Appeal from Circuit Court of Douglas County. No. 94D6. Honorable Frank W. Lincoln, Judge Presiding.
As Corrected September 23, 1997.
Honorable James A. Knecht, J., Honorable Rita B. Garman, J. - Concur, Honorable Robert W. Cook, J. - Dissent. Justice Knecht delivered the opinion of the court.
The opinion of the court was delivered by: Knecht
JUSTICE KNECHT delivered the opinion of the court:
In February 1994, petitioner Paula Minear filed a petition for dissolution of her marriage to respondent Robert Minear. In October 1994, the trial court granted the dissolution and entered the final judgment on remaining issues on August 28, 1996. Robert appeals, arguing the trial court abused its discretion by (1) disregarding certain depreciation expenses when the court calculated his net income, (2) failing to award him child support, (3) ordering him to pay Paula $500/month in maintenance, (4) distributing the marital property "equally to the last penny," and (5) ordering him to pay part of Paula's attorney fees and part of her prospective attorney fees on appeal. We affirm.
The parties were married in 1975. When the dissolution proceedings began, Paula was 40 years old and Robert was 41. Two children were born, Melissa in 1978 and Michael in 1981. As Melissa reached her majority on July 21, 1996, no custody order was entered. Robert was granted custody of Michael, which is not disputed on appeal.
Robert disputes the trial court's calculation of his net income. Specifically, he argues the trial court should have reduced his net income by deducting certain depreciation expenses related to the operation of his service station. Using Robert's financial statement for the first nine months of 1995, the court added Robert's claimed depreciation expense of $10,873 (for the same nine months) to his base income in calculating net monthly income of $3,063.
Robert argues this depreciation expense should have been deducted from net income pursuant to section 505(a)(3) of the Illinois Marriage and Dissolution of Marriage Act (Act) (750 ILCS 5/505(a)(3) (West 1994)). Section 505(a)(3)(h) allows a deduction from net income for "expenditures for repayment of debts that represent reasonable and necessary expenses for the production of income." 750 ILCS 5/505(a)(3)(h) (West 1994). Robert, relying on Posey v. Tate, 275 Ill. App. 3d 822, 656 N.E.2d 222, 212 Ill. Dec. 69 (1995), contends the trial court abused its discretion in not permitting the depreciation deduction.
In Posey, the trial court allowed the defendant to deduct depreciation expense from investment rental property from gross income to calculate child support. The First District Appellate Court, relying on section 505(a)(3)(h), found the trial court did not abuse its discretion in doing so. Posey, 275 Ill. App. 3d at 827, 656 N.E.2d at 226. The Posey court first looked to Black's Law Dictionary, which defined "depreciation" as follows:
"'spreading out [of] the cost of a capital asset over its estimated useful life. *** A decline in value of property caused by wear or obsolescence and *** usually measured by a set formula which reflects these elements over a given period of useful life of property. [Citation.] [The] consistent, gradual process of estimating and allocating cost of capital investments over estimated useful life of asset in order to match cost against earnings.'" Posey, 275 Ill. App. 3d at 826, 656 N.E.2d at 225, quoting Black's Law Dictionary 441 (6th ed. 1990).
"Depreciation is not income, but a return of capital. To subject depreciation expense, which has been allowed as a deduction on a supporting parent's tax return, to child support would be to assess such support against capital instead of income. *** We therefore find that the deduction of straight line depreciation expense from net income by defendant, a taxpayer who is obligated to pay child support, is fair and proper, where he has shown such a deduction to be a 'reasonable and necessary expense for the production of income,' and that it is subject to a specified repayment schedule, as contemplated by section 505(a)(3)(h)." Posey, 275 Ill. App. 3d at 826-27, 656 N.E.2d at 225-26.
We find the reasoning of Posey questionable, since the court found depreciation to be an "expenditure for repayment of debt." See 750 ILCS 5/505(a)(3)(h) (West 1994). "Expenditure" is defined as the "spending or payment of money; the act of expending, disbursing, or laying out of money; payment." Black's Law Dictionary 577 (6th ed. 1990). "Payment" is defined as:
"The fulfillment of a promise, or the performance of an agreement. ***
*** The performance of a duty, promise, or obligation, or discharge of a debt or liability, by the delivery of money or other value by a debtor to a creditor, where the money or other valuable thing is tendered and accepted as extinguishing debt or obligation in whole or in part." Black's Law Dictionary 1129 (6th ed. 1990).
"Debt" is defined as "[a] sum of money due by certain and express agreement. A specified sum of money owing to one person from another, including not only obligation of debtor to pay but right of creditor to receive and enforce payment." Black's Law Dictionary 403 (6th ed. 1990).
Thus, while in some circumstances depreciation may be a "reasonable and necessary expense for the production of income" (see 750 ILCS 5/505(a)(3)(h) (West 1994)), it is not an "expenditure for repayment of debt" as those terms are defined. Further, section 505(a)(3)(h) states: "The court shall reduce net income *** only for the period that such payments are due and shall enter an order containing provisions for its self-executing modification upon termination of such payment period." 750 ILCS 5/505(a)(3)(h) (West 1994). Depreciation expenses cannot reasonably be construed as "payments" subject to "payment periods" as required by the Act.
This court recently emphasized the significance of this language. In Gay v. Dunlap, 279 Ill. App. 3d 140, 664 N.E.2d 88, 215 Ill. Dec. 691 (1996), a case cited by neither party, the defendant deducted from his income $10,500 for car and truck expenses, as well as $1,075 for depreciation, legal and professional services, office expense, supplies, meals, and entertainment. In holding such business expenses not deductible under section 505(a)(3)(h) in determining the defendant's child support obligations, this court first distinguished the determination of net income from the trial court's consideration of the "'financial resources and needs of the non[-]custodial parent'" ( Gay, 279 Ill. App. 3d at 146, 664 N.E.2d at 93), quoting 750 ILCS 5/505(a)(2)(e) (West 1992)) in deciding whether to apply the statutory guidelines:
"A trial court decision about whether to apply the statutory guidelines involves carefully balancing many factors--not limited to those listed in the statute. (750 ILCS 5/505(a)(2) (West 1992).) The determination of net income, on the other hand, should be a straightforward, rigorous process. The legislature defined 'net income,' for purposes of the statute, as 'the total of all income from all sources,' minus the specifically ...