Distributions from a Subchapter S corporation to a shareholder, to be transferred by the shareholder to another business entity, are not the shareholder’s income for child support purposes when the distributions and transfer occurred to further the corporation’s legitimate business purposes and were not to be used by the shareholder. Thus, distributions from an S corporation to a shareholder solely for the shareholder to pay her share of the corporation’s tax liability on retained earnings are ordinary and necessary business expenses rather than the shareholder’s income for calculating child support; paying an S corporation’s shareholder for the tax liability associated with that shareholder’s share of corporate income for taxation purposes does not reduce the shareholder’s personal living expenses.
Laura Morgan is a Family Law Consultant. Laura is available for consultation, brief writing and research on family law issues throughout the country. She can be reached through her Web site.