August 12, 2013 – Rosalyn Clark v. Frank Clark, No. 31,547

IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
Opinion Number: __________
Filing Date: August 12, 2013
NO. 31,547
ROSALYN CLARK,
Petitioner-Appellant,
v.
FRANK CLARK,
Respondent-Appellee.
APPEAL FROM THE DISTRICT COURT OF BERNALILLO COUNTY
Elizabeth E. Whitefield, District Judge
Atkinson & Kelsey, P.A.
Thomas C. Montoya
Albuquerque, NM
for Appellant
Johnson Family Law, P.C.
Barbara V. Johnson
Albuquerque, NM
for Appellee

OPINION
GARCIA, Judge.
{1} 	Wife appeals the district court’s award of spousal support for a fixed eighteen-
month term that was based upon the apportionment of wages between Husband and
the community but that excluded certain income distributions from Husband’s
separate Subchapter-S corporation. 	Wife asserted three claims of error. 	We have
determined that this matter should now be remanded to the district court to address
two of the issues raised. First, subject to certain exceptions, income received from a
Subchapter-S corporation owned by a spouse is included when calculating spousal
support. 	Second, the duration of spousal support is controlled by the recipient
spouse’s ability to become self-sufficient. Neither of these two issues were adequately
addressed by the district court nor was an adequate explanation provided for the
deviation from the standards prescribed to establish the duration of spousal support
and the inclusion of Husband’s income from the Subchapter-S corporation. 	As a
result, we affirm in part, reverse in part, and remand for further proceedings.
BACKGROUND
{2} 	Husband and Wife were married in California in 1998. 	Wife did not work
outside the home during the marriage, although she received income of $3,220 per
month as an officer of Husband’s separate property business, IPR, Ltd. 	IPR is a

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Subchapter-S corporation and Husband is the sole owner and operator of the business.
{3} 	As a Subchapter-S corporation, all profits and losses from IPR (the K-1
allocations) were passed through to Husband, who paid taxes on the parties’
individual income tax return at individual income tax rates. 	During the marriage,
Husband also received both a regular salary from IPR (W-2 income) as well as
additional cash distributions from IPR (non-W-2 income), both of these sources of
funds were deposited into the same bank account. The district court appointed a Rule
11-706 NMRA financial expert who supplied a three year summary of wages and
other distributions paid to Husband by IPR. The average annual wages reported as W-
2 income over the three year period was $423,413, and the average annual non-W-2
income distributed from IPR was $212,020. The record established that the non-W-2
income distributed from IPR did not match up with the K-1 allocations from IPR that
were reported on the parties’ tax returns. Based upon this evidence, the district court
found that it could not determine from the record what portion of the overall
allocations from IPR were actual income received by Husband and what portions were
unrelated to income or intended to defray additional income taxes arising from the K-1
allocations received from IPR. Accordingly, based on Husband’s W-2 income alone,
it calculated Husband’s gross pre-tax income for spousal support purposes as $35,284
per month. The district court also determined that a comparable salary for the field

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work Husband was performing as a project manager for IPR was only $8,333 per
month. Despite the difficulties with calculating Husband’s significant income from
IPR, Husband’s pending retirement was also a consideration identified by the district
court in making its decision regarding spousal support.
{4} 	At the time of the final decree of divorce, Husband was 66 years of age, and
Wife was 60. 	Husband’s job was physically demanding and, due to his age and
health, he wanted to retire. In fact, Husband testified that the pending divorce action
was the only reason he had not retired.
{5} 	The parties did not introduce any evidence of Wife’s earning capacity and did
not anticipate Wife’s return to work as a viable reality under the circumstances
presented to the district court. Wife submitted a budget to the court alleging that her
reasonable support needs were $20,078 per month. The district court found that many
of Wife’s alleged expenses were unreasonable or not supported by the evidence. The
district court explained, as examples, that “$200 per month for a psychic is not a
reasonable therapy expense,” and “[v]acations of $1,000 per month [are] not
reasonable for an unemployed person.” 	It also considered Wife’s lack of effort to
become self-supporting and the fact that “[b]oth parties are of retirement age and need
to transition to retirement.” 	The district court awarded Wife transitional spousal
support for an eighteen-month period, in the amount of $6,500 per month, without any

4
findings regarding how she would be supporting herself thereafter.
{6} 	The district court entered its final decree of divorce and order on July 13, 2011.
The court later entered a stipulated order modifying the final decree on August 2,
2011. Wife timely filed her notice of appeal to this Court.
DISCUSSION
Spousal Support
A. 	Standard of Review
{7} 	Spousal support represents a substitute for or a continuation of the right to
support that the spouse had during marriage. Ellsworth v. Ellsworth, 1981-NMSC-
132,¶ 1, 97 N.M. 133, 637 P.2d 564. In determining whether to order spousal support,
the district court is to consider: 	(1) the needs of the proposed recipient, (2) the
proposed recipient’s age, health, and means of self-support; (3) the proposed payor’s
earning capacity and future earnings; (4) the duration of the marriage; and (5) the
amount of property owned by the parties. See Michelson v. Michelson, 1974-NMSC-
022, ¶ 8, 86 N.M. 107, 520 P.2d 263. The actual need of the proposed recipient is a
focal consideration in determining whether to order spousal support. 	Mattox v.
Mattox, 1987-NMCA-021, ¶ 29, 105 N.M. 479, 734 P.2d 259.
{8} 	The district court has wide discretion to award spousal support, and its decision
will only be set aside if it constitutes an abuse of discretion. See Martinez v. Martinez,

5
1997-NMCA-125, ¶ 10, 124 N.M. 313, 950 P.2d 286; Ellsworth, 1981-NMSC-132,
¶ 2. “An abuse of discretion occurs when a ruling is clearly contrary to the logical
conclusions demanded by the facts and circumstances of the case.” 	Sims v. Sims,
1996-NMSC-078, ¶ 65, 122 N.M. 618, 930 P.2d 153. Further, to establish an abuse
of discretion, “it must be shown that the court’s ruling exceeds the bounds of all
reason or that the judicial action taken is arbitrary, fanciful, or unreasonable.”
Meiboom v. Watson, 2000-NMSC-004, ¶ 29, 128 N.M. 536, 994 P.2d 1154 (alteration,
internal quotation marks, and citation omitted). 	“When there exist reasons both
supporting and detracting from a [district] court decision, there is no abuse of
discretion.” 	Talley v. Talley, 1993-NMCA-003, ¶ 12, 115 N.M. 89, 847 P.2d 323.
“Where the court’s discretion is fact-based, we must look at the facts relied on by the
[district] court as a basis for the exercise of its discretion, to determine if these facts
are supported by substantial evidence.” Apodaca v. AAA Gas Co., 2003-NMCA-085,
¶ 60, 134 N.M. 77, 73 P.3d 215 (internal quotation marks and citation omitted).
B. 	Amount
{9} 	Wife contends that the district court abused its discretion in calculating the
amount of spousal support. The issue before this Court is whether the district court
should have considered the non-W-2 income distributions from IPR when it calculated
Husband’s current earnings for spousal support purposes. Wife asserts that it was an

6
abuse of discretion for the district court to base its spousal support calculation only
on a portion of Husband’s W-2 wage income and not on the total amount of his
income from IPR because NMSA 1978, Section 40-4-7(E)(2) (1997) requires the non-
W-2 income distributions to be included in this calculation. Under the particular facts
of this case, we agree with Wife on this issue.
{10} 	As an owner of IPR, Husband is required to include in the parties’ personal tax
return the portion of IPR’s income as set forth in the K-1 allocations to Husband. See
Ashmore v. C.I.R., T.C. Memo 2013-137 (recognizing that even where a taxpayer did
not receive a tax document such as a form W-2 or schedule K-1, the taxpayer is not
excused from his or her duty to report the income on a federal income tax return).
Allocations of corporate income are not the same as distributions of corporate income.
The non-W-2 income that is actually distributed by IPR is available to be consumed
by the parties and can also be used to pay the increased tax obligations incurred as a
result of the K-1 allocations issued to Husband by IPR. Important to this analysis, the
non-W-2 income distributions from IPR that exceed the amount necessary to pay
corporate 	business 	expenses 	or 	the 	shareholder-spouse’s 	tax 	obligations 	are
considered income for purposes of calculating family support obligations. See, e.g.,
NMSA 1978, § 40-4-11.1(C)(2)(b) (2008) (defining, for purposes of child support, a
self-employed parent’s gross income as gross receipts minus ordinary and necessary

7
expenses required to produce such income); see In re Marriage of Schenkelberg, 824
N.W.2d 481, 484-85 (Iowa 2012) (requiring the inclusion of husband’s distributions
from his Subchapter-S corporation that are not used for business or to pay tax
liabilities).
{11} 	Only income that has been retained by a corporation for corporate purposes or
distributed to a shareholder-spouse in an amount sufficient to pay business related
expenses 	or 	tax 	obligations 	would 	be 	deemed 	unavailable 	for 	use 	by 	a
shareholder-spouse to satisfy the financial obligations imposed by a dissolution of
marriage. 	See NMSA 1978, § 7-4-2(A) (1999) (defining “business income” as
“income arising from transactions and activity in the regular course of the taxpayer’s
trade or business and income from the disposition or liquidation of a business or
segment of a business”); Roberts v. Wright, 1994-NMCA-022, ¶ 9, 117 N.M. 294, 871
P.2d 390 (refusing to include a parent’s corporate earnings, over the amount actually
received in payment, in child support calculations); Brett R. Turner, Classifying the
Retained Earnings of a Separate Property Business as Marital Property, 15 No. 8
Divorce Litig. 141 (2003) (“[T]he owner of a business should not be required to place
protection of the marital estate above all other legitimate business concerns.”). As
such, simply attributing K-1 allocations to a shareholder-spouse for tax purposes does
not provide a workable framework for the district courts to assess either the needs of

8
the shareholder-spouse or the spouse’s ability to pay support. Caveney v. Caveney,
960 N.E.2d 331, 342 (Mass. App. Ct. 2012) (noting that “there was no evidence to
suggest 	that 	the 	actual 	amount 	of 	distributions 	made 	to 	the 	wife 	from 	the
[S]ubchapter[-]S corporations bore any resemblance to the amount of the K-1 income
reported by the wife for income tax purposes”); see also § 40-4-7(B)(1) (allowing the
district court to award spousal support as may “seem just and proper” under the
circumstances of the case); Lovato v. Lovato, 1982-NMSC-052, ¶ 8, 98 N.M. 11, 644
P.2d 525 (“It is the duty of the [district] court to make a decision based upon all the
facts and upon all the considerations that will result in fairness to both parties involved
in an alimony and support situation.”).
{12} 	Actual cash distributions of corporate funds to a shareholder-spouse are the
critical factor in calculating support, especially large non-W-2 income distributions
that are received by the shareholder-spouse, deposited in the community bank account,
and used to pay community living expenses and other needs. See § 7-4-2(E) (defining
“nonbusiness income” as “all income other than business income”); cf. Boutz v.
Donaldson, 1999-NMCA-131, ¶ 14, 128 N.M. 232, 991 P.2d 517 (“The definition of
gross income in the child support guidelines represents a legislative effort to estimate
‘actual cash flow,’ that is the amount of money that will actually be available to
support the children.”). We conclude that Subchapter-S corporation funds actually

9
distributed to the shareholder-spouse must be attributed to the shareholder-spouse as
income for spousal support purposes unless and until the shareholder-spouse can
demonstrate what portion of the corporate distribution was used for business purposes
or to offset the payment income taxes resulting from any K-1 allocations. See, e.g.,
Roberts, 1994-NMCA-022, ¶ 8 (“The parent claiming a business expense must show
not only that it is ordinary and necessary to the business, but also that it is irrelevant
to calculating support obligations.”); see also Schenkelberg, 824 N.W.2d at 484-85
(recognizing that it was logical to conclude that husband received more than just
wages from the Subchapter-S corporation, his sole source of income, because he had
sufficient additional income to pay his taxes and maintain his lifestyle without
incurring any resulting debt); cf. Champion Int’l Corp. v. Bureau of Revenue, 1975-
NMCA-106, ¶ 9, 88 N.M. 411, 540 P.2d 1300 (placing burden on the taxpayer to
present evidence on the question of whether any of its income was nonbusiness
income for purposes of disputing an assessment of taxes made by the bureau). With
the burden resting on the shareholder-spouse, the district court must then carefully
consider the particular facts of each case, especially where a shareholder-spouse does
not clearly establish what portion of non-W-2 income actually distributed was
necessary to offset any related business expenses or tax obligations resulting from the
K-1 allocations received by the corporation. 	See Ellsworth, 1981-NMSC-132, ¶ 4

10
(explaining that spousal support is “based on need, ability to self-support, and the
equities of the particular situation”); see also Fennell v. Fennell, 2000 PA Super 166,
¶ 10, 753 A.2d 866 (“[T]he owner of a closely-held corporation cannot avoid a
support obligation by sheltering income that should be available for support by
manipulating salary, perquisites, corporate expenditures, and/or corporate distribution
amounts. 	By the same token, however, we cannot attribute as income funds not
actually available to or received by the party.”
{13} 	This Court generally understands and recognizes that the calculation of a tax
liability is not an exact mathematical science, but it can normally be accomplished
within a reasonable margin or error. Mattox, 1987-NMCA-021, ¶ 23 (explaining that
the district court should generally consider tax consequences when deciding a
property settlement upon dissolution of marriage, but reasoning that “mathematical
exactitude in the division of property is not required”). It is for the district court to
address any unresolved disagreements that might result in the calculation of a tax
liability when reviewing the evidence. Frustration and difficulty cannot be recognized
as the proper basis for failing to calculate the shareholder-spouse’s actual income
received from a corporate entity, especially where the Subchapter-S corporation is the
primary source of income to the parties. See Entzie v. Entzie, 2010 ND 194, ¶ 9, 789
N.W.2d 550 (noting that the district court must apply the proper guidelines to

11
calculate current income even where an accurate depiction of income is difficult);
Pacella v. Pacella, 492 A.2d 707, 713 (Pa. Super. Ct. 1985) (recognizing that earning
capacity rather than salary was more appropriate to calculate spousal support where
the husband had manipulated his corporation and “so commingled corporate and
personal funds as to render efforts to separate the two extremely difficult”).
{14} 	Where corporate funds are actually received and used by the parties for their
standard of living, any presumptions imposed to address financial questions to be
resolved by the district court should not favor the shareholder-spouse. See Roberts,
1994-NMCA-022, ¶ 11 (“[I]f there is a disagreement about the appropriateness of the
deduction, then the deduction must be justified by the party claiming the expense.”);
see also Jurado v. Jurado, 1995-NMCA-014, ¶ 28, 119 N.M. 522, 892 P.2d 969
(recognizing that it would be “unjust” to calculate child support using gross income
attributable to husband’s partnership if some of the income needed to be reinvested
to sustain the business but requiring husband to show what is necessary to sustain his
partnership). 	In addition, recognizing any form of bright-line rule that would
effectively include or exclude Subchapter-S corporation distributions from a spousal
support calculation would not be proper. 	See Zold v. Zold, 911 So. 2d 1222, 1231
(Fla. 2005) (“[A]n inflexible rule treating undistributed ‘pass-through’ income of a
shareholder-spouse as available income in marital dissolution proceedings is contrary

12
to corporate governance[.]”); In re Marriage of Brand, 44 P.3d 321, 328 (Kan. 2002)
(“Courts have been reluctant, for policy reasons, to allow a blanket rule that retained
earnings of a Subchapter[-]S corporation are not income to be considered when
calculating support. Allowing support to be calculated in this way would encourage
shareholders to retain earnings in favor of their own long-term financial interests
without regard for the need for support.”). The district court must be careful to avoid
allowing the shareholder-spouse to manipulate salary, corporate distributions, and
retained earning to his or her unfair advantage, thereby substantially skewing one’s
support obligations. 	See Jurado, 1995-NMCA-014, ¶ 26 (noting the potential for
husband to manipulate his income in a way that would decrease child support
payments by $98,411 annually); Smith v. Smith, 1992-NMCA-080, ¶ 22, 114 N.M.
276, 837 P.2d 869 (affirming the district court’s imposition of a community lien
against a husband’s separate business where substantial evidence supported a finding
that the business under-compensated the community during the course of the
marriage); Williams v. Williams, 600 N.E.2d 739, 743 (Ohio Ct. App. 1991) (“[I]t
would be grossly inequitable to allow appellee to sit upon his assets, hide behind the
shield of corporate business decisions, and prevent his children from enjoying the
standard of living they would have enjoyed had the marriage continued.”). 	The
potential for manipulation is also much greater where the shareholder-spouse is a sole

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or majority shareholder of the corporation and, by virtue of his ownership and control,
has authority to dictate all corporate distributions. 	Zold, 911 So. 2d at 1232; In re
Marriage of Brand, 44 P.3d at 327 (stating that a minority shareholder has less ability
to control the amount of corporate income retained); Fennell, 753 A.2d at 869
(requiring “[a shareholder-spouse who] is able to control the retention or disbursement
of [corporation] funds . . . to [prove] that such actions were ‘necessary to maintain or
preserve’ the business”).
{15} 	We must apply these principles to the district court’s rulings in the present case.
It is uncontested that Husband received significant W-2 income as well as non-W-2
income distributions from IPR every year from 2008 to 2010. However, the district
court wholly disregarded the non-W-2 income distributions when it calculated
Husband’s current earnings for purposes of spousal support, explaining that it was
impossible to tell how much income Husband actually received from these non-W-2
income distributions. This finding is neither sufficiently developed nor explained by
the district court. It fails to identify the difficulty in effectuating a proper calculation
of Husband’s actual income from IPR and does not explain why the resulting
resolution of this issue presumptively favored Husband, the shareholder-spouse.
Because the district court did not provide sufficient information to explain its
exclusion of Husband’s non-W-2 income distributions in the calculation of his income

14
for spousal support purpose and because it did not explain why the difficulties in
making these calculations should not be held against Husband as the shareholder-
spouse, this Court is not capable of adequately reviewing these rulings.
{16} 	Basic logic also presents questions regarding the district court’s decision to
exclude Husband’s non-W-2 income from the calculation of spousal support.
Although the K-1 allocations did not match the non-W-2 income distributions made
to Husband, it is clear that the distributions exceeded the allocation in 2009 by nearly
$190,000. It does not take a Rule 11-706 expert or any special knowledge for this
Court to recognize that Husband did not need a $362,877 non-W-2 income
distribution of cash from IPR to pay his resulting increase in income taxes that are
attributed to a $175,762 K-1 allocation. See Rozelle v. Barnard, 1963-NMSC-101,
¶ 2, 72 N.M. 182, 382 P.2d 180 (“[C]ourts will take judicial notice of matters of
common and general knowledge.”). To do so would require the court to recognize
that the parties were in an income tax bracket that exceeded two hundred percent in
2009. The reality of such a financial scenario defies common sense.
{17} 	Without an explanation to support its rulings, we hold that it was an abuse of
discretion for the district court to exclude all of Husband’s non-W-2 income received
from IPR when calculating spousal support and to shift the burden of proof to Wife,
requiring her to show what portion, if any, of Husband’s non-W-2 income should be

15
included in the calculation of spousal support. 	Generally, the burden should have
remained on Husband to prove what portion of the non-W-2 income distributions were
used to offset the additional taxes resulting from the K-1 allocations. See Zold, 911
So. 2d at 1233 (“The burden is properly on the shareholder-spouse because he or she
has the ability to obtain information to establish the propriety of the corporation’s
actions.”); see also, Champion Int’l Corp., 1975-NMCA-106, ¶ 9 (requiring the
disputing taxpayer to prove which income constituted nonbusiness income).
{18} 	Husband argues that we should address the issue on the basis of IPR’s separate
property status. We are not persuaded by Husband’s argument. Alimony is based on
the standard of living and needs of the respective spouses. 	See Ellsworth, 1981-
NMSC-132, ¶ 4 (“Problems have arisen where the concepts of alimony and property
division are mixed.”). It is calculated based on the needs of each party after property
distribution. See Michelson, 1974-NMSC-022, ¶ 9 (“Certainly an important factor in
determining an award of alimony is the amount of property distributed to the wife as
her share of the community interest. Upon its distribution it becomes her sole and
separate property. What will her needs be after that distribution?”). Thus, there is no
continuation of the community estate at the time the district court calculates alimony
and it must base its calculations of need on the sole and separate assets belonging to
each party at that time. Id.; see Brister v. Brister, 1979-NMSC-038, ¶ 17, 92 N.M.

16
711, 594 P.2d 1167 (“The focal point in each [alimony] case is the recipient’s need
for support.”). 	Husband’s argument that his separate property should not be
considered when calculating alimony payments improperly merges the concepts of
alimony and property division. As a result, we remand this matter to the district court
for a factually definitive and legally reviewable calculation of Husband’s IPR income.
Upon recalculation, Husband’s support obligation to Wife should then be adjusted as
necessary.
C. 	Duration
{19} 	We now address Wife’s contention that it was error for the district court to limit
the duration of spousal support to eighteen months without evidence addressing the
future circumstances of the parties. As Wife points out, Section 40-4-7(E)(2) calls for
spousal support to be based upon factors including the “current and future earnings
and the earning capacity of the respective spouses.” “The appropriateness of an order
for limited-duration rehabilitative support depends on the circumstances of the
particular case.” 	Rabie v. Ogaki, 1993-NMCA-096, ¶ 61, 116 N.M. 143, 860 P.2d
785.
{20} 	“[A district] court should not terminate jurisdiction to extend a future support
order after a lengthy marriage, unless the record clearly indicates that the supported
spouse will be able to adequately meet his or her financial needs at the time selected

17
for termination of jurisdiction.” 	Id. ¶ 10 (alteration, internal quotation marks, and
citation omitted). As a result, rehabilitation awards that provide spousal support for
a limited-duration have generally involved younger recipients with substantial job
skills and relatively short marriages. See Lewis v. Lewis, 1987-NMCA-073, ¶ 50, 106
N.M. 105, 739 P.2d 974. When a district court finds that a spouse is currently entitled
to periodic spousal support but may later become self-sufficient, “the proper course
is to order such support for an indefinite time, with the payor spouse bearing the
burden to move for reduction or elimination of support when it appears that the
recipient spouse has in fact become more self-sufficient.” Rabie, 1993-NMCA-096,
¶ 10.
{21} 	The district court must make sufficient findings concerning Wife’s ability to
support herself in the future so that this Court is able to determine the basis for the
termination of alimony after eighteen months. At the time of the divorce, Wife was
a sixty-year-old homemaker with no known prospects for any future earning capacity.
Wife testified about Husband’s request that she not work outside the home during the
marriage. Thus, Wife lost her only marital source of income, previously derived from
her position as a board member for IPR. 	If she were to remain unemployed, as
anticipated by the record in this case, Wife will have no future earnings other than her
social security benefits. 	Wife was, therefore, “economically disadvantaged by the

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marriage.” Bilbao v. Bilbao, 1985-NMCA-016, ¶ 9, 102 N.M. 406, 696 P.2d 494.
{22} 	Husband, on the other hand, has the ability to pay spousal support, especially
during any future years that he continues to work. We recognize that Husband is in
declining health and planning to retire. But as long as Husband has an interest in IPR,
there is no reason to conclude that he will not continue to receive a substantial
financial benefit, including distributions from the corporation as its sole owner,
regardless of whether he continues to manually work at the project sites. Moreover,
if Husband divests himself of his ownership in IPR, he will receive payment for his
ownership interest that will provide him with substantial income that he can
subsequently reinvest in other income producing assets or use for his benefit. Under
these circumstances, we agree that Wife should not be under an absolute obligation
to obtain employment after eighteen months in order to meet her financial needs. See
Lewis, 1987-NMCA-073, ¶¶ 51-52 (remanding because of insufficient findings after
this Court held that a sixty-two-year-old wife who had been married to her husband
for nearly forty years, whose marital role was primarily that of a homemaker, and
whose spouse is well able to afford alimony, has no obligation to “rehabilitate”
herself).
{23} 	The district court reasonably recognized that “[b]oth parties are of retirement
age and need to transition to retirement.” However, automatic termination of Wife’s

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spousal support after eighteen months could only be justified in this case if, after
eighteen months, Wife’s income was sufficient to establish that spousal support would
no longer be necessary to help support her reasonable needs. The district court made
no findings to that effect, and the facts do not support such a finding or such an
inference. 	Specifically, the court made no findings regarding Wife’s future
employability or potential income. Based upon the lack of any evidence or findings
on this issue, we remand this issue for further consideration by the district court
regarding the duration of the spousal support to Wife. While we do not reverse the
district court’s imposition of a $6,500 per month standard of living for Wife, this level
was originally set as a rehabilitative amount without considering all the IPR income
received by Husband and based upon a presumption that both parties would be making
a transition to retirement. See Lewis, 1987-NMCA-073, ¶ 52. The district court must
reconsider the overall income and expense level of both parties and make a new
decision that is fair and equitable to each of them. 	See id.; see also Lovato, 1982-
NMSC-052, ¶ 8. 	We conclude that spousal support was payable to Wife for the
original eighteen-month interim period but must now be continued and re-evaluated
based upon her current financial needs. 	See Rabie,1993-NMCA-096, ¶ 10. 	As a
result, the district court also abused its discretion when it strictly limited the duration
of spousal support to eighteen months.

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Husband’s Separate Property Income
{24} 	We now address Wife’s allegation that the district court erred in characterizing
a portion of Husband’s income from IPR as his separate property. 	We review the
district court’s equitable distribution of assets and liabilities for an abuse of discretion.
Arnold v. Arnold, 2003-NMCA-114, ¶ 6, 134 N.M. 381, 77 P.3d 285. The district
court here found that IPR was Husband’s separate property and that Husband earned
both a monthly community property salary of $8,333 per month and a separate income
based on his ownership interest in IPR. 	Thus, the issue raised by Wife on appeal
involves only an evidentiary challenge to the district court’s rulings, and we shall
apply a substantial evidence standard of review. 	See Bishop v. Evangelical Good
Samaritan Soc’y, 2009-NMSC-036, ¶ 25, 146 N.M. 473, 212 P.3d 361 (applying a
substantial evidence standard where no legal questions remain); see also Corley v.
Corley, 1979-NMSC-040, ¶ 6, 92 N.M. 716, 594 P.2d 1172; Zemke v. Zemke, 1993-
NMCA-067, ¶ 14, 116 N.M. 114, 860 P.2d 756. 	“Substantial evidence is such
relevant evidence that a reasonable mind would find adequate to support a
conclusion.” Landavazo v. Sanchez, 1990-NMSC-114, ¶ 7, 111 N.M. 137, 802 P.2d
1283.
{25} 	On appeal, it was Wife’s duty to present the evidence in the light most
favorable to support the district court’s findings, and then demonstrate why the

21
evidence failed to support these findings. Jurado, 1995-NMCA-014, ¶ 9. Wife has
not provided any citation to the record or other arguments to rebut the district court’s
conclusions that Husband’s ownership interest in IPR was his separate property and
that a portion of his salary resulted from this separate ownership interest. In addition,
Wife has not provided this Court with any other evidence or arguments as to why it
was error for the district court to accept Mr. Johnson’s testimony regarding the correct
salary for a non-owner employee doing the same work as Husband. 	See Rule 12-
213(A)(4) NMRA; see also Aspen Landscaping, Inc. v. Longford Homes of N.M., Inc.,
2004-NMCA-063, ¶ 28, 135 N.M. 607, 92 P.3d 53 (explaining that a party
challenging a finding for lack of substantial evidence must refer to “all of the
evidence, both favorable and unfavorable, followed by an explanation of why the
unfavorable evidence does not amount to substantial evidence, such as is necessary
to inform both the appellee and the Court of the true nature of the appellant’s
arguments”).
{26} 	On appeal, Wife merely asserts that her version of this factual position was
correct and that the district court should have adopted it. 	See Lahr v. Lahr, 1970-
NMSC-165, ¶ 2, 82 N.M. 223, 478 P.2d 551 (“We presume the correctness of the
judgment of the [district] court who had the advantage of evaluating the demeanor of
the parties and of the witnesses.”). In such a situation, it is well established that the

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district court was free to accept Husband’s evidence and reject Wife’s evidence. Jay
Walton Enters., Inc. v. Rio Grande Oil Co., 1987-NMCA-070, ¶ 26, 106 N.M. 55, 738
P.2d 927 (“Where evidence is conflicting and the court adopts findings on a disputed
issue, the fact that there may have been other evidence upon which the court could
have adopted a different finding does not constitute error.”). “[W]e will not reweigh
the evidence nor substitute our judgment for that of the fact finder.” 	Las Cruces
Prof’l Fire Fighters v. City of Las Cruces, 1997-NMCA-044, ¶ 12, 123 N.M. 329, 940
P.2d 177. On appeal, Wife has failed to meet her burden in this regard. As a result,
we conclude that substantial evidence supported the district court’s determination that
Husband’s ownership interest in IPR was his sole and separate property and that his
reasonable salary for the field work performed for IPR was $8,333 per month. Salary
paid in excess of $8,333 per month must also be treated as separate property
distributions to Husband even though they were originally reported as W-2 income.
Both sources of Husband’s income are appropriately included in the determination of
spousal support.
CONCLUSION
{27} 	For the foregoing reasons, the district court’s findings and determinations of
spousal support to Wife are reversed in part and affirmed in part. We remand this
matter to the district court for further proceedings consistent with this Opinion.

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{28} 	IT IS SO ORDERED.
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TIMOTHY L. GARCIA, Judge
WE CONCUR:
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CYNTHIA A. FRY, Judge
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J. MILES HANISEE, Judge