Family Law Case Review

Case: Arnaldo Trabucco v. Pamela Trabucco

Case Summary by Mike Kohlhaas, Bingham McHale LLP

HELD: Trial court properly relied upon “income averaging” technique for the years preceding the parties’ dissolution to determine Husband’s income for child support purposes.

HELD: Trial court did not err when it provisionally ordered Husband to set aside $200,000 from marital accounts to fund a son’s future college expenses, and then, in its final decree, included the $200,000 as marital property in its allocation of the marital estate between the parties.

HELD: Trial court may have erred by “double counting” certain IRA accounts by including in the marital estate both certain individual IRAs, as well as a subsequently established IRA account that was apparently created by consolidating the various individual IRAs.

HELD: Trial court did not abuse its discretion when it used the date of filing value for a brokerage account awarded to Husband, even though the account lost approximately $175k while the case was pending due solely to a decline in the stock market.

FACTS AND PROCEDURAL HISTORY: Husband and Wife married in 1988, and had two children of the marriage. Husband worked as physician, while Wife was a homemaker. In 2003, the parties moved from New York City to Columbus, Indiana.

During the marriage, Wife smoke marijuana, which she attributed to pain management for a chronic nerve disorder. The marijuana use resulted in Husband and Wife being charged with felony possession of marijuana in 2005. They subsequently both pleaded guilty to a lesser misdemeanor.

The marijuana-related conviction resulted in a six month suspension of Husband’s medical license. Husband contended the arrest led to his loss of privileges in Columbus, requiring him to take a job at St. Vincent Jennings in North Vernon in 2006. Though Husband made over $300,000 that year, he was frustrated by an inability to perform major surgeries at that facility. As a result, in 2007 Husband relocated to Nevada and opened an urology clinic. Husband reported income of $104,026 for 2007 and $67,407 for 2008; however, those figures did not include $275,000 in loans to Husband from a Nevada medical center that were later forgiven.

Wife filed her petition for dissolution in 2007. An agreed preliminary entry included a term that Husband would transfer $200,000 from marital accounts to fund the college expenses for the parties’ 18-year-old son; to the extent this account was more than what was needed to cover the expenses, the left over funds would be divided equally between Husband and Wife.

After a final hearing, the trial court issued its Decree. The Decree calculated child support using, as Husband’s income, an average of the amounts reported on the tax returns from 2004 through 2008, after throwing out the highest and lowest income figures. The Decree also awarded Husband an E*Trade brokerage account using a date of filing value, even though the account lost substantial value during the pendency due to market declines. The Decree also awarded various IRA’s to the parties. The Decree set forth an overall 64/36% allocation of the marital estate between Wife/Husband. Husband appealed.

On appeal, Husband challenged the income averaging technique used by the trial court to calculate his income for child support purposes. Husband took the position that his income at the time of the final hearing was very low due to his relocation to Nevada, and that the trial court’s income average amounted to an unfair imputation of income to Husband. The Court of Appeals rejected Husband’s argument, first noting that income averaging is a recognized child support income calculation method, especially for the self-employed; the Court also noted that, because Husband failed to present detailed documentation of his income, he cannot assign error to the method used by the trial court.

Husband also alleged error for the inclusion in the marital estate of the monies that funded the college account. The Court of Appeals rejected this argument, noting that it was uncontroverted that the account was funded with marital property, and that the provisional order that funded the college account was just that: provisional.

Next, Husband assigned error to the “double counting” of certain IRA’s. The record suggested that various individual IRA’s may have been consolidated into a single IRA prior to final hearing, but the Decree allocated them as separate and distinct assets. The Court of Appeals remanded the issue for determination by the trial court as to whether double counting of the IRA’s had occurred.

Finally, Husband claimed error as to the valuation of the E*Trade brokerage account that was awarded to him under the Decree. Near the date of filing, the account had a value of $325,132. Closer to final hearing, the account was worth just $97,470. Husband admitted to withdrawing just over $50,000 from the account during the pendency, but asserted that the remaining decline of $176,000 was due to market decline and should not be counted as part of his share of the marital estate. The trial court awarded the account to Husband with a date-of-filing value of $325,132. The Court of Appeals recited the well-settled doctrine that a trial court has discretion to value marital property on the date of filing, the date of final hearing, or any date in between. The Court also noted case law supporting the proposition that the risk of loss should be borne by the party in control of the asset which, in this case, was Husband. As such, the trial court’s valuation date was not an abuse of discretion.

To view the text of this opinion in its entirety, click here: Arnaldo Trabucco v. Pamela Trabucco

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