In Re-Marriage of Schulze

Case Cite: 60 Cal. App. 4th, 519, 70 Cal.rptr.488
Date: December 29, 1997
Court: Fourth Appellate District, Division Three

This recent court case addresses the taxability of "employer-provided benefits." These benefits are also referred to as perquisites or perks.

Mr. Schulze was the recipient of approximately $1,100/month of employer-provided benefits in the form of $600 rental subsidy and $500 for the use of a 1989 Mercedes company car. These perks were utilized in calculating a family support award. The trial court deemed these perks as non-taxable income. The appellate court reversed the trial court's decision and these perquisites were held to be taxable forms of compensation based upon their potential tax liability.

On the other hand, the Court of Appeals held in In re Marriage of McQuoid (1991) 9 Cal.App.4th 1353, 12 Cal.Rptr.737 that "so long as the (income) tax liability is not paid, it cannot be deducted from gross income" in determining support. While that case dealt with an individual tax protester, the concept of taxability is entirely applicable to perquisites.

The issue becomes not whether perquisites should be taxed under IRS tax code, but whether the perquisites should be taxed in the context of setting temporary and permanent support levels. We do not believe individuals should commit tax fraud by not taxing their perquisites, but if they aren't taxing their perquisites, the spousal support should be calculated upon their actual taxable and nontaxable income.