Appeal from the Order entered April 30, 1987 in the Court of Common Pleas of Armstrong County, Civil, No. 1984-0547.
John B. Wise, Pittsburgh, for appellant.
Robert Petrosky, Kittanning, for appellee.
Cirillo, President Judge, Beck and Popovich, JJ. Cirillo, President Judge, files dissenting opinion.
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Reese and Mary Louise Cunningham were divorced after almost forty years of marriage. Extensive hearings were held before a master in divorce, who filed a report with his recommendations as to equitable distribution and alimony. Following review of the exceptions filed by Mr. Cunningham, the trial court issued an award of equitable distribution and alimony which Mr. Cunningham now challenges on appeal. We consider the issues he raises seriatim.
The standard by which we review an award of alimony and equitable distribution of marital property is abuse of discretion; unless the trial court has abused its discretion, we will not disturb its decision. Vajda v. Vajda, 337 Pa. Super. 573, 579, 487 A.2d 409, 412 (1985). We find that the trial court did not abuse its discretion and we affirm.
Mr. Cunningham first claims that the trial court erred in adopting the master's finding that he had an income of $2,000 per month. Mr. Cunningham's most recent income tax return showed a gross annual income of over $24,000, or approximately $2,000 per month. He claimed over $17,000 in deduction and depletion allowances. Mr. Cunningham challenges the trial court's refusal to
[ 378 Pa. Super. Page 282]
deduct any of the $17,000 he claimed in depreciation and depletion expenses from his gross income in arriving at an estimate of his disposable income.
It is well established that depreciation and depletion expenses, permitted under federal income tax law without proof of actual loss, will not automatically be deducted from gross income for purposes of determining awards of alimony and equitable distribution. In determining the financial responsibilities of the parties to a dissolving marriage, the court looks to the actual disposable income of the parties:
[T]hat income must reflect actual available financial resources and not the oft-time fictional financial picture which develops as the result of depreciation deductions taken against . . . income as permitted by the federal income tax laws. Otherwise put, "cash flow" ought to be considered and not federally taxed income.
Commonwealth ex rel. Hagerty v. Eyster, 286 Pa. Super. 562, 568-69, 429 A.2d 665, 668-69 (1981) (citations omitted). Accord, Flory v. Flory, 364 Pa. Super. 67, 527 A.2d 155 (1987); Parkinson v. Parkinson, 354 Pa. Super. 419, 512 A.2d 20 (1986).
Depreciation and depletion expenses should be deducted from gross income only where they reflect an actual reduction in the personal income of the party claiming the deductions, such as where, e.g., he or she actually expends funds to replace worn equipment or purchase new reserves. This is not the case here. Mr. Cunningham does not claim on appeal, nor did he claim below, that he in fact spent any of his $24,000 income to replace worn equipment or purchase new coal reserves. To the contrary, the couple's daughter, an accountant who prepared a financial analysis of the Cunninghams' coal company based on Mr. Cunningham's 1984 income tax return, testified that the depreciation and depletion claimed by her father did not represent any actual expenditures on his part.*fn1
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Second, Mr. Cunningham claims that the trial court erred in refusing to consider the testimony given at the October 31, 1986 hearing on his Petition for Reduction of Alimony Pendente Lite in determining its distribution of marital property and final award of alimony. This hearing was held after the master had closed his hearings and issued his recommendation to the trial court, but before the trial court issued its final order. Mr. Cunningham claims that testimony given at the October 31, 1986 hearing established that his income for the first seven months of 1986 was considerably lower than had been reported in earlier financial information filed with the ...