E.D. v J.D. (Supreme Court, Westchester County)

Defendant-husband is the sole shareholder of a corporation and for purposes of determining child support and maintenance, the Court held a hearing to determine how much, if any, income of the corporation should be deemed defendant’s “earned income.”  The Court found the defendant’s testimony to be not credible and that the plaintiff-wife had properly pierced the corporate veil and demonstrated that certain income that defendant contended to be income of the corporation should be imputed as personal income.

As the sole shareholder, defendant had control of all significant business decisions including purchasing, hiring, expenditures, and setting salaries.  The evidence showed that defendant deliberately reduced his personal income by paying himself an artificially low salary while still managing to support his pre-corporation standard of living by expensing personal/family expenditures through the business.  Further examples of questionable corporate expenses include: 1) salaries paid to defendant’s children in 2010, who were aged 10, 15, and 19 at that time; 2) payment of legal fees relating to the divorce action; 3) restaurant meals with the children; 4) travel expenses for son’s bar mitzvah; and 5) rent payment for personal apartment.

In cases where defendant has complete control over the corporation, the Court does not have to simply accept the defendant’s claims regarding salary.  Pursuant to review of the evidence, the Court determined that the plaintiff was entitled to additional maintenance and child support payments.