In re the Marriage of: Carrie Ann Roth, petitioner, Respondent,

This opinion is nonprecedential except as provided by
Minn. R. Civ. App. P. 136.01, subd. 1(c).

STATE OF MINNESOTA
IN COURT OF APPEALS
A20-1439

In re the Marriage of:
Carrie Ann Roth, petitioner,
Respondent,

vs.

David Arthur Roth,
Appellant,

Washington County Community Services, intervenor,
Respondent.

Filed January 10, 2022
Affirmed
Johnson, Judge

Washington County District Court
File No. 82-FA-16-669

Robert J. Polski, St. Paul, Minnesota (for respondent)

Sean P. Stokes, Law Offices of Sean P. Stokes, P.L.L.C., Stillwater, Minnesota (for
appellant)

Considered and decided by Larkin, Pres iding Judge; Johnson, J udge; and Slieter,
Judge.
NONPRECEDENTIAL OPINION
JOHNSON, Judge
David Arthur Roth moved to modify th e amount of the mo nthly child-support
payment he makes to his former wife, Carrie Ann Roth. He introduced evidence that, at
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the time of the dissolution, his gross income was less than th e amount to which he then
stipulated. He also introduced evidence that his current gross income is much less than the
amount to which he had stipulat ed. The district court found that his gross income is the
same as the amount to which he stipulated at the time of the dissolution. The district court
also found that Carrie’s gross income had d ecreased to a nominal amount. The district
court denied David’s motion. We conclude that the district court did not clearly err in its
findings of fact concerning the parties’ respective incomes. Therefore, we affirm.
FACTS
The parties were married in May 2002. They have tw o children: twins who were
born in October 2007. Carrie petitioned for dissolution of the marriage in July 2015. The
parties agreed to a stipulated dissolution decree in July 2017. The district court approved
the stipulation and filed a judgment and decree in August 2017.
In the decree, the district court awarded each party joint lega l and joint physical
custody of the children and ordered equal parenting time. The parties agreed that David’s
gross income as a self-employed realtor was $106,000 per year (or $8,833 per month). The
parties agreed that Carrie was unemployed a nd that her only source of income was non-
taxable disability benefits of $4,441 per month (or $53,292 per year). Both parties waived
their respective interests in spousal maintenance. The parties agreed that David would pay
Carrie basic child support of $1,000 per month an d medical support of $160 per month,
and the district court ordered support in those amounts.
In April 2020, David moved to modify th e award of basic child support and medical
support. He initially repres ented himself using forms provi ded by the court. In an
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accompanying affidavit, David stated that, at the time of the dissolution, he had not
completed or filed several years of income-tax re turns. He stated furt her that he recently
had completed and filed five years of income-tax returns and had discovered that his gross
income was and is lower than he previously believed. Specifically, he stated that his gross
income is $3,659 per month (or $43,908 per year) rather than the previously stipulated
amount of $8,833 per month (or $106,000 per year). He also stated that his monthly
expenses are $9,796. In support of his motion, David submitted his individual and business
income-tax returns for the year s 2013 to 2019. David’s indi vidual tax returns show that
his gross income between 2013 and 2016 (the four years prior to the dissolution) averaged
$44,525, which is less than half of the amount stated in the decree.
The matter was referred to a child sup port magistrate, who presided over an
evidentiary hearing on two days in June an d August of 2020. Th e only witnesses were
Carrie and David. Carrie, who was represented by an attorney at the hearing, testified that
she had been receiving workers’ compensation benefits but that they were terminated in
July 2020 and that her monthly income at th e time of the hearing was only $20. She also
testified that, because of physical limitations arising from on-the-job injuries, her previous
employer was unable to accommodate her work restrictions, and she expected that no other
employer would hire her for the same type of work.
David, who was represented by an attorney at the hearing, was cross-examined
extensively about his income-tax returns but was unable to explain them. He testified that
the tax returns were prepared by an accountant whom he ha d retained for that purpose.
David also was cross-examined about his ability to pay monthly expenses of $9,796 with
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an income of less than half that amount. David responded by testifying that he was drawing
on his savings.
In September 2020, the magistrate filed an order denying David’s motion to modify
child support. The magistrate found that Davi d’s gross income is $106,000 per year, the
same amount to which he had stipulated in 2017. The magistrate found that Carrie’s gross
income is $20 per month (or $ 240 per year) based on her tes timony at the hearing. The
district court stated that it had “not been provided with any evidence to indicate [Carrie] is
voluntarily unemployed at this time.” The district court completed a child-support
guidelines worksheet, which indicated a basic child-support payment of $911 per month.
The district court reasoned that, because $911 is within 20 percent of $1,000, there has not
been a substantial change in circumstances and, thus, there is no justification for a
modification. David appeals.
DECISION
David argues that the magistrate erre d by denying his motion to modify child
support on the ground that the magistrate cl early erred in finding his gross income and
clearly erred in finding Carrie’s gross income.
To determine the existence and amount of a basic child-support obligation, a district
court must determine the gross income of ea ch parent. Minn. Stat. §§ 518A.29, .34(a),
(b)(1) (2020). Gross income includes income from sel f-employment, Minn. Stat.
§ 518A.29(a), which “is defined as gross rece ipts . . . minus ordinary and necessary
expenses required for self-employment or business operation,” Minn. Stat. § 518A.30
(2020). “The person seeking to deduct an e xpense . . . has the burden of proving, if
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challenged, that the expense is ordinary and necessary.” Id. After finding gross income,
the district court must refer to statutory guidelines to determine the presumptively
appropriate amount of basic child support an d must calculate each parent’s proportional
share of that amount. Minn. Stat. § 518A.35, subd. 2 (2020). The district court also must
consider certain statutory factors to determ ine whether to deviate from the presumptive
child-support obligation. Minn. Stat. § 518A.43 (2020); Haefele v. Haefele, 837 N.W.2d
703, 708 (Minn. 2013). This court applie s a clear-error standard of review to a district
court’s findings of fact concerning gross income for child-support purposes. Rutten v.
Rutten, 347 N.W.2d 47, 51 (Minn. 1984); Ludwigson v. Ludwigson, 642 N.W.2d 441, 446
(Minn. App. 2002).
A district court may modify an existing child-support obligation if the moving party
shows that either party has experienced a subs tantial change in circumstances that makes
the existing obligation unreasonable and unfair. Minn. Stat. § 518A.39, subd. 2(a) (2020).
If a new application of the child-support guidelines would result in a child-support
obligation that is at least 20 percent more or less and at least $75 more or less than the
amount of the existing obligation, an irrebutta ble presumption of a s ubstantial change in
circumstances arises. Id., § 518A.39, subd. 2(b)(1); Rose v. Rose, 765 N.W.2d 142, 145
(Minn. App. 2009). The moving party bear s the burden of showing both a substantial
change in circumstances and that any subs tantial change makes the existing obligation
unreasonable and unfair. Bormann v. Bormann , 644 N.W.2d 478, 480-81 (Minn. App.
2002). This court applies an abuse-o f-discretion standard of review to a district court’s
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determination as to whether there has been a substantial change in circumstances. Id. at
481.
A. David’s Gross Income
David first argues that the magistrate clea rly erred by finding that his gross income
is $8,833 per month (or $106,000 per year).
The magistrate, after reviewing David’s evidence, found as follows:
The court does not believe that it has been provided with
credible testimony and document ation as to [David]’s actual
income. [David] was not able to provide details as to many of
the entries on his tax returns and he appears to be earning
income comparable to what he earned at the time of the August
16, 2017 order when he asserted that his income was $106,000
per year. [David] is paying household living expenses of
$9,700 per month and, although not determinative, this is also
an indication that he is earning income far in excess of that set
forth on his tax returns.

David contends that the magistrate erred by disregarding his tax returns even though
no other evidence was introduced to contradict them. David also contends that the
magistrate erred by essentially drawing an adverse inference against David because he did
not understand how the accountant had prepared the returns and because the magistrate did
not understand the tax returns. In response, Carrie contends that the magistrate’s finding
of David’s gross income is based on a cred ibility determination, which this court should
review with deference.
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1 Carrie does not argue that, even if David could prove that his gross income at the
time of the dissolution actually was less than the finding of gross income in the decree,
David nonetheless is bound by the finding in th e decree (which, in this case, reflected the
parties’ stipulation). Accordingly, for pur poses of this opinion, we assume without
deciding that a party may es tablish a substantial change in circumstances under section
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In a child-support case, parties are require d by statute to disclose “all sources of
gross income,” including “relevant supporting documentation.” Minn. Stat. § 518A.28(a)
(2020). A party’s income-tax returns are not conclusive evidence of the person’s income.
Stephenson v. Stephenson , 104 N.W.2d 517, 51 8-19 (Minn. 1960); Otte v. Otte , 368
N.W.2d 293, 297 (Minn. App. 1985). Rather, income-tax returns “a re evidence of [a
party]’s income and may be considered by the court along with other evidence in the record
in making its determinatio n” of gross income. Stephenson, 104 N.W.2d at 519.
Furthermore, this court has recognized “the opportunity for a self-employed person to
support himself yet report a negligible net income.” Ferguson v. Ferguson, 357 N.W.2d
104, 108 (Minn. App. 1984). For example, in Gully v. Gully, 371 N.W.2d 63 (Minn. App.
1985), we stated, “Respondent’s practice of deducting these expenses for tax purposes did
not preclude the family court from attributing these items to respondent for purposes of
determining the proper level of child support.” Id. at 65.
In this case, the magistrate found that David had not provided “credible testimony
and documentation” concerning his gross income. The magistrate’s order does not explain
in detail why David’s evidence was lacking in credibility. The magistrate may have
believed that the tax returns were not reliable because they indicated to the magistrate that,
for 2016 and 2017, David’s business expenses equaled his business revenues. In cross-
examination, Carrie’s attorney asked David to explain how th at could be true, and David

518A.39 by proving that his or her gross income has not actually changed but that the prior
finding of gross income in the dissolution decree was incorrect.
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was unable to explain. 2 The magistrate also may have been concerned about the lack of
detail concerning David’s business expenses. In cross-examination, Carrie’s attorney
asked David to explain how he could have incurred business expens es of approximately
$162,000 and whether he had provided his accountant with receipts for all such expenses.
Again, David was unable to explain. We note that the tax returns include the total amounts
of business expenses by category for some year s but not for other years. The magistrate
also may have mistrusted the tax returns because of the amounts of some business
expenses. For example, the magistrate expr essed doubt during the hearing as to whether
David actually drove his vehicle 56,000 miles for business purposes in 2019 so as to justify
mileage expenses of approximately $28,000.

2 When David’s attorney ob jected to this line of qu estioning, the magistrate
overruled the objection and stated, “I am looking at it also and I had the same questions as
I was reviewing it. . . . So somebody’s going to have to explain that. I mean, if it’s not
him it has to be an accountant . . . . I need to understand it somehow and I’m not
understanding it.” Our review of the 2016 tax returns indicates that David’s business, Dave
Roth Inc., an S corporation, had revenue of $143,277, paid David a salary of $27,000, and
incurred $87,724 in other business expenses, resulting in a corporate profit of $28,553,
which was distributed to David by a K-1 form. David’s individual tax return corresponds
by showing that he received a salary of $27, 000 and a distribution of corporate profit of
$28,553, resulting in total income of $55,553. He also attached a Schedule C, which shows
that he had no profit or loss from his business because the business had gross receipts of
$143,277 and total expenses of $143,277. As the supreme court has explained in this
context, an S corporation is “subject to a pass-through taxation system, under which
[corporate] earnings are not taxed at the corpor ate level” but, rather, “are deemed to pass
through directly to the shareholders . . . a nd are reported on the shareholders’ individual
tax returns.” Haefele, 837 N.W.2d at 705 (citing I.R.C. §§ 1363(a)-(b), 1366(a)-(b)). We
too are unable to determine whether David’s income-tax returns were properly completed.
David could have presented additional evid ence, such as the testimony of his tax
accountant, to explain his tax returns and th ereby ensure that his gross income was
accurately determined.
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In any event, the magistrate clearly was skeptical of David’s income-tax returns
because they did not correspond to his self-disclosed expenses. During the hearing, the
magistrate asked David how he was able to pay almost $10,000 in monthly expenses if he
had only $5,000 per month in gross income. David answered that he had been living in
part on his savings. The magistrate’s order states that David “was not able to credibly
explain how he is able to pay almost $9,7 00 of monthly living expenses from monthly
income of $4,999.” The magistrate’s order is consistent with the dissolution decree, which
indicates that David had no more than a nomin al amount of savings in 2017, on ly three
years before his motion to modify. For thes e and other reasons, th e evidentiary record
provided the magistrate with several valid reasons for making a fi nding of David’s gross
income that differs from the income reflected on his income-tax returns.
Thus, the district court did not clearly e rr by finding that David’s gross income is
$8,833 per month (or $106,000 per year).
B. Carrie’s Gross Income
David also argues that, for two reasons, th e magistrate clearly erred by finding that
Carrie’s gross income is only $20 per month (or $240 per year).
David first contends that the magistrate erred on the ground that Carrie did not
comply with the statute that requires parties to disclose all sources of income and relevant
supporting documentation. See Minn. Stat. § 518A.28(a). In response, Carrie contends
that she has no such documentation because she has almost no income. Carrie testified that
she is unemployed and has not been employed since April 2019. The magistrate made
findings that conform to her testimony, which indicates that he found her testimony to be
credible. We generally defer to a district court's credibility detenninations. See Goldman
v. Greenwood, 748 N.W.2d 279,284 (Minn. 2008).
David also contends that the magistrate erred by finding that Carrie is not voluntarily
unemployed and by not making a finding of her potential income. But David does not cite
any evidence to contradict Carrie's testimony that she is unemployed because of physical
limitations arising from on-the-job injuries. David was the only other witness at the
hearing, and he did not testify about whether Carrie has the potential to be employed. A
party is not considered voluntarily unemployed if she is unemployed because she is
· physically incapacitated. Minn. Stat § 518A.32, subd. 3(3) (2020). The magistrate
specifically found that Carrie is unemployed because of physical injuries, and that finding
is supported by Carrie's testimony. In the absence of a finding that Carrie is voluntarily
unemployed, the magistrate was not required to make a finding of her potential income.
See Minn. Stat. § 518A.32, subd. 1 (2020); Welsh v. Welsh, 775 N.W.2d 364, 369-71
(Minn. App. 2009).
Thus, the district court did not err by finding that Carrie's gross income is not more
than $20 per month (or $240 per year).
In sum, the district court did not err by denying David's motion to modify child
support on the ground that there has not been a substantial change in circumstances.
Affirmed.
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