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Unrealized income and child support: what you should know

The key factor in determining how much a person receives from an ex-spouse in child support is the gross income of the former spouse. However, some income may exist only on paper and has never actually been received. Some people in Virginia may wonder if this income, known as unrealized income, counts toward calculating child support payments.

The difference between unrealized and realized income, according to Chron, comes down to worth versus an actual transaction. Unrealized income is basically financial worth that has not been converted to cash. Real estate, for example, may be reported in terms of unrealized income since the property is worth money, but it is not actual income until the property has been sold. Similarly, stocks and paper securities are also reported in terms of unrealized income. Until they are sold for actual cash, these investments have not generated actual income.

This raises the question of whether Virginia courts can calculate a person’s unrealized income as part of a person’s overall income and then use that amount to determine child support payments. Some may argue that since unrealized income is not actual income, there is no real income to take into account. Unfortunately, there is no clear guidance for how unrealized income is factors in for child support.

The problem is that different states have come to various conclusions on the question, with some states allowing unrealized income to be a factor and some not. For example, Findlaw points out that Virginia is one of a number of states whose courts have ruled that interest collected on IRAs is not counted as part of child support calculations. However, other states such as Ohio and Montana have ruled that it can.

Other areas of unrealized income include money held in trusts, capital gains, stock options, and retained income from certain kinds of businesses. States have taken various stances on these unrealized income sources, counting some as eligible for child support and others not. In the absence of a strict standard, individuals facing this question in their divorce cases should consult with knowledgeable attorneys who understand the current state of the law in Virginia concerning these matters.


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