                   IN THE COURT OF APPEALS OF IOWA

                                   No. 19-0038
                              Filed February 5, 2020


IN RE THE MARRIAGE OF CARRIE LEFF
AND CHARLES LEFF

Upon the Petition of
CARRIE LEFF,
      Petitioner-Appellee,

And Concerning
CHARLES LEFF,
     Respondent-Appellant.
________________________________________________________________


      Appeal from the Iowa District Court for Howard County, James D. Coil,

Judge.



      Charles Leff appeals the provisions regarding child support and tax benefits

from the ruling dissolving his marriage to Carrie Leff. AFFIRMED AS MODIFIED

AND REMANDED.



      Christopher F. O'Donohoe of Elwood, O'Donohoe, Braun & White, LLP,

New Hampton, for appellant.

      Jeremy L. Thompson of Putnam, Fern & Thompson Law Office, P.L.L.C.,

Decorah, for appellee.

      Heard by Tabor, P.J., and Greer and Ahlers, JJ.
                                         2


AHLERS, Judge.

       The husband in a dissolution of marriage proceeding challenges the trial

court ruling setting the husband’s child support obligation and apportioning the

right to claim the parties’ three minor children as dependents on the parties’ tax

returns. He argues the trial court improperly determined his income for calculating

his child support obligation and improperly allowed the wife to claim one of the

parties’ children as a dependent on her tax returns. The wife agrees with the trial

court ruling and requests appellate attorney fees.

       We agree with the trial court that the husband’s gross annual income for

support purposes is $84,440.00, but we find his entire income is taxable.

Therefore, we remand to the district court for the purpose of calculating the

husband’s child support obligation using $84,440.00 in taxable gross annual

income and entering a corresponding support order. Because the child support

obligation may influence the determination of how to equitably allocate the right to

claim the children as dependents on the parties’ tax returns, we also remand to

reconsider such allocation. We otherwise affirm the trial court, and we deny the

wife’s request for appellate attorney fees.

       I.     Background Facts and Proceedings

       Charles Leff and Carrie Leff were married in 2000. The couple had three

children, born in 2003, 2005, and 2007. In 2017, Carrie petitioned for dissolution

of the marriage. The parties entered into a pretrial stipulation that resolved many,

but not all, of the parties’ issues. The stipulation included an agreement that the

parties would have joint legal custody of the parties’ children and Carrie would
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have physical care of all three children. The matter proceeded to trial on the issues

that were not resolved by the parties’ pretrial stipulation.

       Carrie works as an associate in her local school district. For child support

purposes, the trial court determined her gross annual income to be $15,000.00.

Charles does not challenge this determination.

       Charles works as a service technician for a local business earning $22.00

per hour. In addition to his income as a service technician, Charles has other

sources of income. He is a member of the United States Army Reserves. His

normal commitment to the Army Reserves is one weekend per month and two

weeks per year, though he often serves additional time as well. He does not earn

wages as a service technician during his service in the Army Reserves. He plans

to continue serving in the Army Reserves. In 2017, he earned $12,179.84 from

the Reserves.

       The trial court found that Charles also earns additional income from farming.

He received approximately fifty-five acres of farmland in the parties’ property

distribution. He also farms 120 acres held in trust with all net trust income paid to

him.1 The parties’ tax returns show they earned farm income as follows:




1 These 120 acres passed to the trust on the death of Charles’s father according
to his will. His father’s will passed additional farmland to a trust with the net trust
income paid to Charles’s mother and then Charles upon her death.
                                            4


    Tax Year   Net Farm Income         Section 179            Net Farm Income
                                       Deduction 2            Plus Section 179
      2013                   $78.00                $79,738.00          $79,816.00
      2014                 $3457.00                $45,376.00          $48,833.00
      2015                 $2644.00                $25,000.00          $27,644.00
      2016                       $0                 $7744.00             $7744.00
      2017              -$11,734.00                        $0         -$11,734.00
    Average               -$1111.00                $31,571.60          $30,460.60

Charles claims he received gifts of grain from his mother that he sold and reported

as taxable income worth $9305.00 in 2015 and $19,246.00 in 2016.

        Following a trial on the issues not resolved by the parties’ pretrial stipulation,

the trial court issued a ruling setting Charles’s child support obligation and

allocating the right to claim the children as dependents on the parties’ respective

tax returns. In the ruling, the court found three components to Charles’s annual

income for child support purposes. First, it found Charles receives $42,240.00 in

annual wages as a service technician, calculated by multiplying his $22.00 hourly

wage times forty hours per week for forty-eight weeks.            Second, it found he

receives $12,200.00 in annual income from the Army Reserves. Third, it found he

receives $30,000.00 in untaxed annual farm income. In determining Charles’s

farm income, the court used a five-year average of the net farm income without

section 179 deductions, as summarized in the above table. The court refused to

allow him to deduct from his income the value of the gifts of grain he claimed to

have received.     The court concluded Charles’s total annual gross income is

$84,440.00. Using the parties’ adjusted net incomes and giving Charles a 15%



2 Section 179 of the Internal Revenue Code allows a taxpayer to elect to deduct
the cost of certain types of property on the taxpayer’s tax returns rather than
requiring the cost to be capitalized and depreciated. See 26 U.S.C. § 179; In re
Marriage of Gaer, 476 N.W.2d 324, 325 (Iowa 1991).
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reduction for extraordinary visitation credit, the court ordered Charles to pay

monthly child support of $1419.00 for all three children, decreasing to $1218.87

when only two children are eligible for support, and decreasing to $845.30 when

only one child is eligible for support. The court also granted Carrie the right to

claim the middle child as a dependent on her tax returns and granted Charles the

right to claim the oldest and youngest children as dependents on his tax returns.

Charles now appeals the provisions regarding child support and allocation of the

dependent exemptions, and Carrie requests appellate attorney fees.

       II.    Standard of Review

       We review dissolution proceedings de novo. In re Marriage of McDermott,

827 N.W.2d 671, 676 (Iowa 2013). “We give weight to the findings of the district

court, particularly concerning the credibility of witnesses; however, those findings

are not binding upon us.” Id. We will disturb the district court’s “ruling only when

there has been a failure to do equity.” In re Marriage of Schriner, 695 N.W.2d 493,

496 (Iowa 2005) (quoting In re Marriage of Romanelli, 570 N.W.2d 761, 763 (Iowa

1997)).

       III.   Child Support

       We calculate a child support obligation using the child support guidelines.

See Iowa Code § 598.21 (2017); see also Iowa Ct. R. 9.2; In re Marriage of

Erpelding, 917 N.W.2d 235, 245 (Iowa 2018). “The purpose of the guidelines is to

provide for the best interests of the children by recognizing the duty of both parents

to provide adequate support for their children in proportion to their respective

incomes.” Iowa Ct. R. 9.3(1). To calculate the obligation, we begin by finding the

parties’ gross incomes.     Iowa Ct. R. 9.14.     A party’s gross income is their
                                          6


“reasonably expected income from all sources.” Iowa Ct. R. 9.5(1)(a). We must

determine gross “income from the most reliable evidence presented.”                In re

Marriage of Powell, 474 N.W.2d 531, 534 (Iowa 1991).

      Charles does not appeal the trial court’s finding that his gross annual

income includes $42,220.00 from his wages as a service technician and

$12,200.00 from his service in the Army Reserves. However, he raises multiple

issues with the court’s finding that his income includes an untaxed $30,000.00 from

farming.

      Charles claims he earns no net income from farming, but he offers no

credible explanation for why he cannot earn a net income from farming other than

his testimony that his farm income is “negative” and “[i]t’ll be even worse” in the

near future. The trial court explicitly found him not credible on his assertion of

having no farm income. The court concluded that “he was attempting to obfuscate

his farm assets and income” while testifying, based in part on the following

testimony:

              Q. How many acres do you farm? A. How many acres do I
      farm?
             Q. Uh-huh. A. That’s pretty vague.
             Q. Well, how many acres of corn are in the field right now? A.
      Currently? Together or separate?
             Q. Well, that you have an interest in, whether you own it,
      whether you own it on halves, or whether it’s part of the trust that you
      are the trustee for. A. I have approximately—it should be stipulated.
             Q. You would agree you are the sole trustee of that hundred
      acres or so? A. I am a trustee. My mother would be “co.”
             Q. There’s different trusts that your father’s will created, right?
      A. Correct.
             Q. And for at least the east hundred acres, that was given to
      you, as trustee? Do you agree with that? A. Say again. East
      hundred?
             ....
                                           7


               Q. [The will says] you, as trustee, will “pay the net income to
       Charles Leff in convenient installments;” would you agree with that?
       A. Yes.
               Q. To date, you haven’t received any installments; is that
       right? A. As of what date?
               Q. Today, here. I can rephrase. Have you received any
       money from the trust that you manage? A. So, you're saying that if I
       have received anything from the trust. It should be stated—that was
       in the exhibits that were submitted to you already.
               Q. I guess I’m asking for you to tell the court, have you written
       yourself a check from the trust. A. No, not written myself a check
       from the trust. No.
               Q. Do you anticipate that the trust is going to have money at
       the end of the year, after the crop is harvested? A. It depends if the
       crop is harvested.
               Q. Do you remember what the value of that real estate was,
       that’s your father’s estate? A. Which piece?
               Q. The piece that you serve as trustee for. A. The value?
               Q. Yes. A. No, I do not have an idea of the value.
               Q. If I told you that the report and inventory filed listed a value
       of $873,000 for that piece of real estate, does that sound accurate?
       A. Not without validating it. I could not tell you.

We give weight to this credibility determination and share the trial court’s view that

Charles’s claim of no farm income lacked credibility. He is entitled to the income

from 175 acres of farmland as either owner or trust beneficiary. We agree with the

court that it is both equitable and in the children’s best interests to expect him to

earn a net income from his significant farm assets.

       In support of his claim that his farm income is zero, Charles makes a number

of arguments. First, Charles argues the court erred by using a five-year average

of his farm income rather than a three-year average as urged by Charles. At oral

argument, Charles claimed great surprise at the court’s use of the five-year

average. There is no basis for the claim of surprise. The court admitted the parties’

tax returns for all five years (2013 through 2017) as exhibits without objection. To

the extent he argues the court should not have admitted the returns for years 2013
                                         8

and 2014, Charles has not preserved that issue for our review. See Meier v.

Senecaut, 641 N.W.2d 532, 537 (Iowa 2002) (“It is a fundamental doctrine of

appellate review that issues must ordinarily be both raised and decided by the

district court before we will decide them on appeal.”). He cannot claim surprise the

court considered evidence admitted into the record. Additionally, Charles should

not have been surprised at the court considering a five-year average. “[W]hen a

parent’s income is subject to substantial fluctuations, it may be necessary for the

court to average the parent’s income over a reasonable period” to determine the

parent’s income for support. In re Marriage of Knickerbocker, 601 N.W.2d 48, 52

(Iowa 1999) (emphasis added). Contrary to Charles’s argument, the reasonable

period used to calculate average annual income varies according to the equities

of each case. See, e.g., In re Marriage of Drake, No. 18-1724, 2019 WL 2872327,

at *3 (Iowa Ct. App. July 3, 2019) (using a five-year average of farm income); In re

Marriage of Cossel, 487 N.W.2d 679, 683 (Iowa Ct. App. 1992) (using a three-year

average of farm income); In re Marriage of Hoag, 380 N.W.2d 8, 10 (Iowa Ct. App.

1985) (using a five-year average of farm income). Here, the past five years include

good years and bad years for Charles’s farm income. Other than his testimony

about expecting poor farm income in the near future, he presented no evidence for

why the past three years better represent his farm income than the past five years.

We agree with the trial court that considering an average of the past five years is

a better representation of his farm income than an average of the past three years

as proposed by Charles.

      Second, Charles argues that alleged gifts of grain to him from his mother,

which he sold and reported as income for tax purposes, should not be considered
                                           9


as part of his income for support. The record contains little information about these

gifts other than Charles’s testimony and prepared exhibits claiming the gifts in 2015

and 2016. The court impliedly expressed skepticism of these claimed gifts by

repeatedly referring to them as “alleged” gifts, but essentially concluded that, even

if the gifts took place, the transfers of grain were done “to allow Charles to take full

advantage of deductions while minimizing his mother’s income.” We note the

record shows closeness between Charles and his mother and their farming

operations, and Charles has a history of claiming large deductions from his farm

income. Gross income for support purposes is generally the same as the “total

taxable” income reported for tax purposes. See In re Marriage of McKamey, 522

N.W.2d 95, 98 (Iowa Ct. App. 1994). Charles reported the proceeds from these

gifts as taxable income, and the record supports a finding that the gifts are

reasonably expected to continue in the future as he takes full advantage of his

available tax deductions. Thus, we find that, to the extent gifting took place, these

gifts were properly included in his income.

       Third, Charles argues the record regarding trust income is insufficient to

calculate any income. We agree the record is limited as to the trust, but we

calculate income using “the most reliable evidence presented.”            Powell, 474

N.W.2d at 534. The will from Charles’s father explicitly entitles him to income from

the 120 acres of farmland in the trust, and he presented no evidence suggesting

the trust will not produce income for him. Thus, we agree with including trust

income as part of his gross income for support.

       Fourth, Charles concedes we should add his section 179 deductions back

to his income for support purposes. While Charles does not advance an argument
                                         10


on this issue, we note his concession and specifically address his section 179

deductions. Our supreme court has decided section 179 deductions should be

added back to income for support purposes; however, “the amount of depreciation,

if any, to be considered in determining the availability of net income for the

purposes of alimony and support awards is best left to the court’s discretion.”

Gaer, 476 N.W.2d at 328 (quoting Stoner v. Stoner, 307 A.2d 146, 152 (Conn.

1972)). Previous decisions have deducted from gross income an amount equal to

straight-line depreciation rather than the section 179 deduction. See id. at 329;

see also McDermott, 827 N.W.2d at 685; Knickerbocker, 601 N.W.2d at 52. The

record here does not contain enough information to convert Charles’s section 179

deduction into straight-line depreciation, and Charles does not request any

deduction from income in lieu of his section 179 deductions.3 We also note Charles

claimed other substantial deductions from farm income—including straight-line

depreciation—in each of the five years in the record. Thus, we accept Charles’s


3  At oral argument, Charles urged us to deduct straight-line depreciation in
calculating his farm income. “Under the straight line method, the cost of the
property, less its estimated salvage value, is deducted in equal amounts over the
period of its remaining estimated useful life.” Knickerbocker, 601 N.W.2d at 51
n.1. Besides the fact that we do not have sufficient information to make such a
calculation, Charles has not preserved error on this issue. The trial court did not
deduct straight-line depreciation from farm revenue in arriving at Charles’s farm
income. Although Charles filed a motion under Iowa Rule of Civil Procedure
1.904(2), the motion did not raise this issue. Therefore, error was not preserved
on this issue. See Bank of America, N.A. v. Schulte, 843 N.W.2d 876, 883–84
(Iowa 2014) (holding that to preserve error on even a properly raised issue on
which the district court failed to rule, the party who raised the issue must file a
motion requesting a ruling in order to preserve error for appeal). Additionally,
Charles did not raise this issue in his brief. Charles raised this issue for the first
time in his reply brief. The straight-line calculations in his brief are not supported
by the record before us, and we do not consider arguments raised for the first time
in a reply brief. See Young v. Gregg, 480 N.W.2d 75, 78 (Iowa 1992) (“[W]e have
long held that an issue cannot be asserted for the first time in a reply brief.”).
                                          11


concession and agree with adding his section 179 deduction into his income

without providing an additional deduction for depreciation.

       Before proceeding to Charles’s final argument, involving taxation of his farm

income, it is worth noting additional evidence in the record that supports the trial

court’s conclusion that Charles has farm income of $30,000.00 per year for

purposes of calculating child support. One such item of evidence is that Charles,

in submitting an application for financing to John Deere Financial in 2016 or 2017,

made representations to the lender that his gross income was $98,250.00. It is

not clear whether this figure included Carrie’s income. Even if it did, after deducting

Carrie’s income of $15,000.00, it would still leave Charles with having admitted

that his annual income is $83,250.00, which is very close to the income figure

arrived at by the trial court. This evidence further supports the trial court’s findings

regarding Charles’s farm income.

       Finally, Charles argues any farm income should be treated as taxable for

support purposes. The trial court determined he receives $30,000.00 in annual

farm income, which is roughly equivalent to his average section 179 deduction

over the past five years. He agreed to add the section 179 deduction back into his

income for support, and we do so without providing an alternative deduction for

depreciation. This farm income would be taxable for tax purposes without the

deduction, and we see no reason to treat it as untaxable for support purposes.

Thus, we agree with Charles’s final argument and find his $30,000.00 of annual

farm income is taxable for support purposes. We otherwise affirm the district

court’s determination of his income for support.
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       IV.    Tax Dependency Allocation

       Charles argues he should receive the right to claim all three children as

dependents on his tax returns. Generally, “the parent given primary physical care

of the child is entitled to claim the child as a tax exemption.” In re Marriage of

Okland, 699 N.W.2d 260, 269 (Iowa 2005). “However, courts have the authority

to award tax exemptions to the noncustodial parent ‘to achieve an equitable

resolution of the economic issues presented.’” Id. (quoting In re Marriage of Rolek,

555 N.W.2d 675, 679 (Iowa 1996)).

       Although Carrie has physical care of all three children, the trial court

awarded her the right to claim only the middle child as a dependent, with the right

to claim the other two children awarded to Charles. Charles claims his higher

income justifies awarding all three exemptions to him. Despite his assertion, he

does not provide evidence that awarding him all three exemptions would be more

beneficial. We also note his tax returns show he routinely uses various deductions

to reduce his taxable farm income to near zero. For those reasons, we find no

error in the court’s division of the right to claim the children as dependents on the

parties’ respective tax returns based on the child support calculations originally

made by the court.

       While the court did not err on this issue, we recognize that the child support

calculation originally made by the trial court may have influenced the court’s

decision with regard to allocation of dependency exemptions. Since the case is

being remanded to calculate the proper amount of child support after taxing

Charles’s $30,000.00 of farm income and the new child support amount may

change the court’s mind with regard to equitable allocation of dependency
                                          13


exemptions, we find it appropriate to remand on that issue as well. We express

no opinion on whether the allocation of dependency exemptions should be

changed. We merely remand to direct the court to reconsider that issue after

recalculation of the child support amount. In reconsidering this issue, it will be

within the trial court’s discretion whether to address the issue based on the

evidence already presented, have the parties submit worksheets or affidavits, or

conduct a hearing on the issue. The parties are not permitted to relitigate the issue

of their income. On remand, consistent with the trial court’s findings and this ruling,

calculations shall be based on Carrie having annual taxable income of $15,000.00

and Charles having annual taxable income of $42,220.00 from his wages as a

service technician, $12,200.00 from his service in the Army Reserves, and

$30,000.00 from farming (a total of $84,440.00 for Charles). On the issue of

allocation of dependency exemptions after recalculation of child support, the trial

court is to consider how allocation of dependency exemptions would affect the

parties’ respective tax liabilities and the corresponding amount of child support

given the parties’ respective incomes. We also encourage the trial court to consider

the implications of the Tax Cuts and Jobs Act of 2017 in allocating the exemptions.

       V.      Appellate Attorney Fees

       Carrie requests appellate attorney fees. Appellate attorney fees are within

the discretion of the appellate court. In re Marriage of Ask, 551 N.W.2d 643, 646

(Iowa 1996).    “In determining whether to award appellate attorney fees, we

consider the needs of the party making the request, the ability of the other party to

pay, and whether the party making the request was obligated to defend the

decision of the trial court on appeal.” In re Marriage of Hoffman, 891 N.W.2d 849,
                                         14

852 (Iowa Ct. App. 2016) (quoting In re Marriage of Kurtt, 561 N.W.2d 385, 389

(Iowa Ct. App. 1997)). After considering all factors, including the fact that Charles

was successful in challenging portions of the trial court’s ruling, we decline to

award appellate attorney fees.

       VI.    Conclusion

       We find Charles’s farm income is $30,000.00 and the farm income is taxable

for support purposes. We reverse the district court as to that issue. We otherwise

affirm the district court’s determination of Charles’s income, and we remand for the

purpose of calculating his support obligation using $84,440.00 in taxable gross

annual income and entering a corresponding support order. Such order should

continue to include an appropriate credit for extraordinary visitation. We also

remand for reconsideration of the issue of allocation of the parties’ rights to claim

the children as dependents on their tax returns, as the determination of that issue

may be influenced by the child support calculation. We decline to award appellate

attorney fees. Costs are to be divided equally between the parties. Pending a

ruling on remand, we order child support to be paid as set by the dissolution

decree. We do not retain jurisdiction.

       AFFIRMED AS MODIFIED AND REMANDED.
