The Journal of The DuPage County Bar Association

Back Issues > Vol. 18 (2005-06)

Northern’s Exposure
Should the Sale of a Primary Residence Constitute "Income" for Purposes of Child Support Calculations?
By Brett Geiger

In 2004 the Illinois Supreme Court decided In re Marriage of Rogers to determine whether a gift could constitute income for purposes of child support calculation under section 505 of the Illinois Marriage and Dissolution of Marriage Act.1  In resolving the dispute, the Court attached an even more expansive definition to the meaning of the word "income" within the meaning of that statute than prior cases, perhaps opening the door for an argument under section 505 to consider even the gains from the sale of a residence in determining child support.2  This article will first discuss the Rogers case itself, second the application of Rogers in the lower appellate courts, and finally the natural and probable consequences of the rule if it is found to include profits gained from the sale of a primary residence.

I. The Rogers Decision

In Roger,s the parent obligated to pay child support was receiving $46,000 from his parents annually, in addition to his $15,000 dollar a year income.3  The sole issue of the appeal was whether the money received by the parent could be used to calculate child support.4  The task of the Court was to then determine whether this money could be properly classified as "income" under the relevant statute.5  To determine whether the $46,000 was to be included in the child support calculation, the court first distinguished income under the Internal Revenue Code from the word as stated in the Illinois Statute, holding that income under the Child Support law was even more expansive than it is for purposes of Federal Taxation.6  Following from this proposition, although the contributions from the non-custodial parent may have been un-taxable by the federal government, because they "represented a valuable benefit to the father that enhanced his wealth and facilitated his ability to support [his son]," the $46,000 was in fact income for purposes of child support calculation.7 

Although in the Rogers case the income seemed to be recurring, the Court took a moment to dispel any room for a categorical exclusion of nonrecurring income when calculating child support.8  This was nothing new, and as previously decided, "the Act does not provide for a deduction of nonrecurring income in calculating net income for purposes of child support."9  That being said, the Court instructed that when income was unlikely to occur again, deviation from the statutorily dictated percentages is permissible.10  In the end, for the forgoing reasons, the decision of the trial court to adjust the child support based on these "gifts" was affirmed.11 

II. Problems with Rogers

In the beginning of its analysis in Rogers, the Court stated that the plain and ordinary meaning of the word income could be derived from Webster’s Third New International Dictionary and Black’s Law Dictionary.12  Both of the definitions cited suggest that some types of one time events might not constitute income under the plain meaning of the word. Webster’s defines income, in part, as "a gain or recurrent benefit."13  Black’s Law Dictionary defines income as "[t]he money or other form of payment that one receives, usually periodically. . ."14  Both definitions imply that the plain and ordinary meaning of income strongly relates to a source of money that is in some way periodic. Instead of adhering to the meaning provided in these sources, the Court seems to summon a new one: that anything constituting a valuable benefit to the paying parent, enhancing his wealth and facilitating his or her ability to support the child, is income.15  In fact the only possible exceptions to this "accession of wealth" standard as stated by the Supreme Court are directly referenced in the statute itself, limited to state and federal income tax, social security, mandatory retirement contributions, union dues, insurance premiums, and prior obligations of support actually paid.16  Clearly, these exceptions leave the vast majority of acquired wealth subject to consideration when calculating child support payments. This proposition is supported by subsequent decisions from the appellate courts.

The Second District attacked similar issues in the case In re Marriage of Lindman.17  The wealth being considered in Lindman was disbursements from an IRA.18  Strangely enough, before even considering whether the nonrecurring nature of the disbursement would disqualify the money from consideration, the court presumed the money was in fact income, before considering whether it was "net income."19  Citing Rogers, the court concluded it was in fact net income within the meaning of the statute, and should be considered to calculate child support.20  However, before concluding the opinion, the court suggested if the money being taken from the IRA was in fact money that had been previously considered in child support calculations it could be exempted.21  In other words, if the disbursement was profit from the investment, it would be counted, but if it was simply a withdrawal of the invested money previously considered it would not.22 

Given the holdings of these cases, two things become fairly clear. First, anything and everything not listed in the statute itself as exempt can be used for the calculation of child support. Secondly, while the nonrecurring nature of a source of income may be considered in adjusting the statutorily suggested percentage, it will not remove a source of wealth from the child support calculation. 

III. Is the Principal Residence Next?

These two principals seem to very strongly suggest what could be a troubling policy for trial courts to enforce, namely, that the profit realized from the sale of a principle residence will be considered in calculating child support. While the Rogers case itself seemed to be addressing a situation where a non-custodial parent was avoiding child support by veiling his income in the form of a gift, when followed to its natural conclusion, in may envelop profits from a principal residence.23  If the sale of a principal residence became a commonly considered source of income in this way, two things would likely happen. First, any person owing child support would face a much more complicated process when attempting to ascertain what type of home he or she could afford. Secondly, those with child support obligations would likely shy away from relocation until the minor reached an age where child support payments would cease.

Assuming the sale occurs after an original order has been issued; the consideration of profits gained from the sale of a principal residence will of course only occur if the custodial parent files a motion to modify support.24  This would leave a support paying parent wondering whether such action will be taken, altering any plans that parent might have to purchase a new home. The amount of money available to make a down payment, and receive a favorable interest rate will depend on whether he or she faces 20 percent or more being taken from the appreciation of the property while it has been lived in.25  Having to ponder a potential legal action before purchasing a home would not only impute a great deal of speculation in the purchasing process, but might simply dissuade the parent from moving at all.

Providing an even stronger disincentive for a parent considering a move, is the fact that any profit gained from the sale of a home could not be considered had the child become an adult before the relocation.26  A rule mandating a certain amount of income be designated for the support of a child presumes that a non-custodial parent will not voluntarily surrender income he or she could otherwise keep. Naturally, if the sale of a home would increase monthly payments for child support, some parents would choose not to move, inevitably harming the child. The increased wealth and quality of a home that comes along with purchasing a new residence would be kept from both the child and the parent, at least until the age of maturity.27 

Of course both of these consequences are of no importance, if no value is attached to the benefits of home ownership, and the freedom to relocate without fear of monetary consequences exists. But this value seems to be strong within our country, as evidenced by the Federal Laws of Taxation.28  The Internal Revenue Code allows both for the deduction of interest payments on a mortgage, and a blanket $250,000 exclusion on the sale of a principal residence.29  Encouraging home ownership is an important policy goal of at least the federal government, if not the state of Illinois. Such a contradiction of policy makes one wonder if this was the foreseen consequence of such an expansive view of "income" under section 505 when Rogers was decided, or whether it is a positive one. 

IV. Conclusion

Recent Illinois decisions, including Rogers and Lindman, have taken an expansive view of what constitutes income for purposes of calculating child support. Although no case law exists explicitly holding that the sale of a principle residence should be considered in this calculation, such a sale seems to match the requirements established by Rogers.30  If this proposition proves to be true, without legislative action, it may complicate the financial decisions of support paying parents and prohibit their ability to relocate freely, frustrating progress for both the parent and the child. 

1 In re Marriage of Rogers, 213 Ill. 2d 129, 130, 820 N.E.2d 386, 387 (2004); 750 Ill. Comp. Stat. § 5/505(a)(3) (2003).

 2 See Rogers, 213 Ill. 2d at 136-38, 820 N.E.2d at 390-91.

 3 Id. at 135, 820 N.E.2d at 389.

 4 Id.

 5 Id. at 135-36, 820 N.E.2d at 389-90.

 6 Id. at 137, 820 N.E.2d at 390. Claiming that income under the Illinois Law has a broader scope than its definition contained in the Internal Revenue Code is a powerful one indeed, considering income under that code has been described as the "full measure of [Congress’s] taxing power." See Comm’r. V. Glenshaw Glass Co., 348 U.S. 426, 429 (1955).

 7 Id. at 137, 820 N.E.2d at 390-91.

 8 Rogers, 213 Ill. 2d at 134, 139, 820 N.E.2d at 388, 391.

 9 In re Marriage of Hart, 194 Ill. App. 3d 839, 850-51, 551 N.E.2d 737, 744 (1990).

 10Rogers, 213 Ill. 2d at 139, 820 N.E.2d at 391.

 11 Id. at 140, 820 N.E.2d at 392. The court dismissed a further claim that these gifts were in fact loans to be repaid, because no evidence demonstrated any obligation on the part of the father to repay them. Id. And although the Court did not address the issue of a loan directly, it is extremely difficult to conceive that a true loan with an attaching obligation to repay would be seen as "net income." See Comm’r. v. Indianapolis Power & Light Co., 493 U.S. 203, 207 (1990).

 12 Rogers, 213 Ill. 2d at 136, 820 N.E.2d at 390.

 13 Id. at 136, 820 N.E.2d at 390.

 14 Id. at 137, 820 N.E.2d at 390.

 15 Id.

 16 Id. at 136, 820 N.E. at 390.

 17 356 Ill. App. 3d 462, 824 N.E.2d 1219 (2nd Dist. 2005).

 18 Id. at 467, 824 N.E.2d at 1223.

 19 Id.

 20 Id. at 468, 824 N.E.2d at 1224.

 21 Id. at 470-71, 824 N.E.2d at 1226.

 22 See Id.

 23 See Helen W. Gunnarsson, Rogers: Gifts are Income When Calculating Support Owed, 93 Ill. B.J. 8 (January 2005).

 24 See In re Marriage of Lindman, 356 Ill. App. 3d 462, 467, 824 N.E.2d 1219, 1224 (2nd Dist. 2005).

 25 It is almost certain that the basis in the property, or any money spent to pay down the mortgage or in the original purchase, would not be considered. This seems to be true based on the discussion of "double counting" had in the Lindman case. Id. at 470-71, 824 N.E.2d at 1226.

 26 750 Ill. Comp. Stat. § 5/505(a).

 27 See Elizabeth Zarek Jorgenson, Forcing the Heir to Share: The Effect of Cash Inheritance on Child Support Obligations, 105 Dick. L. Rev. 289, 299 (2001) (discussing similar problems with delayed or circumvented assets in child support matters).

 28 Whether these tax incentives are justifiable has been the source of some debate. See generally Mark Andrew Snider, The Suburban Advantage: Are the Tax Benefits of Homeownership Defensible?, 32 N. Ky. L. Rev. 157 (2005).

Brett Geiger is a second year law student at Northern Illinois University. He is a staff member of the NIU law review. He received his undergraduate degree from the University of Illinois at Chicago in 2004.

The author would like to thank his father, Robert Geiger, for inspiring this article, in one of many debates about the law. 

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