017. And for pur-
poses of this case, Larson was asked to “analyze and deter-
mine the amount of earnings being generated by Eriksen
Construction . . . applicable to child support, and determine
if there was any increase in value, based on the retained earn-
ings of [Jennifer’s] interest in Eriksen Construction.” Larson
reviewed the parties’ individual tax returns; the K-1’s issued
by Eriksen Construction for 2015, 2016, and 2017; and the gift
tax returns of Jennifer’s father and his wife for 2014 and 2015.
Larson also reviewed an affidavit by Schroeder.
   Larson stated:
         The numbers on the K-1 are pretty straightforward of
      what they represent and it’s — it would be general knowl-
      edge, in the accounting profession, that earnings that are
      not distributed are retained by the entity, which would,
      therefore, increase the book value of the entity, which,
      in this particular case, would increase the value of that
      ownership interest.
The following colloquy took place between Matthew’s counsel
and Larson.
         Q. Okay. . . . [I]f an accountant were to hypothetically
      say he does not agree that it’s a reasonable assumption
      that a value of a company increases dollar for dollar with
      retained earnings, what would your response be to that?
         A. In this particular case, I would disagree with that.
      In this particular case, it would, at a minimum, increase
      dollar for dollar.
         Q. Why is that?
         A. Multiple reasons. The — the stock had been recently
      valued for gift tax purposes and it was reported on the gift
      tax return as the value being equal to the retained earn-
      ings or the basis in the entity, which is, again, the book
      value in an S Corporation.
         Q. Would that have been the 2015, 709 gift tax return
      from the Eriksens to [Jennifer]?
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                   BORNHORST v. BORNHORST
                     Cite as 28 Neb. App. 182

         A. That’s correct.
         And then, in addition to that, just from business valu-
      ation knowledge, on a profitable entity, if you are retain-
      ing those earnings, that increases the book value and is
      going to increase the value of the company.
         Q. Okay. And so did you ultimately make a conclu-
      sion about — first of all, how many — about the retained
      earnings with regard to [Jennifer’s] 8 percent interest in
      Eriksen Construction and any increase in value that may
      have occurred?
         A. Well, in 2015, there was approximately $26,000 of
      earnings that were retained by the company.
         And, in 2016, there was approximately $76,000 of
      earnings retained by the company.
         And so the combination of those two years is approxi-
      mately $102,000.
         Q. Okay. And so are you saying that the company has,
      at a minimum, increased at that value?
         A. I’m saying that [Jennifer’s] interest in the com-
      pany has increased, at a minimum, $102,000 during 2015
      and 2016.
   Larson agreed that typically book value is going to be the
low-end value, which is part of the reason why he could rea-
sonably conclude that Jennifer’s 8.3-percent stock increased
at least a minimum of $102,000. Exhibit 89 is the summary
Larson prepared from the information contained in Jennifer’s
2015 and 2016 K-1’s for Eriksen Construction, showing how
he arrived at the $102,000 figure (actually $102,310) for
retained earnings, which he said is also reflective of the mini-
mum amount Jennifer’s interest in the company had increased.
Exhibit 89 shows that the pass-through income allocated
to Jennifer’s ownership interest was $129,420 in 2015 and
$215,051 in 2016. After additions and deductions for interest
income, ordinary dividends, long-term capital gains and losses,
“Section 179” expenses, tax-exempt interest income, and non-
deductible expenses, the total net income was $93,919 in 2015.
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                     Cite as 28 Neb. App. 182

From that, Larson subtracted the $67,499 distribution made
to Jennifer in 2015, which left $26,420 in earnings retained
by Eriksen Construction. He did the same type of calcula-
tions for 2016, showing a total net income of $201,804, from
which he subtracted the $125,914 distribution made to Jennifer
in 2016, which left $75,890 in earnings retained by Eriksen
Construction; the total of the 2015 and 2016 retained earnings
equaled $102,310, which Larson opined was the minimum
increase in value for Jennifer’s interest in the S corporation.
   On cross-examination, Larson testified that the preferred
method for business valuation is “really fact specific on each
one,” but “[i]t’s not uncommon to use the asset approach in
a construction business.” When asked what tax documents
he would ideally have at his disposal in order to accurately
determine the book value of that business, Larson responded,
“Generally you’d want financial statements and income
tax returns” from the corporation; he did not have those in
this case.
   Larson was asked, under a hypothetical, if you sell a build-
ing or buy a building, if it is still on the balance sheet.
Larson responded:
      For example, if you had [a] $100,000 building with no
      appreciation, and you sold it — so you have [a] $100,000
      building and there’s nothing else, you’ve got $100,000 of
      book value. You sell that building for $110,000, you’ve
      now got a gain of $10,000 on that building. Right? But
      now you have $110,000 of cash and you’ve got $110,000
      of book value. That $10,000 would have showed up on
      this K-1 as capital gain income and we would have cap-
      tured that $10,000 from the K-1.
Larson explained, “The assets change from a building to cash,
but the book value only changed by the gain, which is reflected
on the K-1s.” He agreed that is another reason why it can be
assumed that the value of Jennifer’s 8.3-percent interest in the
business has increased, at a minimum, to an amount equal to
the retained earnings for 2015 and 2016.
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                     Cite as 28 Neb. App. 182

                  (iii) District Court’s Ruling
   The district court, after noting that Jennifer serves as vice
president of Eriksen Construction, stated:
     Based upon the evidence that [Jennifer] had retained earn-
     ings from 2015 and 2016 totaling $102,310, and upon the
     testimony of . . . Larson, the Court finds that [Jennifer’s]
     non-marital stock grew in value in an amount at least
     equivalent to the total retained earnings, and the growth
     in value is a marital asset for purposes of dividing the
     marital estate.
                  (iv) Did District Court Abuse
                          Its Discretion?
   In light of the evidence presented, and giving deference, as
we must, to the district court, which heard and observed the
witnesses, we find the district court did not abuse its discre-
tion by determining that Jennifer’s nonmarital stock grew in
value in an amount at least equivalent to her share of the total
retained earnings ($102,310) from 2015 and 2016 and that the
growth in value was a marital asset.
   As stated in Stephens v. Stephens, 297 Neb. 188, 899
N.W.2d 582 (2017), accrued investment earnings or appre-
ciation of nonmarital assets during the marriage are presumed
marital unless the party seeking the classification of the growth
as nonmarital proves: (1) The growth is readily identifiable and
traceable to the nonmarital portion of the account and (2) the
growth is not due to the active efforts of either spouse. It was
Jennifer’s burden to demonstrate that any portion of Eriksen
Construction’s appreciation was due to passive forces or the
active efforts of third parties who would qualify as first-tier
management or similar. See id. Here, Jennifer did not meet her
burden to prove that the appreciation of her stock was nonmari-
tal, as we explain below.
   Jennifer was the vice president of Eriksen Construction. And
Schroeder, who did tax preparation for Jennifer and Eriksen
Construction, acknowledged that a vice president would be
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a key officer. Jennifer stated that she handles the administra-
tive side of the day-to-day operations, e.g., human resources,
for the company. Her job “is to oversee a lot of the business
functions, all of the insurances, the health and medical plans,
the 401k. [She] oversee[s] all of the safety. [She does] a lot of
oversight with the project managers.” She said that someone
else handles the construction side of the project managers and
that she “handle[s] their vacation when they take vacation
requests, [she] make[s] sure they get information out to the
jobsites, and so forth.” Although Jennifer claimed that others
in the company, such as the chairman (who is her father) and
the president, as well as the construction side of the business,
were responsible for the growth of the company, that does not
mean that her role on the administrative side was not impor-
tant. The district court found Jennifer’s role as vice president
significant in its determination that the growth in value of her
nonmarital stock was a marital asset, and we find no abuse
of discretion in the district court’s determination. Nor do
we find an abuse of discretion in the district court’s reliance
on Larson’s testimony when determining that Jennifer’s non-
marital stock grew in value in an amount at least equivalent
to the total of her share of the retained earnings ($102,310)
for 2015 and 2016, as calculated by Larson. Even Schroeder
acknowledged that any ordinary business income for Eriksen
Construction which was not distributed to the shareholders
“would normally go into an accumulation of equity.” And the
chairman of Eriksen Construction testified that if there are
earnings that are not distributed, they stay in the corporation.
When asked if such retained earnings would increase the value
of the corporation, Schroeder’s answers were vague and eva-
sive. We find no error in the election by the district court to
rely on Larson’s testimony instead. See Donald v. Donald, 296
Neb. 123, 892 N.W.2d 100 (2017) (when evidence is in con-
flict, appellate court considers, and may give weight to, fact
that trial judge heard and observed witnesses and accepted one
version of facts rather than another).
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                  2. Matthew’s Cross-Appeal
   [15,16] On cross-appeal, Matthew claims the district court
erred by not including for purposes of child support “the
substantial distributions” Jennifer received from Eriksen
Construction in 2015 ($67,499), 2016 ($125,914), and 2017
($67,525). Although these distributions are tied to Jennifer’s
inherited and nonmarital interest in the corporation, the child
support guidelines provide for consideration of income derived
from all sources, including nonmarital sources. See, Marcovitz
v. Rogers, 267 Neb. 456, 675 N.W.2d 132 (2004) (profits gen-
erated from real estate development entities, in which ex-wife
had inherited ownership interest, constituted income for pur-
poses of calculating child support); Hughes v. Hughes, 14
Neb. App. 229, 706 N.W.2d 569 (2005) (for purposes of
child support, husband’s income included income generated
from his mother’s trust); Neb. Ct. R. § 4-204 (rev. 2016)
(total monthly income is income of both parties derived from
all sources, except all means-tested public assistance benefits
which includes any earned income tax credit and payments
received for children of prior marriages). The paramount con-
cern in child support cases, whether in the original proceed-
ing or subsequent modification, remains the best interests of
the child. Fetherkile v. Fetherkile, 299 Neb. 76, 907 N.W.2d
275 (2018).
   In determining Jennifer’s income for the purpose of calcu-
lating child support, the district court included Jennifer’s wage
income as reported on her W-2 form, but did not include her
K-1 distributions. The court explained:
      [Matthew] argues for inclusion of [Jennifer’s] K-1 dis-
      tributions. The Court finds that [Jennifer] has produced
      sufficient evidence that the character of the distributions
      is such that inclusion of the same as income for child sup-
      port purposes would create an unjust result, because the
      income is speculative and [Jennifer] has no control over
      the timing or amount of these distributions.
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   In support of his argument that the distributions should have
been included as income for child support purposes, Matthew
cites to Coffey v. Coffey, 11 Neb. App. 788, 661 N.W.2d 327
(2003) (funds used by mother to pay estimated tax liability for
S corporation and family partnership for 3 years came from
corporation and family partnership and it was appropriate to
include such in mother’s income; because amounts varied
significantly, it was appropriate to average). He contends that
Coffey is “absolute precedent for what the district court should
have done in these proceedings.” Brief for appellee on cross-
appeal at 45.
   However, since this court’s opinion in Coffey, several other
jurisdictions have addressed distributions made to sharehold-
ers in order to offset the shareholder’s proportionate share of
the taxes on an S corporation’s pass-through earnings. Those
jurisdictions have determined that distributions to cover cor-
porate tax liability should not be included as income for
purposes of calculating child support. See, Trojan v. Trojan,
208 A.3d 221 (R.I. 2019) (father was sole shareholder of
S corporation drywall business; approximately $1 million in
retained earnings for bonding purposes and distribution used
to pay taxes on pass-through income properly excluded for
child support purposes); In re Marriage of Moorthy, 2015 IL
App (1st) 132077, 29 N.E.3d 604, 390 Ill. Dec. 672 (2015)
(concluding that amounts used to pay father’s proportionate
share of taxes on S corporation’s earnings did not constitute
disbursements to him that should have been included in child
support calculation); Diez v. Davey, 307 Mich. App. 366, 861
N.W.2d 323 (2014) (funds distributed by S corporation to
shareholders to actually offset payment of taxes on earnings
retained by corporation should not be included as income to
shareholder-parent under Michigan Child Support Formula);
Tebbe v. Tebbe, 815 N.E.2d 180, 184 (Ind. App. 2004) (hold-
ing that “pass-through S-corporation income that is merely
disbursed to offset pass-through shareholder tax liability,
and which does not increase the shareholder’s actual income,
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should not be included in child support calculations”); In
re Marriage of Brand, 273 Kan. 346, 44 P.3d 321 (2002)
(historical information regarding respondent’s interests sup-
ports district court’s conclusion that amounts distributed to
respond­ent were for sole purpose of paying his share of cor-
poration’s taxes and were not available to pay support). See,
also, J.S. v. C.C., 454 Mass. 652, 912 N.E.2d 933 (2009)
(generally agreeing with reasoning in decisions of courts in
several jurisdictions that have held that portion of distribution
designated to pay taxes on earnings legitimately retained by
corporation is not available to shareholder parent to satisfy
child support obligation); Walker v. Grow, 170 Md. App. 255,
907 A.2d 255 (2006).
    We find the reasoning of the jurisdictions set forth above
to be persuasive, and we choose to be guided by them here,
particularly given the testimony from both accountants that a
common purpose of such distributions is to cover a sharehold-
er’s tax liability on his or her share of the S corporation’s pass-
through income. While it was disputed whether the amounts
distributed here exceeded that tax liability, the evidence cer-
tainly supported that the intended purpose of the distributions
in this case was to offset personal tax consequences resulting
from the S corporation’s pass-through income.
    Jennifer testified that there was a “distribution four times
a year that’s issued to cover the taxes that we have to pay”
and that “[i]t’s usually issued about a week before the taxes
are due, and we deposit it, and then make the tax payment.”
As explained by Schroeder, the “biggest complaint” in being
a minority shareholder of a subchapter S corporation is that
“you can owe taxes on . . . what they call phantom income
and have no cash to pay it.” He explained that the distribu-
tions are based on quarterly estimates of the S corporation’s
tax liability. He further explained, “To avoid a penalty, you
have to have at least a hundred percent of the prior year’s tax
paid in. So sometimes that makes you pay in more than what
. . . the income is.” For example, when questioned about why
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Jennifer’s 2017 K-1 showed her share of the S corporation’s
ordinary business income was only $57,975, and yet her distri-
bution was $67,524, Schroeder explained that the distribution
is “not related to that year.” Similarly, the $125,914 distribu-
tion made to Jennifer in 2016 would relate in part to her share
of the ordinary business income in 2015.
   According to Schroeder, the purpose of the distributions
was to cover the estimated tax liabilities; the “distributions
were to pay taxes on the taxable income of the company that
she . . . was allocated, based on her ownership, but that she
did not receive.” And according to the chairman of Eriksen
Construction, he alone makes the decision as to what, if any,
distributions are to be made “based on what [his] quarter
deposits are for income tax.” He determined that no distribu-
tions would be made for the 2018 tax year because after get-
ting his “taxes back about a week ago,” he saw that he had
no quarterly deposits to make, since he had “overpaid.” He
acknowledged that this was due to the fact the company did
not do as well in 2017 as it had previously. Jennifer testified
that it did not look like she would be receiving a distribu-
tion to cover taxes for 2018 because “the 2017 estimated
taxes were based on the 2016 income, and so we paid in
those estimate[]s.” Since the corporation’s income for 2017
“was so much lower . . . everybody overpaid. And when that
happens, the refund goes towards your quarterly estimates
for 2018.” Jennifer said neither she nor anybody else in the
company would have any estimated quarterly taxes to pay in
2018 because “everybody overpaid last year and that all went
directly into our estimate[]s for this year.”
   Although Larson agreed that it was common in a closely
held family business that “there are distributions made to
pay taxes,” he disagreed that the distributions at issue were
only enough to pay taxes because the distributions were “in
excess of what the taxes” had been. In support of his posi-
tion, Larson used Jennifer’s 2016 K-1 and the parties’ 2016
joint personal tax return as an example. According to the
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K-1, Jennifer’s share of the corporation’s ordinary business
income in 2016 was $215,051 and her share of “Section 179”
expenses were $41,528. This resulted in S corporation income
of $173,523 ($215,051 - $41,528) being reported on the par-
ties’ joint federal tax return. Jennifer’s distribution in 2016
was $125,914. Larson claimed this was $50,000 in excess of
the total tax liability owed by the parties in 2016. When asked
if the distribution bore a close correlation with the amount of
taxes owed, he responded, “It doesn’t appear to.” Larson’s
position that there were distributions made in excess of the
tax liability associated with the S corporation’s pass-through
income for a given year has merit when looking strictly at a
given tax year, such as in the 2016 example just provided.
However, Larson did not address the earlier testimony about
distribution overpayments in a tax year potentially being
applied to taxes owed in a subsequent year. Larson was not
asked about, and therefore did not address, how that excess
might be applied to taxes in subsequent years or possibly
result in zero distributions in a subsequent year to adjust for
a prior excessive distribution as described by Schroeder, the
chairman of Eriksen Construction, and Jennifer.
   Therefore, based on the evidence presented to the district
court, we cannot say the court abused its discretion by deter-
mining that the inclusion of the distributions as income for
child support purposes in this case would create an unjust
result. There is no question that the S corporation’s pass-
through income substantially increases Jennifer’s personal tax
liability and that the distributions determined by the chairman
from year-to-year are intended to cover that tax liability. And
while it is certainly possible for distributions to be paid out in
excess of that tax liability, and for such excess to potentially be
considered as income for purposes of calculating child support,
the evidence here supports the district court’s conclusion that
to do so in this instance would be unjust.
   [17] Accordingly, we conclude that distributions made to
a shareholder of a subchapter S corporation, as reported on
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a K-1, should not be included as income for purposes of cal-
culating child support for those portions of the distribution
intended to offset the shareholder’s personal tax liability on
his or her proportionate share of the S corporation’s pass-
through earnings. However, if the evidence establishes that
the total distribution exceeds the shareholder’s tax liability
on his or her proportionate share of the S corporation’s pass-
through earnings, such excess portions of the distribution may
be included as income for child support purposes unless the
evidence demonstrates that such excess amounts are reason-
ably expected to be applied to future tax liabilities. In the
present case, the inherited shares were relatively new (gifted
to Jennifer in 2014 and 2015), so how a possible excess dis-
tribution in 2017, for example, would affect distributions in
2018, was not yet known, other than the testimony indicating
that the excess from 2017 would be applied to tax liabilities
in 2018 and that there would be zero distributions in 2018.
Certainly, an analysis correlating a shareholder’s distributions
to his or her tax liabilities over a longer period of time may
reveal a regular pattern of excess distributions which cannot
be solely tied to the tax liabilities associated with the S cor-
poration’s pass-through income. In such cases, the amount
of a shareholder’s distribution which exceeds the correlated
tax liability for an S corporation’s pass-through income may
be subject to inclusion as income for child support purposes.
However, as noted, we cannot say the district court abused
its discretion by excluding the distributions from Jennifer’s
income for child support purposes based on the evidence pre-
sented in this case.
   Matthew also argues that “[r]egardless of the purpose for
the distributions, Jennifer was not legally obligated to use the
distributions received for said purpose,” and that “[t]hus, they
were income to her like any other income.” Brief for appellee
on cross-appeal at 42. But as Jennifer aptly notes in response,
“[t]he taxes were due and had to be paid in some fashion with
the same amount of resources,” and therefore, her “obligation
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to pay the taxes would not dissipate had she decided to pay
some other obligation.” Reply brief for appellant at 3. And
Jennifer testified that she uses the distributions to pay taxes,
“because I don’t have other funds to pay those taxes.”
   We have already explained why the district court did not
abuse its discretion by excluding Jennifer’s K-1 distributions
as income for child support purposes. Whether Jennifer has
the discretion to use those particular distributions to actually
pay or not pay the additional tax liability on the S corpora-
tion’s pass-through income does not change the fact that the
liability is incurred and must be paid. While distribution
amounts in excess of the incurred tax liability can be used
at Jennifer’s discretion, the evidence presented in this case
indicated that any excess distribution would be applied to the
tax liability for the 2018 tax year and that no 2018 distribu-
tions would be made. Thus, as previously stated, based upon
the evidence presented to the district court, we cannot say
it abused its discretion by deciding not to include the distri-
butions as income attributable to Jennifer when calculating
child support.
                     VI. CONCLUSION
  For the reasons stated above, we affirm the decree, as
amended by the district court, in all respects.
                                                Affirmed.
