Pass-Through Income in Florida Family Law Cases: What Zold v. Zold Means for Business Owners, Spouses, and K-1 Income
A business can make money, but that does not automatically mean the owner personally received that money. Corporate income is money earned by the company. Personal income is money actually paid to, distributed to, or otherwise made available to the owner. In a traditional corporation, often called a C corporation, the company generally pays its own income tax first, and the owner may later pay personal tax if money is paid out as wages, bonuses, or dividends. That is non-pass-through taxation. In many closely held businesses, however, the company is taxed differently. Partnerships, S-corporations, and many LLCs often “pass through” income to the owners for tax purposes. While the income is only taxed once (as opposed to taxing the corporation on its income and again when the income is paid to shareholders), the business owner may have to report business income on a personal tax return even if the company kept the money in the business and did not pay the income out to the owner. This is where Florida family law gets complicated: taxable income is not always the same thing as income available to pay alimony and child support, and Florida case law tells courts how to separate the two.
Pass-through income can be one of the most misunderstood financial issues in a Florida divorce, alimony case, child support case, or attorney fee hearing. A spouse may receive a Schedule K-1 showing hundreds of thousands—or even millions—of dollars in taxable income. The other spouse may argue that the number should be counted as income for purposes of paying alimony or child support. The business-owner spouse may respond that the income was never actually distributed and was retained inside the company.
Both sides may be partly right. That is why these cases require serious legal and tax analysis.
Florida’s leading case is Zold v. Zold, 911 So. 2d 1222 (Fla. 2005). Zold does not say that all pass-through income counts as income. It also does not say that pass-through income can always be ignored. Instead, Zold requires the court to determine whether the retained pass-through income was actually available to the spouse or whether it was retained for legitimate business purposes.
At Mockler Leiner Law, P.A., we have extensive trial experience involving Zold income issues, closely held businesses, S corporations, partnerships, LLCs, shareholder disputes, K-1 income, retained earnings, tax distributions, and complex financial divorce cases. These are not simple “plug the tax return into the worksheet” cases. They require lawyers who understand family law, business law, federal tax law, corporate accounting, trial evidence, and financial strategy.
Richard Mockler brings a corporate background, substantial complex litigation experience, and a Master of Laws in Taxation to these cases. That combination matters when the issue is not just what a tax return says—but what the tax return actually means.
For related issues, see our pages on divorce for business owners, high net worth divorce, child support, alimony, and equitable distribution.
The Key Question Under Zold: Was the Income Available?
Zold involved pass-through income from an S corporation. For federal tax purposes, an S corporation generally does not pay income tax at the corporate level. Instead, the corporation’s income, deductions, losses, and credits pass through to the shareholders. The shareholder may owe income tax on the shareholder’s allocated share of corporate income even if the corporation does not distribute that money to the shareholder.
That creates a family law problem.
A spouse’s tax return may show a large amount of S corporation income. But the spouse may not have received that income as cash. The corporation may have retained the money for payroll, debt service, inventory, equipment, reserves, expansion, receivables, capital requirements, or ordinary business operations.
Zold recognizes the distinction between:
Taxable pass-through income, which may appear on a tax return;
Actual distributions, which are cash or property paid out to the shareholder;
Tax distributions, which may be paid to cover the shareholder’s tax liability from pass-through income;
Retained earnings or retained pass-through income, which remain inside the company;
Available income, which is what matters in Florida family law.
The Florida Supreme Court held that undistributed pass-through income that is retained for corporate purposes does not automatically count as income for support or fee purposes. But if the income is retained for a noncorporate purpose—such as shielding income from a spouse or manipulating support—then the court may treat it as available income.
That is the battle line in many Zold cases.
Why a K-1 Is Not the End of the Analysis
A Schedule K-1 is an important tax document. It reports a shareholder’s, partner’s, or member’s share of income, losses, deductions, credits, and other tax items. But a K-1 is not the same thing as a paycheck.
In a divorce case, a K-1 may show income that:
Was distributed to the spouse;
Was partially distributed;
Was distributed only to cover taxes;
Was retained inside the company;
Was reinvested into the business;
Was needed for working capital;
Was restricted by loan covenants, shareholder agreements, operating agreements, or corporate law;
Was allocated to the spouse for tax purposes but never actually received.
That is why Zold rejects a bright-line rule.
The court cannot simply say, “The K-1 says $500,000, so income is $500,000.” The court also cannot simply say, “The money stayed in the company, so it never counts.” The court must examine the facts.
The Zold Factors Florida Courts Consider
Zold requires a case-by-case factual analysis. The shareholder-spouse generally has the burden to prove that undistributed pass-through income was retained for legitimate corporate purposes.
The court may consider:
The spouse’s ownership interest in the company;
The spouse’s control over distributions;
Whether the spouse can force distributions;
Whether other shareholders, members, partners, lenders, or governing documents limit distributions;
Whether Florida corporate law restricts distributions;
Whether the business needed the retained income for legitimate business purposes;
Whether the company historically retained income in the same way before the divorce;
Whether the company changed distribution practices after litigation began;
Whether retained earnings were used for payroll, inventory, debt, reserves, expansion, equipment, or cash flow;
Whether the company paid personal expenses for the spouse;
Whether the company made shareholder loans, related-party payments, or irregular distributions;
Whether the retention of income appears designed to reduce support, alimony, or attorney’s fees.
The issue is not ownership alone. A majority owner or sole owner may have more control, but ownership does not automatically mean every dollar of company income is available for personal use. Conversely, a minority owner may have limited control, but actual distributions, guaranteed payments, wages, personal expenses paid by the company, or recurring shareholder payments may still be income.
Federal Tax Law: Why Pass-Through Income Creates Confusion
Pass-through entities are common in closely held business divorce cases. These may include:
S corporations;
Partnerships;
Limited liability companies taxed as partnerships;
Limited liability companies taxed as S corporations;
Professional associations;
Closely held professional practices;
Family-owned businesses;
Real estate holding companies;
Investment entities.
The confusion starts because federal tax law and Florida family law ask different questions.
Federal tax law asks: Who must report the income and pay the tax?
Florida family law asks: What income is actually available for support, alimony, fees, and financial ability?
Those are not the same question.
S Corporations
An S corporation is generally a pass-through entity for federal tax purposes. The corporation files an informational tax return, and the shareholder receives a Schedule K-1. The shareholder is taxed on the shareholder’s pro rata share of S corporation income whether or not that income is actually distributed.
That means a shareholder may owe tax on income retained by the corporation.
For family law purposes, the court must separate:
W-2 wages paid to the shareholder-employee;
Bonuses;
Actual distributions;
Tax distributions;
Personal expenses paid by the company;
Shareholder loans;
Retained income;
Noncash tax allocations;
Legitimate business retentions.
An S corporation shareholder who works in the business may also receive wages. Those wages are usually income. Distributions may also be income. But undistributed pass-through income requires a Zold analysis.
Partnerships and LLCs Taxed as Partnerships
Partnerships and many LLCs are also pass-through entities. A partner or LLC member may be taxed on a distributive share of income regardless of whether that income is distributed.
In family law, this can create the same problem. The tax return may show income. The money may not have been distributed. The business may have retained it. Or the entity may have distributed cash to cover taxes or to provide actual spendable income.
A court must determine what was truly available.
Shareholder Basis and Distributions
Tax law also treats basis differently than family law treats income.
For tax purposes, pass-through income may increase a shareholder’s or partner’s basis. Distributions may reduce basis. Some distributions may not be taxable if they are within basis. But that does not mean the distribution is irrelevant in family law.
A distribution can be tax-free for federal tax purposes and still be actual cash received by a spouse. Family law courts care about financial reality. A nontaxable distribution may still matter for child support, alimony, attorney’s fees, lifestyle, ability to pay, and equitable distribution.
This is one reason these cases require lawyers who understand both tax concepts and courtroom evidence.
Tax Distributions: The Issue That Can Decide the Case
Many pass-through entities make “tax distributions.” These are distributions made to owners so they can pay the tax caused by pass-through income.
For example, assume a shareholder is allocated $1,000,000 of pass-through income. The company may distribute $350,000 to the shareholder so the shareholder can pay the federal income tax generated by that allocation. The remaining $650,000 may stay in the business.
How should that be treated in a Florida family law case?
The answer may depend on the facts and the appellate district. Some cases have treated tax distributions as unavailable because the money is effectively committed to paying taxes. More recently, the Sixth District in J.E.J. v. S.A.B., 416 So. 3d 1186 (Fla. 6th DCA 2025) distinguished retained income from actual distributions and explained that actual tax distributions may be counted as gross income, with the corresponding income tax liability deducted when calculating net income.
That distinction matters.
If a court counts a tax distribution as gross income but also deducts the actual tax liability, the result may be very different from counting the full K-1 income as available income. The correct calculation requires careful attention to:
Gross pass-through income;
Actual cash distributions;
Tax distributions;
Federal tax liability;
State tax liability, if applicable;
Self-employment tax, where applicable;
Payroll taxes;
Net income under Florida child support law;
Actual ability to pay.
A sloppy calculation can overstate or understate income by a large amount.
Zold and Child Support
Florida child support begins with gross income and net income. Business income can include income from self-employment, partnerships, independent contracts, and closely held corporations. But business income is generally calculated after deducting ordinary and necessary expenses required to produce income.
In a Zold case, the child support issue becomes more complicated because the court must determine what income is actually available to the parent.
For child support purposes, the court may need to analyze:
W-2 wages;
Owner compensation;
Guaranteed payments;
Actual distributions;
Tax distributions;
Personal expenses paid by the business;
Retained earnings;
Ordinary and necessary business expenses;
Depreciation and other noncash deductions;
Add-backs for personal expenses or discretionary payments;
The owner’s real cash flow;
Whether retained pass-through income was kept for business purposes or personal manipulation.
The wrong child support number can affect both parents and the child. Overstating income may create an impossible obligation. Understating income may deprive the child of proper support. The goal is not to punish a business owner or ignore business income. The goal is to get the number right.
For more on support issues, visit our child support page.
Zold and Alimony
Alimony requires analysis of need and ability to pay. Pass-through income can be central to both sides of that analysis.
If a spouse owns a business, the other spouse may argue that the owner has far greater ability to pay than the salary suggests. That may be true if the owner receives distributions, controls company cash, runs personal expenses through the business, or uses retained income to manipulate the divorce case.
But it may be false if the income is only taxable paper income, retained inside the company for legitimate reasons, or needed to keep the business alive.
Alimony litigation involving pass-through income often requires examination of:
Historical distributions;
Salary history;
Company cash flow;
Retained earnings;
Debt obligations;
Payroll needs;
Capital expenditure requirements;
Expansion plans;
Industry norms;
Personal expenses paid by the company;
Tax returns and financial statements;
Whether income changed after the divorce filing;
Whether the business owner has discretion to increase distributions.
A business owner should not be ordered to pay alimony based on money that cannot be distributed without harming the company. But a spouse should not be deprived of alimony because income was artificially trapped inside a company.
That is the Zold problem.
For related issues, see our alimony and high net worth divorce pages.
Zold and Attorney’s Fees
Florida family courts may consider the parties’ relative financial resources when awarding attorney’s fees. In business-owner divorce cases, pass-through income may be relevant to whether one spouse has a superior ability to pay fees.
But again, the issue is availability.
If the business-owner spouse has real access to company funds, discretionary distributions, shareholder loans, personal expenses paid by the company, or retained income that is not needed for corporate purposes, the court may view the spouse as having greater financial ability. If the income is retained for legitimate business purposes, counting it as available may distort the financial picture.
Attorney’s fee hearings involving Zold income can become highly technical. The court may need to determine whether claimed business restrictions are real, whether the owner’s financial presentation is credible, and whether the tax return accurately reflects spendable income.
Zold and Equitable Distribution: Avoiding the Double Dip
Pass-through income issues can also overlap with equitable distribution.
For example, a spouse may argue that retained earnings should be included in the value of the business. At the same time, the spouse may argue that the same retained earnings should be treated as income available for support. That can create a double-counting problem.
Florida courts have cautioned against treating retained earnings as both a business asset and spendable income without proper analysis. Retained earnings are not simply a personal savings account. They may be part of the business’s value, working capital, or accounting structure.
In a divorce involving a closely held company, the court may need to distinguish:
The value of the ownership interest;
The income stream generated by the business;
The shareholder’s compensation;
The shareholder’s actual distributions;
Retained earnings;
Company cash;
Business debt;
Nonmarital ownership interests;
Marital appreciation;
Whether business income is being counted twice.
This is where family law, corporate law, accounting, valuation, and tax law collide.
For related issues, see our pages on equitable distribution, divorce for business owners, and shareholder and partner disputes.
Evidence That Matters in a Zold Case
A Zold case is won or lost with evidence. General testimony that “the company needed the money” may not be enough. A court needs proof.
Important evidence may include:
Personal tax returns;
Business tax returns;
Schedule K-1s;
Form 1120-S returns;
Form 1065 partnership returns;
W-2s;
1099s;
General ledgers;
Profit and loss statements;
Balance sheets;
Cash flow statements;
Bank records;
Shareholder agreements;
Operating agreements;
Buy-sell agreements;
Loan agreements;
Debt covenants;
Minutes and resolutions;
Distribution history;
Payroll records;
Accounts receivable and accounts payable;
Inventory records;
Capital expenditure records;
Business valuation reports;
Forensic accounting reports;
Evidence of personal expenses paid by the company.
The business-owner spouse may need to prove legitimate corporate purpose. The non-owner spouse may need to expose whether retained income is actually being used as a shield.
Both sides need a lawyer who knows what documents matter and how to use them at trial.
Red Flags in Pass-Through Income Cases
Certain facts may signal that pass-through income requires deeper analysis.
Red flags include:
The business owner reports large K-1 income but claims very low income in the divorce;
Distributions stopped or decreased after separation;
The company pays personal expenses;
The owner takes shareholder loans instead of income;
The business retains unusually large amounts of income without explanation;
The owner controls whether distributions are made;
Other shareholders receive distributions but the spouse claims income is unavailable;
The business has no clear reason for retaining income;
The company’s documents do not support the claimed restrictions;
The owner’s lifestyle is inconsistent with reported income;
The owner’s financial affidavit does not match tax returns or bank records;
The company makes payments to related parties;
The company accelerates expenses or delays income;
The business claims large depreciation or noncash deductions;
The owner uses tax distributions as a shield without proving actual tax liability.
These facts do not automatically prove manipulation. But they justify careful discovery and trial preparation.
What Business Owners Need to Prove
A business owner facing a Zold issue should be prepared to prove why income was retained and why it was not available for personal use.
That may require evidence showing:
The company needed working capital;
The business had debt obligations;
Distributions were restricted by law, agreement, lender, or cash flow;
The company historically retained similar income;
The retained income was used for payroll, inventory, equipment, expansion, taxes, or operations;
The owner could not unilaterally force distributions;
Other owners were treated consistently;
The retained funds were not used for personal expenses;
The business would be harmed by forced distributions.
A strong Zold defense is not built on vague testimony. It is built on documents, credible explanations, and a financial story that holds together.
What Non-Owner Spouses Need to Prove
A non-owner spouse should not assume that a K-1 automatically establishes available income. But a non-owner spouse should also not accept “the company kept the money” as the end of the analysis.
The non-owner spouse may need to investigate:
Whether the owner controls the company;
Whether distributions are discretionary;
Whether the company has a history of distributions;
Whether distribution practices changed after divorce became likely;
Whether retained income is excessive compared to business needs;
Whether personal expenses are paid through the company;
Whether shareholder loans are disguised income;
Whether other owners receive distributions;
Whether the owner’s lifestyle exceeds stated income;
Whether business expenses are personal or inflated;
Whether tax distributions exceed actual tax liability;
Whether the business documents support the claimed restrictions.
A well-presented Zold case does not merely point to the K-1. It shows why the income was actually available or why the claimed business purpose is not credible.
Why Richard Mockler’s Tax and Corporate Background Matters
Pass-through income cases are not ordinary support cases. They require understanding the intersection of Florida family law, federal tax law, corporate governance, accounting, valuation, and trial advocacy.
Richard Mockler has a corporate background and a Master of Laws in Taxation. He has handled complex financial litigation, high-stakes business disputes, and family law cases involving closely held companies, business owners, and sophisticated income issues. Mockler Leiner Law, P.A. has extensive trial experience involving Zold income disputes and the correct calculation of business-owner income.
That experience matters because these cases often involve:
Complex tax returns;
K-1 income;
Corporate distributions;
Partnership income;
LLC operating agreements;
Shareholder disputes;
Closely held business valuation;
Forensic accounting;
Hidden income claims;
Tax distributions;
Retained earnings;
Support and alimony calculations;
Trial testimony from business owners, accountants, and experts.
When the issue is pass-through income, the lawyer must understand more than the child support guidelines. The lawyer must understand the business.
Visit Richard J. Mockler’s attorney profile to learn more about his background.
Common Mistakes in Zold Cases
Mistake 1: Treating K-1 Income as Automatically Available
A K-1 is not a paycheck. It is a tax reporting document. It may reflect taxable income that was never distributed.
Mistake 2: Ignoring Actual Distributions
Actual cash distributions usually matter. A spouse cannot ignore money actually received merely because it is labeled a distribution instead of wages.
Mistake 3: Failing to Deduct Real Tax Liability
If tax distributions are counted, tax liability must be analyzed carefully. Gross income and net income are not the same.
Mistake 4: Ignoring Corporate Restrictions
Florida corporate law, operating agreements, shareholder agreements, lender restrictions, and business realities may limit distributions.
Mistake 5: Letting the Business Owner Hide Behind the Company
Zold protects legitimate corporate retention. It does not protect manipulation, artificial income suppression, or using the business as a shield.
Mistake 6: Double Counting Retained Earnings
Retained earnings may affect business value. They may or may not be available income. Counting the same money twice can distort the case.
Mistake 7: Not Using Experts Correctly
Forensic accountants, valuation experts, tax professionals, and business experts can be critical. But the lawyer must know how to frame the issue and present the evidence.
Practical Example
Assume a spouse owns 60% of an S corporation. The spouse’s K-1 shows $900,000 in pass-through income. The spouse received:
$220,000 in W-2 wages;
$150,000 in tax distributions;
$50,000 in ordinary cash distributions;
$480,000 retained inside the company.
The other spouse argues income is $1,120,000: wages plus all K-1 income.
The business-owner spouse argues income is only $220,000: wages only.
Both positions may be wrong.
The court may need to determine:
Whether the $150,000 tax distribution is gross income;
What actual tax liability resulted from the K-1 income;
Whether the $50,000 distribution is income;
Whether the $480,000 retained income was needed for legitimate corporate purposes;
Whether the owner controlled the decision to retain income;
Whether the retention was consistent with historical practice;
Whether the company paid personal expenses;
Whether the retained funds were actually used for business needs.
The correct income number may be very different from either side’s first position.
Frequently Asked Questions About Pass-Through Income in Florida Family Law
Does Florida count K-1 income for child support?
Sometimes. K-1 income may count if it reflects income actually available to the parent. But under Zold, undistributed pass-through income retained for legitimate business purposes is not automatically income for child support.
Does Zold apply only to S corporations?
Zold involved an S corporation, but the same type of pass-through income issue can arise with partnerships, LLCs, and other closely held entities. The analysis focuses on availability, control, distributions, tax treatment, and business purpose.
Who has the burden of proof under Zold?
When pass-through income is disputed, the shareholder-spouse generally has the burden to prove that undistributed pass-through income was retained for corporate purposes rather than personal or noncorporate purposes.
Are tax distributions income?
Actual tax distributions may matter because they are real distributions. But the corresponding tax liability also matters. A court should not count tax distributions without analyzing the taxes they were intended to pay.
Can a business owner avoid support by keeping money in the company?
No. Zold does not allow a business owner to hide income. If income is retained for a noncorporate purpose, or if the company is used to manipulate support, the court may treat the income as available.
Can a spouse simply use the K-1 number as income?
No. A K-1 is evidence, but it is not the whole analysis. The court must determine whether the income was actually distributed, available, retained for legitimate business purposes, or retained for improper reasons.
Why do these cases require tax knowledge?
Federal tax law may tax a shareholder or partner on income that was never distributed. Florida family law must determine actual available income. Understanding that difference is essential to correct support, alimony, and fee calculations.
Bottom Line: Zold Cases Are About Financial Reality
Pass-through income cases are not about labels. They are about financial reality.
A K-1 may show taxable income. The company may retain money. The owner may receive distributions. Tax distributions may be paid. Retained earnings may be part of business value. Personal expenses may be buried in the books. A business owner may have real control—or no meaningful control at all.
Zold requires the court to sort it out.
Mockler Leiner Law, P.A. represents clients in complex Florida family law cases involving business owners, closely held companies, K-1 income, pass-through entities, high net worth divorce, child support, alimony, equitable distribution, and appeals. We bring courtroom experience, business litigation experience, tax knowledge, and trial strategy to cases where getting the number right matters.
If your Florida family law case involves pass-through income, K-1 income, an S corporation, partnership, LLC, closely held business, or a Zold dispute, contact Mockler Leiner Law, P.A.
Call (813) 331-5699 or contact Mockler Leiner Law, P.A. online to schedule a consultation.
