      Notice: This opinion is subject to correction before publication in the P ACIFIC R EPORTER .
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      corrections@appellate.courts.state.ak.us.



                THE SUPREME COURT OF THE STATE OF ALASKA

MALLORY D.,                                      )
                                                 )        Supreme Court No. S-14715
                       Appellant,                )
                                                 )        Superior Court No. 3PA-09-01846 CI
      v.                                         )
                                                 )
MALCOLM D.,                                      )        OPINION
                                                 )
                       Appellee.                 )        No. 6826 – September 20, 2013
                                                 )

              Appeal from the Superior Court of the State of Alaska, Third
              Judicial District, Palmer, Eric Smith, Judge.

              Appearances: Mallory D., pro se, Palmer, Appellant. Tara
              Logsdon and J. Matthew Hayes, Golter & Logsdon, P.C.,
              Palmer, for Appellee.

              Before: Fabe, Chief Justice, Winfree, Stowers, Maassen, and
              Bolger, Justices.

              BOLGER, Justice.

      I.      INTRODUCTION
              A mother appeals from an order modifying her child support obligation.
She argues that the court improperly calculated the father’s self-employment income and
also erred by imputing a 40-hour workweek when calculating her income. We agree that
the court did not conduct a sufficiently probing review of the father’s business expenses,
reimbursements, and in-kind contributions to determine his adjusted annual income for
child support purposes. And the superior court erroneously ruled that controlling
precedent required the court to conclude that the mother was underemployed. We
therefore reverse and remand for recalculation of the child support award.
II.    FACTS AND PROCEEDINGS
              Malcolm and Mallory were married and had three children.1 In August
2009 they filed a petition for dissolution of marriage.2 Following the entry of the
dissolution decree, Mallory filed a motion to modify custody on May 5, 2010.3 After
litigation in superior court and an appeal to this court, the parties were granted joint legal
custody and shared physical custody of their two daughters, and Malcolm was granted
primary custody of their son.4
              On remand, the parties filed several proposed child support orders; they
disputed the amount of Malcolm’s income and whether Mallory was voluntarily and
unreasonably underemployed. The superior court held an evidentiary hearing regarding
child support on February 21, 2012. Mallory testified that she worked an average of 30
hours per week. Her wages were $18.00 per hour. She explained that her employer was
a construction company that did not have full-time work for her, especially in the winter
season. But her employment schedule also allowed her to drive her daughter to and from
school during the weeks that she was exercising custody, so that she did not have to use
day care. Mallory testified that she had applied for full-time employment in Anchorage
without success. Malcolm testified that he owned a business that applied urethane foam
insulation. He explained that the income tax figures used in his child support guidelines
affidavit were based on information that he received from his accountant.


       1    Mallory D. v. Malcolm D., 290 P.3d 1194, 1197 (Alaska 2012). We use
the same pseudonyms in this case that we used in our previous opinion.
       2
              Id.

       3

              See id. at 1197-98.

       4      See id. at 1198-1200, 1207.

                                             -2-                                        6826

              At the close of the hearing, the court invited the parties to submit post-
hearing briefing regarding (1) Malcolm’s deductions for the business use of his home and
(2) imputation of income for Mallory. After considering the parties’ post-hearing
briefing, the superior court determined that Malcolm’s income should be as stated in his
2011 federal income tax return and that Mallory’s income would be imputed at the rate
of $18 per hour for full-time employment. The court issued a new child support order
effective June 1, 2010. Mallory appeals from this order.
III.   STANDARD OF REVIEW
              We may reverse a child support award if the trial court abuses its discretion
or applies an incorrect legal standard.5 “We will find an abuse of discretion when our
review of the record leaves us with a ‘definite and firm conviction based on the record
as a whole that a mistake has been made.’ ”6 The correct legal standard for a child
support determination is a question of law that we review independently.7
       “Whether a party is voluntarily underemployed is essentially a question of fact.”8
“We set aside a trial court’s factual findings only if they are clearly erroneous, including




      5      Beaudoin v. Beaudoin, 24 P.3d 523, 526 (Alaska 2001) (citing Sanders
v. Sanders, 902 P.2d 310, 313 (Alaska 1995)).

       6      Id. at 526 (quoting Kowalski v. Kowalski, 806 P.2d 1368, 1370 (Alaska
1991)).

       7      Id. (citing Marine v. Marine, 957 P.2d 314, 316 (Alaska 1998)).

       8    Ward v. Urling, 167 P.3d 48, 52 (Alaska 2007) (citing Robinson v.
Robinson, 961 P.2d 1000, 1004 (Alaska 1998)).

                                            -3-                                       6826

a trial court’s findings regarding a party’s income.”9 We review the superior court’s
decision to impute income for abuse of discretion.10

IV.	   DISCUSSION
       A.	   The Superior Court Erred By Failing To Examine Malcolm’s Self-
             Employment Income And Expenses.
             Alaska Civil Rule 90.3(a)(1) states that “[a]djusted annual income as used
in this rule means the parent’s total income from all sources minus” certain mandatory
deductions, voluntary retirement contributions, child support and alimony payments, and
child care expenses.11 The commentary to Rule 90.3 states:
             Income from self-employment . . . includes the gross receipts
             minus the ordinary and necessary expenses required to
             produce the income . . . . Expense reimbursements and in-
             kind payments such as use of a company car, free housing or
             reimbursed meals should be included as income if the amount
             is significant and reduces living expenses.[12]
This court has approved a superior court’s decision to disallow business deductions if
those expenses significantly reduced the parents’ living expenses.13
             In this case, the superior court credited Malcolm’s testimony, and found that
his 2011 tax return accurately reflected his income. The court found that Malcolm’s


       9      Id. (citing Bennett v. Bennett, 6 P.3d 724, 726 (Alaska 2000); Koller v.
Reft, 71 P.3d 800, 804 (Alaska 2003)).

       10    Helen S.K. v. Samuel M.K., 288 P.3d 463, 473 (Alaska 2012) (citing
O’Connell v. Christenson, 75 P.3d 1037, 1039 (Alaska 2003)).
       11	
             Alaska R. Civ. P. 90.3(a)(1)(A)-(E).
       12
             Alaska R. Civ. P. 90.3 cmt. III.B.
       13
              Coghill v. Coghill, 836 P.2d 921, 926 (Alaska 1992) (affirming the superior
court’s denial of various deductions).



                                           -4-	                                     6826

home office was an “ordinary and necessary” business expense. The court’s order did
not discuss the extent to which expense reimbursements and in-kind payments were
“significant and reduce[d] living expenses.”
              Mallory argues that the superior court erred by failing to require proof of
Malcolm’s ordinary and necessary business expenses. In response, Malcolm claims that
his 2011 tax return contained an accurate reflection of his business expenses for that year.
              At the hearing, the superior court questioned Malcolm’s deduction for
business use of his home, which was apparently based on the use of his heated shop to
store the truck containing his urethane material. But in its final decision, the court
approved the deduction for Malcolm’s use of his home.
              In Mallory’s post-hearing briefing, she contended that about $4,933 of
Malcolm’s personal fuel purchases were being passed off as business expenses. Mallory
repeated this argument in a motion for reconsideration. She pointed out that $4,078 in
fuel purchases were made at the Holiday station in Meadow Lakes, which is the station
that Malcolm uses to fuel up his snowmachines on his way to his family cabin. In her
motion for reconsideration, Mallory also objected to several other business expenses that
she contended were actually for personal groceries, meals, cell phones, and recreational
goods. The court did not mention these other business expenses in its final decision;
instead, it simply approved the deduction of the expenses shown on Malcolm’s income
tax return.   On appeal, Malcolm argues that all of these business expenses were
legitimate.
              Mallory also argues that the court’s reliance on Malcolm’s tax return
income of $29,224 was erroneous because Malcolm had transferred $94,669 from his
business account to his personal account during calendar year 2011 and because his tax
return income does not match his current lifestyle. Malcolm responds that these transfers
(and his personal expenditures) do not necessarily document his business income because


                                            -5-                                       6826

they could be due to expense reimbursements, non-cash expenses like depreciation, or
simply funds that were borrowed.
             The superior court’s order did not address whether the expenses that
Malcolm claimed actually reduced his living expenses.14 In Swaney v. Granger,15 we
recently explained:
             The [Civil Rule 90.3(a)] commentary specifically addresses
             the situation of a self-employed parent, prescribing that
             “[i]ncome from self-employment . . . includes the gross
             receipts minus the ordinary and necessary expenses required
             to produce the income.” . . . The commentary lists certain
             business expenses that are allowed by the IRS for federal tax
             purposes that are not appropriate when calculating child
             support, and it notes that “[e]xpense reimbursements and in-
             kind payments such as use of a company car, free housing or
             reimbursed meals should be included as income if the amount
             is significant and reduces living expenses.”[16]

In Swaney, we reversed the child support order because “the superior court did not
examine the affairs of [the ex-husband’s] business in relation to his personal finances to
determine his adjusted annual income, nor did it meaningfully discuss or analyze the
deductions claimed by the business.”17 We explained that “the commentary to Rule 90.3
makes clear that a probing review of [the ex-husband’s] — and his business’s —




      14
              See Alaska R. Civ. P. 90.3 cmt. III.B (“Expense reimbursements and in-kind
payments such as use of a company car, free housing or reimbursed meals should be
included as income if the amount is significant and reduces living expenses.”).
      15
             297 P.3d 132 (Alaska 2013).

      16     Id. at 138 (alterations in original) (footnotes omitted) (citations omitted).

      17     Id.

                                           -6-                                       6826

financial affairs must be conducted to determine his adjusted annual income for child
support purposes.”18
             The applicable commentary thus requires the superior court to consider the
extent to which Malcolm’s reimbursements and in-kind contributions were “significant
and reduce[d] living expenses.”19 Mallory has identified several areas where Malcolm’s
reimbursements and in-kind contributions could have significantly reduced his living
expenses. We thus conclude that the superior court did not apply the correct legal
standard.20 We must reverse and remand for the superior court to determine whether
Malcolm’s claimed business expenses were legitimate and whether Malcolm’s
reimbursements and in-kind contributions significantly reduced his living expenses.
             Mallory also argues that the superior court erred by failing to address
Malcolm’s 2010 income. The child support order was effective June 1, 2010.21 We note
that the superior court had a copy of Malcolm’s 2010 tax return, which was attached to
his child support guidelines affidavit filed on August 9, 2011. This return shows
substantially higher self-employment income that would support income for child
support purposes in the amount of $62,348. On remand, the superior court should
consider Malcolm’s actual 2010 income and either enter a separate child support order
for 2010 or average Malcolm’s income to calculate child support.




      18     Id. (emphasis added).
      19
             Alaska R. Civ. P. 90.3 cmt. III.B.

      20      See Beaudoin, 24 P.3d at 526 (explaining that a child support award will
be reversed if the superior court applied the incorrect legal standard).
      21
             Boone v. Boone, 960 P.2d 579, 585 (Alaska 1998) (stating that the service
date of a motion to modify child support is the preferred effective date of a modified
child support order).

                                          -7-                                     6826

      B.	    The Superior Court Was Not Required To Impute Mallory’s
             Income From Full-Time Employment.
             When calculating child support, the superior court may impute additional
income to a parent if the court finds the parent is voluntarily and unreasonably
underemployed.22    Mallory argues that the superior court erred when it imputed
additional income to make her child support income equivalent to a full-time job at $18
per hour. We conclude that the superior court erred when ruling that under Beaudoin23
it was required to “impute full-time income to a parent who could work full-time but
chooses not to in order to meet their children’s scheduling needs.” In so ruling, the
superior court misinterpreted our holding in Beaudoin.
             In Beaudoin, the father, Michael, claimed that his ex-wife Georgia was
voluntarily underemployed.24 Georgia worked without any compensation in her new
domestic partner’s business, and she chose not to seek gainful employment elsewhere.25
Georgia’s partner estimated her work “was worth at least $7 per hour”; “Georgia held
herself out to be a co-owner of the business”; and “her friends described her as a
businesswoman who devoted substantial time to the business.”26 Michael pointed out
that Georgia had previously held a job, and he submitted a vocational counselor’s report
stating that Georgia could find work paying $15 to $16 per hour.27




      22
             Sawicki v. Haxby, 186 P.3d 546, 550 (Alaska 2008).

      23
             24 P.3d 523.

      24

             Id. at 524.

      25     Id. at 525.

      26     Id.

      27     Id. at 524-25, 527.

                                          -8-	                                    6826

             In Beaudoin, the superior court denied Michael’s request for an evidentiary
hearing on the issue of underemployment.28 On appeal, we reversed and remanded for
an evidentiary hearing because Michael had presented substantial evidence that Georgia
would be capable of earning significantly more money and that she declined to seek
employment, which raised genuine issues of material fact as to whether Georgia was
“voluntarily and unreasonably” underemployed.29 We identified the relevant inquiry
under Civil Rule 90.3 as “whether a parent’s current situation and earnings reflect a
voluntary and unreasonable decision to earn less than the parent is capable of earning.”30
We emphasized that we were merely remanding for an evidentiary hearing, and we
expressed no opinion as to the ultimate validity of Michael’s claim.31 We explained that
it was “important . . . to observe that Rule 90.3(a)(4) does not rigorously command
pursuit of maximum earnings. The rule’s more modest objective is to give courts broad
discretion to impute income based on realistic estimates of earning potential in cases of
voluntary and unreasonable unemployment or underemployment.”32

             Thus, contrary to the superior court’s ruling in this case, Beaudoin does not
establish a bright-line rule that “the court must impute full-time income to a parent who
could work full-time but chooses not to in order to meet their children’s scheduling
needs.” This error requires reversal in this case. There was evidence that Mallory was
not voluntarily and unreasonably underemployed, including her testimony that her
employer could not offer her more hours and that she had applied for other full-time jobs.


      28     Id. at 525.
      29
             Id. at 530.
      30
             Id. at 528 (citing Alaska R. Civ. P. 90.3(a)(4) & cmt. III.C).

      31     Id. at 530.

      32     Id.

                                           -9-                                      6826

There is very little record support for the court’s conclusion that Mallory could earn $18
per hour at full-time employment. On remand, the superior court should determine
whether Mallory was voluntarily and unreasonably underemployed considering the
totality of circumstances.33
V.     CONCLUSION
              We REVERSE the superior court’s order modifying child support and
remand for further proceedings consistent with this opinion.34




       33
              Id. at 528 (citing Alaska R. Civ. P. 90.3 cmt. III.C; Pugil v. Cogar, 811 P.2d
1062, 1066 (Alaska 1991)); see also Sawicki, 186 P.3d at 550 (explaining that the totality
of circumstances “include such factors as whether the obligor’s reduced income is
temporary, whether the change is ‘the result of economic factors or of purely personal
choices,’ the children’s needs, and the parents’ needs and financial abilities”) (footnotes
omitted) (citations omitted).
       34
            Because we remand for further proceedings, we do not need to reach
Mallory’s additional arguments.

                                           -10-                                       6826
