In Determining Child Support Orders, a Divorce Court May Impute the Fair Market Value of Rental Properties to Parent’s Income

After a dissolution proceeding father, Eduardo Dacumos, was ordered to pay child support payments to mother, Hilda Dacumos. Mother’s divorce lawyer filed a request for support. Father’s divorce lawyer contended that health problems prevented him from finding fulltime employment and his income was just over $2,000 a month, including income from a rental property in San Francisco. Father had received $1,000 a month for his rental property, but after extended vacancy rented the place for $500 to $750 a month. In 1996, the divorce court ordered father to pay $400 a month in child support payments and $76 per month for tuition.  The order was based on a finding that mother’s monthly income was $5,349 and father’s monthly income was $2,247.

Subsequently, in 1998 the divorce court ordered father to pay $832 a month in child support. The court imputed income of $2,000 a month to father, based on his previous income of $4,000 a month in 1994. Further, the divorce court found additional income of $2,900 per month from pension investments and imputed rental income. The divorce court calculated the imputed rental income by considering the fair market value of his properties in addition to the net equity of the properties. Finally, the court ordered father to pay mother attorneys fees of $2,500. Father’s divorce attorney filed a timely appeal.

On appeal, father’s divorce lawyer argued that the court abused its discretion by imputing rental income to father for the purpose of determining child support. Father’s family law attorney argued that the court, in considering “earning capacity” was limited to income received from employment and not imputed rental income. The Court determined that earning capacity is composed of (1) ability to work, (2) willingness to work, and (3) an opportunity to work. The Court concluded that based on the broad statutory interpretation “earning capacity” included income that could be derived from income producing assets as well as employment. Thus, a parent cannot lessen his parental obligations for child support by reducing his earning capacity through unemployment, underemployment, or under-utilizing income producing assets (renting a property at an under-market rate). The Court of Appeal agreed with mother’s divorce attorney and ruled that the divorce court was entitled to impute rental income to the father based on the fair market renal value of the properties.

In re Marriage of Dacumos (1999) 76 Cal. App. 4th 150