                                 IN THE
                         TENTH COURT OF APPEALS

                                No. 10-10-00139-CV

                   IN THE INTEREST OF S.R.S., A CHILD



                           From the 66th District Court
                               Hill County, Texas
                              Trial Court No. 34815


                          MEMORANDUM OPINION


      Timothy Brooks Sampson appeals from the granting of a modification that

increased his child support obligation. TEX. FAM. CODE ANN. § 156.401 (West 2008).

Sampson complains that the trial court erred in calculating his net disposable resources

by not deducting ordinary and necessary business expenses required to produce the

income and by failing to deduct operating expenses and mortgage payments in

determining his net rental income. Because we find that the trial court abused its

discretion, we reverse and remand the judgment to the trial court.

      Because the trial court’s award of child support requires consideration of both of

Sampson’s issues jointly to some degree, we will address them together where

necessary.
Standard of Review

          We review a trial court's determination of child support under an abuse of

discretion standard. In the Interest of A.A.G., 303 S.W.3d 739, 740 (Tex. App.—Waco

2009, no pet.); see also Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990). A trial court

abuses its discretion when it acts in an arbitrary and unreasonable manner, or when it

acts without reference to any guiding principles. See Beaumont Bank, N.A. v. Buller, 806

S.W.2d 223, 226 (Tex. 1991); Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42

(Tex. 1985). If there is some evidence of a substantive and probative character to

support the decision of the trial court, no abuse of discretion occurs. A.A.G., 303 S.W.3d

at 740.

The Facts

          Sampson and Harris are the parents of S.R.S., a sixteen year old female child. At

the time of their divorce in 1998, Sampson was ordered to pay child support in the

amount of $456.00 per month. Harris filed this modification action seeking to increase

Sampson’s child support obligation.

          Sampson is self-employed as an investment advisor and real estate broker. He

also receives income from rental properties purchased since the divorce. The evidence

presented to the trial court was that his income (money received) from his various

enterprises was $168,853.69 in 2008 and $191,024 for eleven months in 2009. Sampson’s

2008 1040 income tax return was admitted into evidence and a 2009 year-to-date income

and expense worksheet was admitted for a limited purpose as an aid to the trial court.

Harris contended that the financial needs of the child were $2,278 per month, which

In the Interest of S.R.S.                                                            Page 2
was not disputed by Sampson. Harris sought an increase in child support to $1,500 per

month.

         At the conclusion of the hearing, the trial court established child support in the

amount of $1,200 per month, made the new amount retroactive to the date of service of

the modification action, and awarded Harris attorney’s fees.         The trial court filed

findings of fact and conclusions of law that the child support awarded was calculated in

accordance with the child support guidelines set forth in the Family Code; that

Sampson’s net resources were more than $6,000 per month, that $1,200 is the amount of

child support awarded, and that the amount of child support awarded was based on 20

percent of Sampson’s net resources.

Family Code Section 154.062(b)

         Section 154.062(b) of the Family Code, which defines what constitutes an

obligor’s net resources, states:

           (b) Resources include:

           (1) 100 percent of all wage and salary income and other compensation
         for personal services (including commissions, overtime pay, tips, and
         bonuses);

         …

           (3) self-employment income;

          (4) net rental income (defined as rent after deducting operating expenses
         and mortgage payments, but not including noncash items such as
         depreciation); ….

TEX. FAM. CODE ANN. § 154.062(b) (West 2008).




In the Interest of S.R.S.                                                             Page 3
Family Code Section 154.065

         Section 154.065 of the Family Code, entitled “Self-Employment Income,” states:

    (a) Income from self-employment, whether positive or negative, includes
        benefits allocated to an individual from a business or undertaking in the
        form of a proprietorship, partnership, joint venture, close corporation,
        agency, or independent contractor, less ordinary and necessary expenses
        required to produce that income.

    (b) In its discretion, the court may exclude from self-employment income
        amounts allowable under federal income tax law as depreciation, tax
        credits, or any other business expenses shown by the evidence to be
        inappropriate in making the determination of income available for the
        purpose of calculating child support.

TEX. FAM. CODE ANN. § 154.065 (West 2008).

Analysis

         Sampson complains that the trial court did not include any deductions for

ordinary and necessary expenses in its calculation of child support as is required for the

trial court’s determination of child support according to the guidelines.         Further,

Sampson complains that the trial court erred by not deducting operating expenses and

mortgage payments from his net resources. Harris contends that the trial court was not

required to follow the guidelines in a modification action and therefore, whether or not

the trial court followed the guidelines does not matter. However, the trial court’s

findings of fact clearly indicate that the trial court was basing its decision pursuant to

the child support guidelines; therefore, we will use those same principles to determine

whether or not the trial court abused its discretion in its calculation.

         The trial court did not allow Sampson to testify at length regarding the substance

of his 2008 income tax return nor did Sampson offer detailed explanations regarding the

In the Interest of S.R.S.                                                            Page 4
expenses he alleged in his income and expense worksheet. While the determination of

income for purposes of paying taxes to the federal government differs from that used to

calculate net resources to determine child support, the tax return does contain some

evidence as to what Sampson’s ordinary and necessary expenses to produce that

income were. See Powell v. Swanson, 893 S.W.2d 161, 163 (Tex. App.—Houston [1st

Dist.] 1995, no writ) (“Federal income tax regulations are distinct from the rules in the

Family Code, and calculations prepared under one set of rules do not necessarily

comply with the requirements of the other.”). “A trial court must carefully examine a

federal income tax return in order to extract the appropriate information without

slavishly adopting its complete calculations.” Id. Additionally, copies of Sampson’s

business bank account statements were offered into evidence by Harris. The statements

also constituted some evidence as to those expenses.

         During the hearing before the trial court, there was no evidence presented that

Sampson’s business expenses as listed on his 2008 income tax return were unreasonable

or unnecessary. It would be an abuse of discretion to not take at least some portion of

those expenses into account when calculating Sampson’s net disposable earnings.

         Further, section 154.062(b)(4) is clear that Sampson was entitled to a deduction

for his mortgage payments on his rental property as well as any operating expenses. It

is an abuse of discretion not to deduct the expenses and mortgage payments when

calculating an obligor’s net resources.

         Based on the evidence before the trial court at the time it made its ruling

regarding the modification, we are unable to reconstruct the trial court’s calculations

In the Interest of S.R.S.                                                          Page 5
and can find nothing on which to base the trial court’s determination of Sampson’s net

resources. Also, the trial court did not include any guidance in its findings of fact and

conclusions of law.         We conclude that the trial court abused its discretion in the

calculation of Sampson’s net resources under sections 154.062 and 154.065.1 We sustain

issues one and two.

Conclusion

         Because we find that the trial court abused its discretion by not including

Sampson’s business expenses and mortgage payments in determining his net resources,

we reverse the judgment and remand this proceeding to the trial court.



                                                TOM GRAY
                                                Chief Justice

Before Chief Justice Gray,
       Justice Davis, and
       Justice Scoggins
Reversed and remanded
Opinion delivered and filed January 26, 2011
[CV06]




1This opinion should not be construed to mean that the trial court is required to accept as reasonable and
necessary all of Sampson’s business and rental expenses on remand. See TEX. FAM. CODE ANN. §
154.065(b) (West 2008).

In the Interest of S.R.S.                                                                          Page 6
