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February 18, 1994


Appeal from Circuit Court of Champaign County. No. 84C666. Honorable John G. Townsend, Judge Presiding.

Petition for Rehearing Denied April 25, 1994. As Corrected March 18, 1994. Petition for Leave to Appeal Denied October 6, 1994.

Honorable Frederick S. Green, J., Honorable Robert W. Cook, J., Honorable Carl A. Lund, J.

The opinion of the court was delivered by: Green

JUSTICE GREEN delivered the opinion of the court:

On October 31, 1985, the circuit court of Champaign County entered a decree dissolving the marriage of petitioner Jorja L. Wertich, then known as Jorja L. Yaxley (Jorja), and respondent Thomas E. Yaxley (Tom). Incorporated in the decree was an approved settlement requiring respondent to pay petitioner rehabilitative maintenance through periodic payments. On February 23, 1988, the court approved an agreement modifying the requirements for payment of child support and maintenance. On November 12, 1992, Tom filed a petition seeking an interpretation and modification of the existing decree and a refund for claimed past overpayments of maintenance. Jorja then filed a counterclaim seeking reimbursement for a claimed deficiency in the payments Tom had been making. After an evidentiary hearing, the court entered an order on June 24, 1993, denying Tom all the relief he requested and awarding Jorja $32,760 on her counterclaim covering monies owed up to December 31, 1991. Tom has appealed.

The significant portions of the agreed modification of Tom's maintenance obligation as set forth in the February 23, 1988, order state as follows:

"A. Maintenance for Jorja: Tom recognizes that he has a legal obligation of rehabilitative support imposed or incurred because of the parties' marital relationship and an obligation to support the parties' minor children. In discharge of these obligations, Tom shall make periodic payments as follows: As of June 1, 1987, payments to JORJA will be 30% of the net profits earned by TOM in connection with his practice as a public accountant and from any other personal services rendered by him. However, payments in no event will be less than $1,400.00 per month. In order to maintain the percentage basis, when the amount based on profits exceeds the minimum payment of $1,400.00 per month, the excess amount above $1,400 shall be credited to TOM to cover amounts paid by him in excess of 30% of his net profits. Where there are no longer any excess payments to be credited to TOM, then the entire 30% of net profits shall be paid directly to JORJA. Net income for this purpose will be determined based on the tax return prepared for TOM'S business or any other income from his personal services subject to the following adjustments to allowable expenses to determine net profits under this agreement.

(1) No expense related to Country Club dues shall be deducted nor more than 60% of any other club dues;

(2) 60% of actual expenses for meals, entertainment, and automobile expenses (including depreciation) will be deductible; and

(3) No expenses will be deductible for travel for professional development for TOM.

B. This amendment is made with the specific intent that all of the periodic payments made hereunder will be deductible by TOM, and includible by JORJA for income tax purposes pursuant to Sections 71 and 215 of the Internal Revenue Code.

C. This provision unless further amended shall commence and be effective with the payment otherwise due September 30, 1987, and relate back to payments made as of August 1, 1987[,] and payments shall be payable on or before the last day of each month through and including January 31, 1992. It is agreed that no amendment may be made to increase any benefit specifically for Jorja." (Emphasis added.)

The parties do not dispute that under the modified agreed order in regard to maintenance, Tom was required to pay Jorja 30% of his "net profits earned [by him] in connection with his practice as a public accountant and other personal service rendered by him" within the meaning of that order. Because of the statement in that order defining "net income," the circuit court determined Tom's net income by first finding the sum of the amounts shown on schedule C of each of Tom's Federal income tax returns for the years in question as "net profit or loss." The court then made additions because some of the expenses allowed in schedule C came within the categories of adjustments required under the agreement. In regard to the year 1987, the court adjusted that amount by seven-twelfths because the new procedure for determining maintenance took effect June 1, 1987, and continued for the last seven months of that year. The court then compared the total sum reached with the amount actually paid and arrived at the figure of $28,760 as the amount of arrearages owed for maintenance. The court also found that Tom owed Jorja $4,000 on another matter. The propriety of that award is not disputed.

Tom asserts that the circuit court (1) erred in failing to deduct from Tom's gross income, payments shown on his Federal income tax returns for the various years as adjustments for (a) one-half of his self-employment tax, (b) his self-employment insurance deduction, and (c) his retirement plan deduction; and (2) erred in the manner in which it considered his "net income" for the last seven months of 1987. We hold that the circuit court did err in failing to make a deduction for one-half of Tom's self-employment tax and in computation of his "net income" from his business ...

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