Lavicka v. Lavicka

NOTICE: NOT FOR OFFICIAL PUBLICATION.
UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

In re the Matter of:

KELSEY WILLIAM LAVICKA, Petitioner/Appellee,

v.

TAMMY THERESA LAVICKA, Respondent/Appellant.

No. 1 CA-CV 25-0146 FC
FILED 05-12-2026

Appeal from the Superior Court in Maricopa County
No. FC2017-003984
The Honorable Glenn A. Allen, Judge

AFFIRMED IN PART; VACATED AND REMANDED IN PART

COUNSEL

Tiffany & Bosco PA, Phoenix
By Kelly Mendoza, Charles E. Sears
Counsel for Petitioner/Appellee

Gillespie Shields & Taylor, Phoenix
By DeeAn Gillespie Strub, Mark A. Shields, Connor L. Dennison
Counsel for Respondent/Appellant

Cervone Law PC, Phoenix
By Kristina L. Cervone
Co-Counsel for Respondent/Appellant
LAVICKA v. LAVICKA
Decision of the Court

MEMORANDUM DECISION

Vice Chief Judge David D. Weinzweig delivered the decision of the Court,
in which Presiding Judge Michael J. Brown and Judge Veronika Fabian
joined. Judge Veronika Fabian specially concurring.

W E I N Z W E I G, Vice Chief Judge:

¶1 Tammy Theresa Lavicka (“Mother”) appeals from a modified
child support order. We affirm in part, vacate in part and remand for
reconsideration.

FACTS AND PROCEDURAL BACKGROUND

¶2 Kelsey William Lavicka (“Father”) and Mother divorced in
August 2019. They share a child with special needs. Mother practiced
optometry but is now fully disabled and receives $5,258 per month in social
security and disability pension benefits. Father works as a professional
engineer and serves in the National Guard. His 2023 W-2 income totaled
$173,622.59.

¶3 Father also receives rental income and distributions from
other businesses. He owns rental properties through Gut Heil, LLC and
Kelcore, LLC. His 2023 tax return showed a net rental loss of $8,373 after
depreciation and other deductions. His 2021, 2022 and 2023 tax returns
show depreciation deductions totaling about $26,000 annually.

¶4 Father receives annual income from Kelcore. His tax returns
show Kelcore paid him $58,500 in 2020, $49,250 in 2021 and $47,550 in 2022.
His 2023 tax return shows $1,845 in dividends and $16,756 in passive
income from Kelcore. Father said he did not know the exact 2023
distribution amount but confirmed the distributions are recurring and he
keeps them all.

¶5 Mother petitioned the superior court in March 2024 to
increase Father’s child support obligation. After an evidentiary hearing, the
court set Father’s income at $14,468.55 a month—his W-2 income only—
and ordered child support of $230 a month prospectively, plus $2,070 in
past support. The court did not include income from Father’s rental
properties because it found no evidence of a net profit after deducting

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expenses. Mother timely appealed. We have jurisdiction. A.R.S. §§ 12-
120.21(A)(1) and -2101(A)(1).

DISCUSSION

¶6 Mother contends the superior court miscalculated Father’s
child support payments because it excluded income from Father’s rental
properties and distributions from Kelcore.1 We review child support
awards for an abuse of discretion. Jacobs v. Jacobs, 259 Ariz. 467, 470, ¶ 16
(App. 2025). We accept the court’s factual findings unless clearly
erroneous, but review de novo its conclusions of law and interpretation of
rules and statutes. Id. Because the parties did not request written findings
of fact and conclusions of law under Arizona Rule of Family Law Procedure
82, we presume the court “found every fact necessary to support its
decision.” Whitt v. Meza, 257 Ariz. 176, 180, ¶ 8 (App. 2024).

I. Depreciation.

¶7 Mother argues the superior court erroneously accepted the
depreciation expenses offered by Father to reduce his rental income. She
contends the court should only reduce Father’s rental income by any actual
out-of-pocket expenses.

¶8 Rental income under the Child Support Guidelines includes
“gross receipts minus ordinary and necessary expenses as determined by
the court to be required to produce the income.” A.R.S. § 25-320 app.
(“Guidelines”) § II.A.1.e. Depreciation is neither automatically included
nor automatically excluded from child support income. Baker v. Baker, 183
Ariz. 70, 71–72 (App. 1995). Arizona courts “look at all the circumstances
before deciding whether to allow a parent to deduct depreciation from his
or her gross income and, if so, how much.” Id. at 72. Whether a deduction
is appropriate depends on “the nature of the depreciated property, the
importance of its need in the business, the business’s capital requirements,
and all other relevant circumstances.” Id.

¶9 We discern no abuse of discretion. Father has claimed the
same standard straight-line depreciation on these properties for years. His

1 Father moved this court to dismiss the appeal because Mother’s
opening brief does not comply with ARCAP 13. Mother concedes her
opening brief lacked adequate record citations but avows (without
citations) that the facts are indeed in the record. We reach the merits in the
exercise of our discretion. Ramos v. Nichols, 252 Ariz. 519, 522, ¶ 8 (App.
2022). Father’s motion is denied.

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2021, 2022 and 2023 tax returns show depreciation deductions totaling
about $26,000 annually. The amounts are not inflated or accelerated.
Mother does not suggest that the depreciation deduction amount was
excessive or accelerated. The court did not abuse its discretion.

II. Kelcore Distributions.

¶10 Mother argues Father received distributions from Kelcore in
addition to the rental income generated by the properties Kelcore holds.
The superior court did not attribute any income to Father beyond his W-2
income, so it implicitly rejected Mother’s claim that Father had income from
Kelcore distributions.

¶11 Father testified he received distributions from Kelcore in 2021
and 2023 of around $40,000 to $50,000. His tax returns include K-1 forms
from Kelcore showing Father received distributions of $58,500 in 2020,
$49,250 in 2021 and $47,550 in 2022. Father also admitted to receiving a
similar distribution in 2023.

¶12 Child support income includes distributions from a
partnership or closely held corporation. Guidelines § II.A.1.e. The Kelcore
distributions fall squarely within this category. To exclude them from his
income, Father had to show that the “ordinary and necessary expenses . . .
required to produce the income” equaled or exceeded the distributions.
Guidelines § II.A.1.e. He made no such showing.

¶13 The tax returns show the distributions from Kelcore are
separate from the rental income. The rental income after deducting
expenses shows a net loss. But the distributions are something else—
money paid by Kelcore to Father that he deposited into his bank account
without any obligation to repay. The court did not consider the distribution
income separately from the rental income or loss. The court’s order does
not explain why it disregarded this income.

¶14 Father argues he may have spent the distributions on other
business expenses. But Father cannot reduce his distribution income by
claiming he spent those funds elsewhere. Child support obligations have
priority over all other financial obligations. Guidelines § I.C.2. Father
conceded he continues to receive distributions from Kelcore and did not
show any “ordinary and necessary expenses” to offset them. See Guidelines
§ II.A.1.e. The superior court erred by not including the distribution income
from Kelcore when determining child support.

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LAVICKA v. LAVICKA
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CONCLUSION

¶15 We affirm the superior court’s decision to allow the
depreciation deduction as a reasonable business expense. We vacate the
child support order because the court improperly excluded Father’s Kelcore
distribution income. We remand for the court to consider the Kelcore
distribution income when recalculating the child support order.

¶16 Mother requests an award of attorney fees on appeal under
A.R.S. § 25-324, arguing Father has superior financial resources and
unreasonably garbled his income. Father argues he is entitled to an award
of attorney fees and costs because Mother’s appeal was unreasonable under
ARCAP 21(a), 25 and A.R.S. § 25-324. In our discretion, we award Mother
a portion of her attorney fees and costs based on the financial disparity. We
find neither party was unreasonable.

¶17 Mother asserts for the first time in her reply brief that Father
improperly claimed a mortgage interest deduction. Issues first raised in a
reply brief are waived. Ramos, 252 Ariz. at 523, ¶ 11. We do not address
this argument. Mother also argued Father should have been attributed
capital gains income but withdrew that argument in her reply brief. Mother
shall not include any fees related to either of these arguments in her fee
application.

F A B I A N, Judge, specially concurring:

¶18 I agree with the majority that under the standard set forth in
Baker v. Baker, the superior court did not abuse its discretion. However, I
write separately to question the wisdom of that standard. The Baker court
held that a depreciation deduction could be an ordinary and necessary
expense based on the relevant circumstances if the court, within its
discretion, finds it appropriate. 183 Ariz. 70, 71-72 (1995).

¶19 I believe that a depreciation deduction should never be
considered an expense for purposes of child support. Leaving that issue to
the court’s discretion is inconsistent with the Arizona Child Support
Guidelines (“Guidelines”). The Guidelines require courts consider the
“standard of living the child would have enjoyed if the child lived in an
intact home with both parents to the extent it is economically feasible
considering the resources of each parent.” A.R.S. § 25-320(D)(3). To that

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LAVICKA v. LAVICKA
Fabian, J., specially concurring

end, the Guidelines define child support income from self-employment,
rent, or business proprietorship as “gross receipts minus ordinary and
necessary expenses as determined by the court to be required to produce
the income.” A.R.S. § 25-320 app. § II.A.1.e.

¶20 The Guidelines do not otherwise define ordinary and
necessary business expenses, nor do they mention depreciation. However,
they do explain that the terms “Gross Income” and “Adjusted Gross
Income,” as they are used in the Guidelines, do not mean the same as they
do for tax purposes. Id. § II.A.1.a. Thus, as the Supreme Court of Montana
concluded, interpreting Montana’s child support guidelines, “the primary
focus for determining available income for paying child support is based
upon a parent’s disposable income rather than their taxable income.” Stewart
v. Stewart, 793 P.2d 813, 814 (Mont. 1990).

¶21 A depreciation deduction is not an expense. It reduces taxable
income to account for a loss in value and anticipates the expenses that would
be incurred to prevent deterioration. As the Connecticut Supreme Court
explained:

Depreciation is a mere book figure which does not either
reduce the actual dollar income of the defendant or involve
an actual cash expenditure when taken. On the contrary, it
represents additional cash available to the defendant by
permitting substantial tax deductions and, ultimately, tax
savings.

Stoner v. Stoner, 307 A.2d 146, 152 (Conn. 1972).

¶22 There is no doubt that if Father had actually spent the money,
that would be an “ordinary and necessary” expense. A.R.S. § 25-320 app.
§ II.A.1.e; see Cunningham v. Cunningham, 548 A.2d 611, 613 (Pa. Super. Ct.
1988) (“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.”). But the depreciation here does not appear to have reduced
Father’s income from the rental property nor reduced the “standard of
living the child would have enjoyed if the child lived in an intact home.”
A.R.S. § 25-320(D)(3). Regardless of the deduction, the money available for
the child’s standard of living from the rental income was the same.

¶23 I believe the proper approach, followed by several states, is to
entirely preclude depreciation deductions from child support income

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calculations. See Cunningham, 548 A.2d at 613; Stewart, 793 P.2d at 815
(“Since the purpose of depreciation is to assist a person in regaining their
expenditures, it does not follow that depreciation is a business expense for
the calculation of disposable income under the [Montana Child Support
Guidelines].”); Glass v. Oeder, 716 N.E.2d 413, 417 (Ind. 1999) (“The trial
court has broad discretion, but should have as a goal the direction of [the
Indiana Child Support Guidelines] to measure ‘a reasonable yearly
deduction for necessary capital expenditures.’ This anticipates smoothing
the year-to-year impact of capital outlays by allowing for a reasonable
accrual-like process for anticipated capital expenditures but does not allow
depreciation as such.”).

¶24 In this case, however, neither party has asked this Court to
revisit Baker. The majority’s decision appropriately applies the law as
decided in Baker. For that reason, I join in its decision.

MATTHEW J. MARTIN • Clerk of the Court
FILED: JR

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