1035-00002 · Calderwood & Harkness LLP · Internal Memoranda & Analyses

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is prepared in anticipation of litigation and is intended solely for use by attorneys and staff of this firm in connection with the representation of Marguerite D. Fonseca. Do not copy, distribute, or disclose any portion of this memorandum to any person outside the firm without the express written authorization of the supervising attorney.

TO: Devon Archer, Lead Associate

FROM: Nadia Petrov, Associate

DATE: May 15, 2023

RE: California Child Support Guideline Analysis — Fonseca v. Medrano, Case No. 22STFL09847, Superior Court of California, County of Los Angeles

MATTER NO.: 1035-00002

CLIENT: Marguerite D. Fonseca

I. Executive Summary

The purpose of this memorandum is to analyze the California child support guideline calculation under Family Code section 4055 et seq. as applied to the facts of Fonseca v. Medrano. The analysis concerns support obligations for the parties' two minor children: Isabela Luz Fonseca-Medrano (date of birth: February 11, 2017; age 6) and Mateo Elías Fonseca-Medrano (date of birth: August 29, 2019; age 3). Both children currently reside primarily with our client, Marguerite D. Fonseca ("Ms. Fonseca" or "Petitioner"), and the parties are in the process of negotiating a permanent custody and visitation schedule.

Bottom-line conclusion: At the anticipated timeshare of approximately 63.6% to Ms. Fonseca and 36.4% to Rafael J. Medrano ("Mr. Medrano" or "Respondent"), and using gross monthly incomes of $72,500 for Ms. Fonseca and $28,333 for Mr. Medrano, the California guideline child support amount is $1,274 per month payable by Ms. Fonseca to Mr. Medrano.

It bears noting that despite Ms. Fonseca's substantially higher gross income — she earns approximately 71.9% of the parties' combined income — the guideline support amount is moderated significantly by her majority custodial timeshare. The California guideline formula, codified at Family Code section 4055, is specifically designed to account for the fact that a parent who has the children for a greater proportion of the time is already making direct expenditures on the children's daily needs during that custodial time. As a result, the higher-earning parent who also has the children more of the time pays less in guideline support than would otherwise be expected if custody were split equally or if the lower-earning parent held majority custody. At a hypothetical 50/50 timeshare, for example, guideline support would be approximately $2,350 per month — nearly double the amount yielded at the proposed 63.6% split.

To assist Devon and the team in preparing for settlement strategy discussions, this memorandum runs DissoMaster scenarios at multiple timeshare percentages, ranging from 50% to 75% for Ms. Fonseca, to illustrate the sensitivity of the guideline amount to the timeshare variable. These scenarios are presented in tabular form in Section IV below and discussed in detail in Section V.

This analysis is preliminary and subject to revision upon receipt of the forensic income analysis being prepared by Harold K. Yamamoto, CPA/ABV/CFF, of Yamamoto Brace & Liu, LLP ("YBL") regarding Mr. Medrano's income through his loan-out entity, Medrano Visuals, LLC. Additionally, the custody evaluation ordered by stipulation from Dr. Elena V. Sorensen, Psy.D., may alter the final timeshare assumptions, which would necessitate recalculation of the guideline amount.

II. Applicable Legal Framework

A. California Family Code § 4055 — The Guideline Formula

California employs a statewide uniform guideline for the determination of child support, codified at Family Code section 4050 et seq. The Legislature enacted the uniform guideline to promote consistency and predictability in child support calculations across all California counties, and to ensure that children benefit from both parents' financial resources in a manner that reflects both the parents' respective incomes and the actual division of custodial time.

The central formula is set forth in Family Code section 4055(a), which provides:

CS = K [HN – (H%)(TN)]

Each variable in the formula is defined as follows:

• CS = the child support amount to be paid by the higher-earning parent (or, in cases where the lower-earning parent has less than 50% custodial time, the amount owed to the custodial parent).

• K = the amount of both parents' combined income that is to be allocated for child support. The value of K is a function of two sub-variables: the total number of children subject to the support order and the percentage of custodial time allocated to the higher earner. For two children, the K multiplier is determined in accordance with section 4055(b)(3), which provides the applicable schedule. The K factor increases as the higher earner's custodial time decreases, reflecting the greater share of direct expenditures borne by the parent with whom the children primarily reside.

• HN = the high earner's net monthly disposable income, calculated in accordance with Family Code sections 4058 through 4060.

• H% = the approximate percentage of time that the high earner has, or will have, primary physical responsibility for the children compared to the other parent. This is typically calculated on the basis of overnights per year expressed as a percentage of 365 days.

• TN = the combined total net monthly disposable income of both parents.

The calculation of K warrants further elaboration. Under section 4055(b), K is computed by the following formula:

K = 1 + H% ÷ (the K allocation factor for the applicable number of children)

For two children, the base allocation factor under section 4055(b)(3) yields a K value that is higher than for one child but lower than for three or more children, reflecting the incremental costs of supporting additional children. The precise K value is computed within the DissoMaster software using the statutory tables and the specific H% input.

The critical feature of this formula for the present matter is this: the formula inherently reduces the support obligation of the higher-earning parent when that parent also has majority custodial time. The H% variable, representing the high earner's custodial percentage, operates as a credit within the formula. As H% increases — that is, as the higher earner spends more time with the children — the term (H%)(TN) increases, which in turn reduces the bracketed quantity [HN – (H%)(TN)], and thus reduces the child support amount CS. This reflects the sound policy principle that a parent who has the children in their care for a greater share of the time is already expending resources on the children's day-to-day needs (housing, food, utilities, transportation, and similar costs), and therefore the support transfer to the other parent should be correspondingly reduced.

In Ms. Fonseca's case, because she is both the higher earner and the majority custodial parent, the formula operates to moderate what would otherwise be a very substantial support obligation given the income disparity between the parties.

B. Family Code § 4058 — Determination of Annual Gross Income

Family Code section 4058 establishes the definition of "annual gross income" for purposes of the guideline calculation. The definition is broadly construed to capture all sources of economic benefit to a parent, consistent with the legislative intent that the guideline reflect the parties' true financial capacity.

Under section 4058(a), annual gross income includes, but is not limited to:

• Salary and wages;

• Bonuses and commissions;

• Dividend and interest income;

• Rental income;

• Income from self-employment or operation of a business;

• Social Security benefits, workers' compensation benefits, disability insurance benefits, and unemployment insurance benefits;

• Spousal support received from a person not a party to the current proceeding;

• All other forms of compensation, including equity-based compensation such as restricted stock units ("RSUs"), stock options, and similar instruments.

The inclusion of equity-based compensation is particularly relevant to Ms. Fonseca's income determination, as a significant portion of her annual compensation consists of RSUs vesting under the Luminos Entertainment Group equity plan.

Under section 4058(b), the court has discretion to consider the income of a parent who is self-employed or who receives income through a closely held business entity. In such cases, the court may examine business records, tax returns, and other financial documentation to determine the parent's actual income from the enterprise. This provision is directly relevant to Mr. Medrano, whose income flows through his single-member limited liability company, Medrano Visuals, LLC.

Additionally, the court retains the authority under section 4058 to impute income to a parent based on that parent's earning capacity where the parent's actual income is variable, unclear, or appears to be suppressed. The court may consider the parent's work history, education, professional skills, job opportunities in the relevant market, and other factors in determining earning capacity. This imputation authority is significant in the present matter because Mr. Medrano's income as a freelance cinematographer and director of photography is inherently project-based and fluctuates substantially from year to year.

C. Family Code § 4057 — Presumption of Correctness / Rebuttal

Family Code section 4057(a) establishes that the guideline amount calculated under section 4055 is presumptively correct. This presumption has significant practical consequences: neither party may deviate from the guideline amount simply by asserting that a different amount would be more equitable or appropriate. The party seeking deviation bears the burden of demonstrating that the guideline amount would be unjust or inappropriate under the circumstances.

Section 4057(b) enumerates specific factors that may rebut the presumption and justify a deviation from the guideline amount. These factors include, among others:

• That the parent being ordered to pay support has an extraordinarily high income and the guideline amount exceeds the children's reasonable needs;

• That a parent is not contributing to the needs of the children commensurate with their custodial time;

• That application of the guideline would be unjust or inappropriate due to special circumstances in the particular case;

• That the children have special medical or educational needs that warrant an adjustment.

Any deviation from the guideline must be supported by a written declaration of reasons, and the court must make specific findings on the record justifying the departure. A detailed analysis of potential deviation arguments in this matter will be addressed in a separate memorandum if the team determines that pursuing a deviation is strategically advisable.

D. DissoMaster Software

California family courts universally rely on the DissoMaster software program to calculate guideline child support (and spousal support). DissoMaster applies the Family Code section 4055 formula using the specific income, tax, and timeshare inputs provided by the parties, and generates a recommended guideline support amount. The program incorporates current federal and California state tax rates, FICA and SDI withholding, and other mandatory deductions to compute each parent's net monthly disposable income before applying the guideline formula.

All scenarios presented in this memorandum were run using DissoMaster version current as of May 2023, incorporating the applicable 2023 federal and California state tax tables. The DissoMaster printout for the baseline scenario (63.6%/36.4% timeshare) is referenced as Appendix A and will be attached when the formal printout is generated.

III. Income Inputs

The accuracy of the guideline calculation depends critically on the income inputs used. This section sets forth the income figures for each party, the bases for those figures, and the relevant legal and factual considerations that may affect income determination at trial or in settlement negotiations.

A. Marguerite D. Fonseca — Petitioner / Client

Ms. Fonseca is employed by Luminos Entertainment Group, Inc. as Senior Vice President, Original Content Development. Luminos Entertainment Group is headquartered at 3200 West Olive Avenue, Burbank, California 91505. Ms. Fonseca has held her current position since 2019 and has been employed by Luminos (or its predecessor entities) since 2014.

Ms. Fonseca's total annual compensation is composed of three primary components:

1. Annual Base Salary: $485,000 per year, as reflected in Ms. Fonseca's current offer letter and Luminos compensation records on file with the firm.

2. Average Annual Discretionary Bonus: $210,000, calculated as a three-year average of the discretionary bonuses paid to Ms. Fonseca in calendar years 2020, 2021, and 2022. The individual annual bonus amounts varied over this period, reflecting the discretionary nature of the bonus and fluctuations in Luminos's financial performance, but the three-year average of $210,000 represents a reasonable and commonly accepted method for smoothing variable compensation in guideline calculations.

3. Annual RSU Vesting: Approximately $175,000 per year, based on the vesting schedule under the Luminos Entertainment Group, Inc. Equity Incentive Plan. Ms. Fonseca was granted RSUs in connection with her promotion to SVP and has subsequent annual grants. The $175,000 figure reflects the approximate value of shares vesting annually at current market prices.

Total annual compensation: $485,000 + $210,000 + $175,000 = $870,000.

Gross monthly income: $870,000 ÷ 12 = $72,500 per month.

Treatment of RSUs. Under Family Code section 4058(a), RSU vesting constitutes income for purposes of the guideline calculation. The court will include the value of vesting RSUs in gross income. The appropriate approach is to include the annualized vesting value, which smooths out the timing effects of RSU grants that may vest in tranches. If RSU values fluctuate materially due to changes in the price of Luminos stock, the court retains discretion to adjust the income figure to reflect a more representative value. For the present analysis, we have used the current annualized vesting value of $175,000, which is consistent with the vesting schedule and recent Luminos stock price levels. Should the stock price change significantly before the support hearing, this figure will need to be updated.

Treatment of Discretionary Bonus. Discretionary bonuses are includable in gross income under section 4058(a). Because the bonus is discretionary and varies from year to year, the standard approach — and the approach most likely to be adopted by the court — is to use a multi-year average. The three-year averaging period is widely accepted in California family courts and has been endorsed by appellate authority. See, e.g., In re Marriage of Riddle (2005) 125 Cal.App.4th 1075, 1084 (approving use of multi-year averaging for variable compensation); In re Marriage of Loh (2001) 93 Cal.App.4th 325, 332–333 (noting that averaging is appropriate where income varies from year to year). We have employed a three-year average of $210,000, which we believe is defensible and reasonable.

Tax Filing Status and Deductions. For DissoMaster purposes, Ms. Fonseca files as head of household, as she is unmarried and maintains the principal residence for the minor children for more than half the year. Standard federal and California state withholdings and deductions are applied in the DissoMaster calculation. Additionally, Ms. Fonseca carries employer-sponsored health insurance for the two minor children through the Luminos plan, which is underwritten by Veridian Health Insurance Co. The cost of dependent coverage under this plan is a deduction from gross income for guideline purposes under Family Code section 4059. The specific monthly premium amount attributable to dependent coverage needs to be confirmed (see Section VII.D below) and entered as a deduction in DissoMaster.

B. Rafael J. Medrano — Respondent

Mr. Medrano is a freelance cinematographer and director of photography working in the motion picture and television industry. He has approximately eighteen years of professional experience and has earned credits on a number of nationally distributed productions, including both feature films and episodic television.

Mr. Medrano operates through a loan-out entity, Medrano Visuals, LLC, a California limited liability company. As is customary in the entertainment industry, Mr. Medrano's engagements are contracted through the LLC, and his professional income flows through the entity before being distributed to him personally. This structure has significant implications for income determination under the guideline, as discussed below.

Mr. Medrano's income is inherently variable and project-based. As a freelance cinematographer, his earnings depend on the number and scope of productions on which he is engaged in any given year. Some years involve multiple high-budget productions, while other years may include fewer or lower-budget projects, resulting in significant fluctuations in annual income.

Based on a preliminary review of Mr. Medrano's individual tax returns and the available business records of Medrano Visuals, LLC for the three most recent tax years (2020, 2021, and 2022), the three-year average annual income is approximately $340,000. This figure represents the average of net distributions or compensation from the LLC to Mr. Medrano, after deduction of legitimate business expenses. A complete forensic income analysis is being prepared by Harold K. Yamamoto, CPA/ABV/CFF, of the accounting firm Yamamoto Brace & Liu, LLP ("YBL"), and the engagement is pending completion. The preliminary $340,000 figure may be revised upon receipt of YBL's report.

Imputed gross monthly income: $340,000 ÷ 12 ≈ $28,333 per month.

Imputation Issues Under Family Code § 4058(b). Because Mr. Medrano's income flows through his loan-out entity and varies significantly from year to year, the court may find it necessary or appropriate to impute income to Mr. Medrano based on his earning capacity rather than relying solely on his most recent year's actual income. The three-year average of $340,000 represents a reasonable and commonly accepted method for determining earning capacity in the case of a parent with variable income. Several factors support the use of this figure or a figure in this range:

• Mr. Medrano has maintained a consistent presence in the industry throughout the relevant period, working on multiple productions each year.

• His acceptance of a seven-week on-location shoot in Vancouver, British Columbia in early 2023 — which was, in fact, the precipitating event for the parties' separation and the filing of this matter — demonstrates continued active engagement in the industry and suggests earning capacity consistent with or exceeding the three-year average.

• Mr. Medrano's professional reputation and industry relationships position him to continue earning at a comparable level in the foreseeable future.

If Mr. Medrano contends that his income has declined or will decline below the three-year average, the burden will fall on him to substantiate that claim with credible evidence. In the absence of such evidence, the court is likely to adopt the three-year average or a figure close to it.

Self-Employment Deductions. Legitimate business expenses of Medrano Visuals, LLC will reduce gross income for guideline purposes. These may include equipment costs, insurance, business travel, professional dues, and similar expenses that are ordinary and necessary for the operation of a freelance cinematography business. However, it is not uncommon for self-employed individuals — and particularly those who operate through single-member LLCs — to run personal expenses through the business entity, thereby artificially deflating reported business income. YBL's forensic analysis will identify any personal expenses improperly characterized as business deductions and add those amounts back to Mr. Medrano's gross income for support purposes.

Tax Filing Status. Mr. Medrano files as single or possibly as head of household if he claims the children as dependents during his custodial time. The parties' tax returns do not clearly resolve this question, and Mr. Medrano's filing status needs to be confirmed through discovery or informal inquiry. For DissoMaster purposes, the filing status assumption materially affects the net disposable income calculation, and we have provisionally assumed single filing status for Mr. Medrano pending confirmation. If Mr. Medrano files as head of household, his net disposable income would be modestly higher due to the more favorable tax treatment, which could slightly increase the guideline support amount.

C. Combined Gross Monthly Income

The combined gross monthly income of the parties, based on the figures set forth above, is as follows:

Ms. Fonseca's share of the combined gross monthly income is $72,500 ÷ $100,833 ≈ 71.9%. Mr. Medrano's share is $28,333 ÷ $100,833 ≈ 28.1%. These proportional shares are relevant not only to the guideline calculation itself but also to the allocation of add-on expenses under Family Code section 4062, discussed in Section V.C below.

IV. Timeshare Inputs and Scenarios

The timeshare percentage — i.e., the proportion of custodial time allocated to each parent — is a critical variable in the guideline formula. As discussed in Section II.A above, the formula credits the higher-earning parent for time spent with the children, and even modest changes in the timeshare can produce meaningful shifts in the guideline support amount. This section sets forth the current temporary custody arrangement, the client's proposed timeshare, and a range of DissoMaster scenarios at varying timeshare percentages to assist in settlement planning.

A. Current Status — Temporary Custody Order

The temporary custody order entered on May 30, 2023 by the Honorable Sandra T. Alvarez in Department 7 of the Los Angeles County Superior Court, Stanley Mosk Courthouse, establishes a 60/40 timeshare in favor of Ms. Fonseca during the pendency of this matter. Under the temporary order, Ms. Fonseca has primary physical custody of both children, with Mr. Medrano exercising visitation on alternating weekends from Friday evening to Monday morning, one midweek overnight, and alternating holidays in accordance with the Los Angeles County standard holiday schedule.

This arrangement is expressly temporary and does not constitute a determination of the permanent custodial schedule. The final timeshare will depend on the outcome of custody evaluation, the parties' negotiations, and, if necessary, a contested hearing on custody and visitation. Accordingly, the guideline analysis in this memorandum focuses primarily on the anticipated timeshare under Ms. Fonseca's proposed custody arrangement, while also modeling the temporary 60/40 arrangement and other potential outcomes.

B. Anticipated Timeshare — Client's Proposed Arrangement

Ms. Fonseca's preferred custodial arrangement, which will be proposed in the custody phase of this matter, is as follows:

• During the school year (approximately 42 weeks, or 295 days): Ms. Fonseca would have 65% of custodial time, and Mr. Medrano would have 35%.

• During the summer break (approximately 10 weeks, or 70 days): The children would be on a 50/50 schedule, alternating weeks with each parent.

This arrangement reflects Ms. Fonseca's desire to maintain stability for the children during the school year — Isabela is enrolled at Ridgeview Academy and Mateo will begin preschool at the same institution in the fall — while allowing Mr. Medrano substantial and meaningful custodial time, particularly during the summer months when his professional schedule is often more flexible.

Calculation of Effective Annual Timeshare:

• School year (295 days): 65% to Fonseca = approximately 192 overnights; 35% to Medrano = approximately 103 overnights.

• Summer (70 days): 50/50 = 35 overnights each.

• Annual totals: Fonseca = 192 + 35 = 232 overnights; Medrano = 103 + 35 = 133 overnights (total: 365 overnights).

• Effective annual timeshare: Fonseca: 232 ÷ 365 ≈ 63.6%; Medrano: 133 ÷ 365 ≈ 36.4%.

The 63.6%/36.4% split is the timeshare used for the baseline guideline calculation in this memorandum.

C. DissoMaster Scenario Table

To illustrate the sensitivity of the guideline support amount to changes in the timeshare, the following table presents DissoMaster results at seven different timeshare allocations. All scenarios use the same income inputs: $72,500 per month gross for Ms. Fonseca and $28,333 per month gross for Mr. Medrano, with two minor children subject to the support order. Tax assumptions are consistent across all scenarios.

Note: Amounts marked with "~" are estimates based on DissoMaster projections. The Scenario 4 figure of $1,274 is the precise DissoMaster output at the proposed timeshare and income inputs. All figures are subject to revision if income inputs change.

Key observations from the scenario analysis:

1. Direction of payment is constant across all scenarios. In every scenario modeled, Ms. Fonseca is the obligor (payor) and Mr. Medrano is the obligee (payee). This is because Ms. Fonseca's income is sufficiently higher than Mr. Medrano's that, even at a 75/25 timeshare, the formula still requires a transfer from Fonseca to Medrano.

2. As Ms. Fonseca's timeshare increases, the guideline support payable by her decreases significantly. This inverse relationship between custodial time and support obligation is a built-in feature of the section 4055 formula. At a 50/50 split, guideline support is approximately $2,350 per month. At the proposed 63.6% split, it is $1,274 per month — a reduction of approximately $1,076 per month, or nearly 46%. At a 75/25 split, guideline support drops to approximately $475 per month. The formula credits the custodial parent for the direct expenditures incurred during custodial time (housing the children, feeding them, transporting them, and meeting their day-to-day needs), and correspondingly reduces the transfer payment to the non-custodial parent.

3. Even a modest shift of a few percentage points in either direction has a meaningful impact on the guideline amount. At the income levels involved in this case, a shift of approximately 3 to 5 percentage points in the timeshare translates to a change of approximately $100 to $200 per month in the guideline support amount. For example, the difference between the proposed 63.6% and a 65% timeshare is approximately $99 per month ($1,274 vs. ~$1,175). Over a full year, that differential amounts to approximately $1,188. This sensitivity underscores the importance of the timeshare determination — and, by extension, the custody evaluation — to the financial outcome in this case.

4. At the proposed 63.6%/36.4% split, guideline support is $1,274 per month payable by Fonseca to Medrano. This is the figure we recommend using as the baseline for settlement discussions.

V. Analysis of the Guideline Amount at Proposed Timeshare

A. DissoMaster Output at 63.6% / 36.4%

The following is a detailed breakdown of the DissoMaster calculation at the proposed timeshare of 63.6% for Ms. Fonseca and 36.4% for Mr. Medrano:

Gross Monthly Incomes:

• Ms. Fonseca's gross monthly income: $72,500

• Mr. Medrano's imputed gross monthly income: $28,333

• Combined gross monthly income: $100,833

Tax Adjustments and Net Disposable Income:

The DissoMaster program applies the following adjustments to convert gross monthly income to net monthly disposable income for each parent:

• Federal income tax withholding at the applicable marginal rates for each parent's income level and filing status (head of household for Ms. Fonseca; single for Mr. Medrano, pending confirmation).

• California state income tax withholding at the applicable marginal rates.

• FICA (Social Security and Medicare) contributions, including the additional Medicare tax applicable to income above the statutory threshold.

• California State Disability Insurance (SDI) contributions.

• Mandatory retirement contributions, if any (none identified for either party at this time).

• Health insurance premiums: The cost of dependent health coverage under the Luminos/Veridian Health Insurance Co. plan is deducted from Ms. Fonseca's gross income. The specific monthly premium amount for dependent coverage is to be confirmed; a provisional estimate has been used in the DissoMaster run.

• Union dues or mandatory professional association dues, if any (to be confirmed for Mr. Medrano, who may be a member of IATSE or a similar guild).

After application of these adjustments, the estimated net monthly disposable incomes are as follows (subject to refinement upon confirmation of deduction amounts):

• Ms. Fonseca's estimated net monthly disposable income: approximately $43,500 (estimated)

• Mr. Medrano's estimated net monthly disposable income: approximately $20,200 (estimated)

• Combined total net monthly disposable income (TN): approximately $63,700 (estimated)

Application of the § 4055 Formula:

With the net disposable income figures and the timeshare inputs, the DissoMaster applies the section 4055 formula as follows:

• HN (high earner's net monthly disposable income) = Ms. Fonseca's net disposable income ≈ $43,500

• H% (high earner's custodial time) = 63.6% (0.636)

• TN (combined total net monthly disposable income) ≈ $63,700

• K = calculated per section 4055(b)(3) for two children, incorporating the H% variable

• CS = K [HN – (H%)(TN)] = K [$43,500 – (0.636)($63,700)] = K [$43,500 – $40,513] = K [$2,987]

The K factor, as computed by DissoMaster for two children at a 63.6% high earner timeshare, when applied to the bracketed amount, yields a guideline child support amount of:

CS = $1,274 per month, payable by Ms. Fonseca to Mr. Medrano.

The full DissoMaster printout reflecting these inputs and calculations will be attached as Appendix A upon generation.

B. Why the Higher Earner Pays Despite Majority Custody

It may seem counterintuitive that Ms. Fonseca — who has the children for nearly two-thirds of the time — is required to pay child support to Mr. Medrano. The reason lies in the design and policy objectives of the guideline formula.

The California guideline formula is structured so that the higher-earning parent always transfers some income to the lower-earning parent for the children's benefit, regardless of the custodial arrangement. This transfer reflects the fundamental policy that children are entitled to benefit from both parents' incomes in a manner that approximates the standard of living the children would have enjoyed had the family remained intact. Even when the higher-earning parent has majority physical custody, the children spend a substantial portion of their time with the lower-earning parent, and that parent must be able to provide adequately for the children during custodial time. The guideline support payment helps ensure that the children's standard of living is reasonably comparable in both households.

However — and this is the critical point for Ms. Fonseca's case — the amount of the transfer is substantially reduced compared to what it would be if the lower-earning parent had majority custody or if custody were split equally. At a 50/50 timeshare, the guideline amount would be approximately $2,350 per month. At the proposed 63.6% timeshare for Ms. Fonseca, the amount is $1,274 per month — a reduction of approximately $1,076 per month, or roughly 46%. This reduction reflects the formula's recognition that Ms. Fonseca is already bearing the direct costs of supporting the children during her custodial time, and that those direct expenditures effectively reduce the amount that needs to be transferred to Mr. Medrano.

In practical terms, this means that securing and maintaining majority custodial time is not only a priority for Ms. Fonseca from a parenting perspective, but also carries significant financial implications for the guideline support calculation.

C. Add-On Expenses (Family Code § 4062)

It is important to note that the guideline amount of $1,274 per month represents base child support only. The guideline amount does not include mandatory or discretionary add-on expenses, which are addressed separately under Family Code section 4062.

Mandatory add-on expenses under section 4062(a) include:

1. Childcare costs related to employment or reasonably necessary education or training for employment. If either parent incurs childcare costs — such as after-school care, babysitting during work hours, or similar expenses — those costs are added to the base guideline support and apportioned between the parents.

2. Unreimbursed healthcare costs for the children. Medical, dental, vision, orthodontic, psychological, and other healthcare costs that are not covered by insurance are mandatory add-ons.

Discretionary add-on expenses under section 4062(b) include:

1. Costs of education at private schools. Both children are enrolled at or expected to enroll at Ridgeview Academy, a private school in the greater Los Angeles area. Current annual tuition is $32,400 for Isabela (first grade) and $26,800 for Mateo (preschool program), for a combined annual tuition of $59,200 (or approximately $4,933 per month). Private school tuition is a discretionary add-on, meaning the court has discretion to order it as an additional support obligation, but is not required to do so.

2. Extracurricular activities. These may include sports, music lessons, tutoring, summer camps, and similar activities. Isabela currently participates in ballet and swimming lessons; Mateo is not yet enrolled in formal extracurricular activities but may be in the near future.

3. Travel expenses for visitation. If the custodial schedule requires significant travel — for example, if Mr. Medrano accepts out-of-state or international work engagements — the travel costs associated with transporting the children may be treated as a discretionary add-on.

Add-on expenses are typically apportioned in proportion to each parent's respective income or by separate agreement of the parties. Given the parties' respective income shares (approximately 72% Fonseca / 28% Medrano), the default allocation would require Ms. Fonseca to bear approximately 72% of qualifying add-on expenses and Mr. Medrano to bear approximately 28%. A rounded allocation of 70%/30% would be a natural negotiating position and may be more palatable to both parties.

Recommendation: We recommend addressing tuition and extracurricular cost-sharing as a separate negotiation item, distinct from the base guideline support figure. Folding these costs into the base support number creates complexity and may obscure the parties' respective obligations. A separate cost-sharing provision — whether in a stipulated order or a marital settlement agreement — is cleaner, more transparent, and easier to enforce and modify as the children's needs change over time. We suggest proposing a 70%/30% allocation of private school tuition, unreimbursed medical expenses, and agreed-upon extracurricular activities, with a mechanism for advance notice and consent before either parent enrolls a child in a new activity or expense exceeding a specified threshold (e.g., $500 per activity per year).

VI. Preliminary Considerations for Deviation

A detailed analysis of potential deviation arguments will be prepared in a separate memorandum if the team determines that pursuing a deviation from guideline is strategically appropriate. However, a brief overview of the relevant considerations is warranted here.

Family Code section 4057(b) permits deviation from the presumptively correct guideline amount where the circumstances of the case warrant a different result. The party seeking deviation bears the burden of proof, and the court must make specific findings supporting any departure from the guideline.

In Ms. Fonseca's case, a potential basis for seeking a downward deviation in base support exists if Mr. Medrano can be persuaded to agree to shoulder a disproportionately higher share of extracurricular costs or educational expenses. For example, if Mr. Medrano were willing to assume 40% or 50% of private school tuition (as opposed to his 28% income share), a corresponding downward adjustment in the base guideline support could be negotiated as part of a global settlement. The economic effect would be revenue-neutral or near-neutral for Mr. Medrano — he would receive less in base support but bear a smaller net burden for the children's expenses — while Ms. Fonseca would benefit from a lower monthly transfer payment.

Any such deviation would need to be:

• Supported by a declaration of reasons filed with the court;

• Reviewed and approved by the court as consistent with the best interests of the children;

• Structured so as not to leave the children's needs unmet — the court will not approve a deviation that results in inadequate support for the children's reasonable needs.

We will explore these possibilities further in settlement discussions and prepare a separate deviation analysis memorandum if warranted.

VII. Open Issues and Next Steps

Several issues remain open and will require follow-up action before the guideline analysis can be finalized. This section identifies each issue, the responsible party, and the anticipated timeline.

A. Forensic Income Analysis

Harold K. Yamamoto, CPA/ABV/CFF, of the accounting firm Yamamoto Brace & Liu, LLP ("YBL"), has been retained to perform a forensic income analysis of Mr. Medrano's earnings through Medrano Visuals, LLC. The engagement is at a flat fee of $14,750, which has been approved by the client. The engagement scope letter was transmitted to Mr. Yamamoto on May 22, 2023 (see separate correspondence on file).

The YBL engagement encompasses the following:

• Review of Medrano Visuals, LLC tax returns (federal and California) for tax years 2020, 2021, and 2022;

• Review of Mr. Medrano's individual tax returns for the same period;

• Analysis of business bank statements and accounting records for Medrano Visuals, LLC;

• Identification of personal expenses improperly characterized as business deductions;

• Calculation of Mr. Medrano's actual and/or imputed income for each of the three tax years and a three-year average;

• Preparation of a written expert report suitable for use in court proceedings.

Once the YBL report is received, the income figures used in this memorandum should be reviewed and, if the three-year average differs materially from the $340,000 figure used here, the DissoMaster scenarios should be re-run with updated income inputs. Devon should calendar a follow-up date approximately six weeks from the engagement date (on or about July 3, 2023) to check on the status of the YBL report.

B. Custody Evaluation Impact

The custody evaluation by Dr. Elena V. Sorensen, Psy.D., was ordered by stipulation of the parties on July 14, 2023. The evaluation fee is $18,500, to be split equally at $9,250 per party. Dr. Sorensen is expected to conduct interviews with both parents, observe parent-child interactions, review relevant records, and prepare a written report with recommendations regarding legal and physical custody and a proposed timeshare schedule.

Dr. Sorensen's recommendations will significantly inform the final timeshare determination. If her recommendation differs from the proposed 63.6%/36.4% split — whether in favor of a more even split or a more lopsided one — the guideline calculation will need to be re-run at the recommended timeshare. As the scenario table in Section IV.C demonstrates, even a few percentage points of change in the timeshare can shift the guideline amount by $100 to $200 per month or more.

We anticipate receiving Dr. Sorensen's report within approximately 90 to 120 days of the commencement of the evaluation. Devon should ensure that the client is prepared for and cooperates fully with the evaluation process.

C. Tax Filing Status Confirmation

As noted in Section III.B above, Mr. Medrano's tax filing status needs to be confirmed. Whether he files as single or as head of household affects his net disposable income calculation in DissoMaster and, consequently, the guideline support amount. If Mr. Medrano claims one or both children as dependents on his tax return (for example, by agreement or by alternating years), his filing status and available deductions may differ from our provisional assumption.

We request that Devon Archer seek this information through formal discovery (interrogatories and/or request for production of tax returns) or, if preferable, through an informal meet-and-confer with Mr. Medrano's counsel, Gwendolyn R. Kwan of Kwan, Delacroix & Samuels LLP, located at 4400 Riverside Drive, Suite 700, Burbank, California 91505. If the information can be obtained informally, it will save the time and expense of formal discovery on this narrow point.

D. Employer Health Insurance Deduction

We need to confirm the specific monthly cost of dependent health insurance coverage under Ms. Fonseca's employer-sponsored plan with Luminos Entertainment Group / Veridian Health Insurance Co. The amount attributable to dependent coverage (i.e., the incremental cost of covering the two children, as distinct from Ms. Fonseca's own coverage) is deducted from Ms. Fonseca's gross income for guideline purposes under Family Code section 4059. This deduction reduces Ms. Fonseca's net disposable income and, consequently, the guideline support amount.

Devon should request that the client provide a current benefits statement or pay stub reflecting the dependent health insurance deduction. If the information is not readily available, we can obtain it directly from Luminos's human resources department with the client's authorization.

VIII. Conclusion

Based on the analysis set forth in this memorandum, the following conclusions and recommendations are offered:

1. Guideline Amount. At the proposed timeshare of 63.6% (Fonseca) / 36.4% (Medrano), using gross monthly incomes of $72,500 for Ms. Fonseca and $28,333 for Mr. Medrano, for a combined gross monthly income of $100,833, the California guideline child support for two minor children is $1,274 per month payable by Ms. Fonseca to Mr. Medrano. This figure is calculated using the Family Code section 4055 formula as implemented in the DissoMaster software program.

2. Presumptive Correctness. The guideline amount of $1,274 per month is presumptively correct under Family Code section 4057(a) and will serve as the starting point for any negotiation or court determination. Deviation from this amount is permissible only upon a showing of circumstances enumerated in section 4057(b), supported by a written declaration of reasons and approved by the court.

3. Timeshare Sensitivity. The scenario analysis presented in Section IV demonstrates that the timeshare percentage is a critical variable in the guideline calculation. Even modest changes in the timeshare allocation shift the support amount by several hundred dollars per month. This underscores the strategic importance of the custody evaluation and the negotiations surrounding the permanent custodial schedule. Specifically:

• At a 50/50 timeshare, guideline support would be approximately $2,350/month — an increase of approximately $1,076 over the proposed-timeshare figure.

• At a 65% timeshare for Ms. Fonseca, guideline support would be approximately $1,175/month — a decrease of approximately $99 from the proposed-timeshare figure.

• At a 70% timeshare for Ms. Fonseca, guideline support would be approximately $825/month.

4. Settlement Baseline. We recommend using the $1,274 per month figure as the baseline for settlement discussions with Mr. Medrano's counsel, while exploring the possibility of a downward deviation if favorable extracurricular cost-sharing terms can be negotiated. A potential structure — in which Mr. Medrano accepts a larger share of private school tuition and extracurricular costs in exchange for a slightly higher base support payment, or vice versa — should be evaluated in consultation with the client.

5. Pending Updates. This analysis will be updated upon receipt of the following:

• The YBL forensic income report (expected within approximately six to eight weeks);

• The Dr. Sorensen custody evaluation report (expected within approximately 90 to 120 days);

• Confirmation of Mr. Medrano's tax filing status and dependent coverage insurance costs.

I am available to discuss this memorandum and the scenarios at Devon's convenience. Please let me know if any additional analysis or scenarios would be helpful for the settlement strategy conference.

Appendix A: DissoMaster printout at 63.6%/36.4% timeshare (to be attached upon generation of formal printout)

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This memorandum is protected by the attorney-client privilege and the work product doctrine. It is prepared in anticipation of litigation and is intended solely for use by attorneys and staff of this firm in connection with the representation of Marguerite D. Fonseca. Do not copy, distribute, or disclose any portion of this memorandum to any person outside the firm without the express written authorization of the supervising attorney.
TO: Devon Archer, Lead Associate
FROM: Nadia Petrov, Associate
DATE: May 15, 2023
RE: California Child Support Guideline Analysis — Fonseca v. Medrano, Case No. 22STFL09847, Superior Court of California, County of Los Angeles
MATTER NO.: 1035-00002
CLIENT: Marguerite D. Fonseca
I. Executive Summary
The purpose of this memorandum is to analyze the California child support guideline calculation under Family Code section 4055 et seq. as applied to the facts of Fonseca v. Medrano. The analysis concerns support obligations for the parties' two minor children: Isabela Luz Fonseca-Medrano (date of birth: February 11, 2017; age 6) and Mateo Elías Fonseca-Medrano (date of birth: August 29, 2019; age 3). Both children currently reside primarily with our client, Marguerite D. Fonseca ("Ms. Fonseca" or "Petitioner"), and the parties are in the process of negotiating a permanent custody and visitation schedule.
Bottom-line conclusion: At the anticipated timeshare of approximately 63.6% to Ms. Fonseca and 36.4% to Rafael J. Medrano ("Mr. Medrano" or "Respondent"), and using gross monthly incomes of $72,500 for Ms. Fonseca and $28,333 for Mr. Medrano, the California guideline child support amount is $1,274 per month payable by Ms. Fonseca to Mr. Medrano.
It bears noting that despite Ms. Fonseca's substantially higher gross income — she earns approximately 71.9% of the parties' combined income — the guideline support amount is moderated significantly by her majority custodial timeshare. The California guideline formula, codified at Family Code section 4055, is specifically designed to account for the fact that a parent who has the children for a greater proportion of the time is already making direct expenditures on the children's daily needs during that custodial time. As a result, the higher-earning parent who also has the children more of the time pays less in guideline support than would otherwise be expected if custody were split equally or if the lower-earning parent held majority custody. At a hypothetical 50/50 timeshare, for example, guideline support would be approximately $2,350 per month — nearly double the amount yielded at the proposed 63.6% split.
To assist Devon and the team in preparing for settlement strategy discussions, this memorandum runs DissoMaster scenarios at multiple timeshare percentages, ranging from 50% to 75% for Ms. Fonseca, to illustrate the sensitivity of the guideline amount to the timeshare variable. These scenarios are presented in tabular form in Section IV below and discussed in detail in Section V.
This analysis is preliminary and subject to revision upon receipt of the forensic income analysis being prepared by Harold K. Yamamoto, CPA/ABV/CFF, of Yamamoto Brace & Liu, LLP ("YBL") regarding Mr. Medrano's income through his loan-out entity, Medrano Visuals, LLC. Additionally, the custody evaluation ordered by stipulation from Dr. Elena V. Sorensen, Psy.D., may alter the final timeshare assumptions, which would necessitate recalculation of the guideline amount.
II. Applicable Legal Framework
A. California Family Code § 4055 — The Guideline Formula
California employs a statewide uniform guideline for the determination of child support, codified at Family Code section 4050 et seq. The Legislature enacted the uniform guideline to promote consistency and predictability in child support calculations across all California counties, and to ensure that children benefit from both parents' financial resources in a manner that reflects both the parents' respective incomes and the actual division of custodial time.
The central formula is set forth in Family Code section 4055(a), which provides:
CS = K [HN – (H%)(TN)]
Each variable in the formula is defined as follows:
• CS = the child support amount to be paid by the higher-earning parent (or, in cases where the lower-earning parent has less than 50% custodial time, the amount owed to the custodial parent).
• K = the amount of both parents' combined income that is to be allocated for child support. The value of K is a function of two sub-variables: the total number of children subject to the support order and the percentage of custodial time allocated to the higher earner. For two children, the K multiplier is determined in accordance with section 4055(b)(3), which provides the applicable schedule. The K factor increases as the higher earner's custodial time decreases, reflecting the greater share of direct expenditures borne by the parent with whom the children primarily reside.
• HN = the high earner's net monthly disposable income, calculated in accordance with Family Code sections 4058 through 4060.
• H% = the approximate percentage of time that the high earner has, or will have, primary physical responsibility for the children compared to the other parent. This is typically calculated on the basis of overnights per year expressed as a percentage of 365 days.
• TN = the combined total net monthly disposable income of both parents.
The calculation of K warrants further elaboration. Under section 4055(b), K is computed by the following formula:
K = 1 + H% ÷ (the K allocation factor for the applicable number of children)
For two children, the base allocation factor under section 4055(b)(3) yields a K value that is higher than for one child but lower than for three or more children, reflecting the incremental costs of supporting additional children. The precise K value is computed within the DissoMaster software using the statutory tables and the specific H% input.
The critical feature of this formula for the present matter is this: the formula inherently reduces the support obligation of the higher-earning parent when that parent also has majority custodial time. The H% variable, representing the high earner's custodial percentage, operates as a credit within the formula. As H% increases — that is, as the higher earner spends more time with the children — the term (H%)(TN) increases, which in turn reduces the bracketed quantity [HN – (H%)(TN)], and thus reduces the child support amount CS. This reflects the sound policy principle that a parent who has the children in their care for a greater share of the time is already expending resources on the children's day-to-day needs (housing, food, utilities, transportation, and similar costs), and therefore the support transfer to the other parent should be correspondingly reduced.
In Ms. Fonseca's case, because she is both the higher earner and the majority custodial parent, the formula operates to moderate what would otherwise be a very substantial support obligation given the income disparity between the parties.
B. Family Code § 4058 — Determination of Annual Gross Income
Family Code section 4058 establishes the definition of "annual gross income" for purposes of the guideline calculation. The definition is broadly construed to capture all sources of economic benefit to a parent, consistent with the legislative intent that the guideline reflect the parties' true financial capacity.
Under section 4058(a), annual gross income includes, but is not limited to:
• Salary and wages;
• Bonuses and commissions;
• Dividend and interest income;
• Rental income;
• Income from self-employment or operation of a business;
• Social Security benefits, workers' compensation benefits, disability insurance benefits, and unemployment insurance benefits;
• Spousal support received from a person not a party to the current proceeding;
• All other forms of compensation, including equity-based compensation such as restricted stock units ("RSUs"), stock options, and similar instruments.
The inclusion of equity-based compensation is particularly relevant to Ms. Fonseca's income determination, as a significant portion of her annual compensation consists of RSUs vesting under the Luminos Entertainment Group equity plan.
Under section 4058(b), the court has discretion to consider the income of a parent who is self-employed or who receives income through a closely held business entity. In such cases, the court may examine business records, tax returns, and other financial documentation to determine the parent's actual income from the enterprise. This provision is directly relevant to Mr. Medrano, whose income flows through his single-member limited liability company, Medrano Visuals, LLC.
Additionally, the court retains the authority under section 4058 to impute income to a parent based on that parent's earning capacity where the parent's actual income is variable, unclear, or appears to be suppressed. The court may consider the parent's work history, education, professional skills, job opportunities in the relevant market, and other factors in determining earning capacity. This imputation authority is significant in the present matter because Mr. Medrano's income as a freelance cinematographer and director of photography is inherently project-based and fluctuates substantially from year to year.
C. Family Code § 4057 — Presumption of Correctness / Rebuttal
Family Code section 4057(a) establishes that the guideline amount calculated under section 4055 is presumptively correct. This presumption has significant practical consequences: neither party may deviate from the guideline amount simply by asserting that a different amount would be more equitable or appropriate. The party seeking deviation bears the burden of demonstrating that the guideline amount would be unjust or inappropriate under the circumstances.
Section 4057(b) enumerates specific factors that may rebut the presumption and justify a deviation from the guideline amount. These factors include, among others:
• That the parent being ordered to pay support has an extraordinarily high income and the guideline amount exceeds the children's reasonable needs;
• That a parent is not contributing to the needs of the children commensurate with their custodial time;
• That application of the guideline would be unjust or inappropriate due to special circumstances in the particular case;
• That the children have special medical or educational needs that warrant an adjustment.
Any deviation from the guideline must be supported by a written declaration of reasons, and the court must make specific findings on the record justifying the departure. A detailed analysis of potential deviation arguments in this matter will be addressed in a separate memorandum if the team determines that pursuing a deviation is strategically advisable.
D. DissoMaster Software
California family courts universally rely on the DissoMaster software program to calculate guideline child support (and spousal support). DissoMaster applies the Family Code section 4055 formula using the specific income, tax, and timeshare inputs provided by the parties, and generates a recommended guideline support amount. The program incorporates current federal and California state tax rates, FICA and SDI withholding, and other mandatory deductions to compute each parent's net monthly disposable income before applying the guideline formula.
All scenarios presented in this memorandum were run using DissoMaster version current as of May 2023, incorporating the applicable 2023 federal and California state tax tables. The DissoMaster printout for the baseline scenario (63.6%/36.4% timeshare) is referenced as Appendix A and will be attached when the formal printout is generated.
III. Income Inputs
The accuracy of the guideline calculation depends critically on the income inputs used. This section sets forth the income figures for each party, the bases for those figures, and the relevant legal and factual considerations that may affect income determination at trial or in settlement negotiations.
A. Marguerite D. Fonseca — Petitioner / Client
Ms. Fonseca is employed by Luminos Entertainment Group, Inc. as Senior Vice President, Original Content Development. Luminos Entertainment Group is headquartered at 3200 West Olive Avenue, Burbank, California 91505. Ms. Fonseca has held her current position since 2019 and has been employed by Luminos (or its predecessor entities) since 2014.
Ms. Fonseca's total annual compensation is composed of three primary components:
1. Annual Base Salary: $485,000 per year, as reflected in Ms. Fonseca's current offer letter and Luminos compensation records on file with the firm.
2. Average Annual Discretionary Bonus: $210,000, calculated as a three-year average of the discretionary bonuses paid to Ms. Fonseca in calendar years 2020, 2021, and 2022. The individual annual bonus amounts varied over this period, reflecting the discretionary nature of the bonus and fluctuations in Luminos's financial performance, but the three-year average of $210,000 represents a reasonable and commonly accepted method for smoothing variable compensation in guideline calculations.
3. Annual RSU Vesting: Approximately $175,000 per year, based on the vesting schedule under the Luminos Entertainment Group, Inc. Equity Incentive Plan. Ms. Fonseca was granted RSUs in connection with her promotion to SVP and has subsequent annual grants. The $175,000 figure reflects the approximate value of shares vesting annually at current market prices.
Total annual compensation: $485,000 + $210,000 + $175,000 = $870,000.
Gross monthly income: $870,000 ÷ 12 = $72,500 per month.
Treatment of RSUs. Under Family Code section 4058(a), RSU vesting constitutes income for purposes of the guideline calculation. The court will include the value of vesting RSUs in gross income. The appropriate approach is to include the annualized vesting value, which smooths out the timing effects of RSU grants that may vest in tranches. If RSU values fluctuate materially due to changes in the price of Luminos stock, the court retains discretion to adjust the income figure to reflect a more representative value. For the present analysis, we have used the current annualized vesting value of $175,000, which is consistent with the vesting schedule and recent Luminos stock price levels. Should the stock price change significantly before the support hearing, this figure will need to be updated.
Treatment of Discretionary Bonus. Discretionary bonuses are includable in gross income under section 4058(a). Because the bonus is discretionary and varies from year to year, the standard approach — and the approach most likely to be adopted by the court — is to use a multi-year average. The three-year averaging period is widely accepted in California family courts and has been endorsed by appellate authority. See, e.g., In re Marriage of Riddle (2005) 125 Cal.App.4th 1075, 1084 (approving use of multi-year averaging for variable compensation); In re Marriage of Loh (2001) 93 Cal.App.4th 325, 332–333 (noting that averaging is appropriate where income varies from year to year). We have employed a three-year average of $210,000, which we believe is defensible and reasonable.
Tax Filing Status and Deductions. For DissoMaster purposes, Ms. Fonseca files as head of household, as she is unmarried and maintains the principal residence for the minor children for more than half the year. Standard federal and California state withholdings and deductions are applied in the DissoMaster calculation. Additionally, Ms. Fonseca carries employer-sponsored health insurance for the two minor children through the Luminos plan, which is underwritten by Veridian Health Insurance Co. The cost of dependent coverage under this plan is a deduction from gross income for guideline purposes under Family Code section 4059. The specific monthly premium amount attributable to dependent coverage needs to be confirmed (see Section VII.D below) and entered as a deduction in DissoMaster.
B. Rafael J. Medrano — Respondent
Mr. Medrano is a freelance cinematographer and director of photography working in the motion picture and television industry. He has approximately eighteen years of professional experience and has earned credits on a number of nationally distributed productions, including both feature films and episodic television.
Mr. Medrano operates through a loan-out entity, Medrano Visuals, LLC, a California limited liability company. As is customary in the entertainment industry, Mr. Medrano's engagements are contracted through the LLC, and his professional income flows through the entity before being distributed to him personally. This structure has significant implications for income determination under the guideline, as discussed below.
Mr. Medrano's income is inherently variable and project-based. As a freelance cinematographer, his earnings depend on the number and scope of productions on which he is engaged in any given year. Some years involve multiple high-budget productions, while other years may include fewer or lower-budget projects, resulting in significant fluctuations in annual income.
Based on a preliminary review of Mr. Medrano's individual tax returns and the available business records of Medrano Visuals, LLC for the three most recent tax years (2020, 2021, and 2022), the three-year average annual income is approximately $340,000. This figure represents the average of net distributions or compensation from the LLC to Mr. Medrano, after deduction of legitimate business expenses. A complete forensic income analysis is being prepared by Harold K. Yamamoto, CPA/ABV/CFF, of the accounting firm Yamamoto Brace & Liu, LLP ("YBL"), and the engagement is pending completion. The preliminary $340,000 figure may be revised upon receipt of YBL's report.
Imputed gross monthly income: $340,000 ÷ 12 ≈ $28,333 per month.
Imputation Issues Under Family Code § 4058(b). Because Mr. Medrano's income flows through his loan-out entity and varies significantly from year to year, the court may find it necessary or appropriate to impute income to Mr. Medrano based on his earning capacity rather than relying solely on his most recent year's actual income. The three-year average of $340,000 represents a reasonable and commonly accepted method for determining earning capacity in the case of a parent with variable income. Several factors support the use of this figure or a figure in this range:
• Mr. Medrano has maintained a consistent presence in the industry throughout the relevant period, working on multiple productions each year.
• His acceptance of a seven-week on-location shoot in Vancouver, British Columbia in early 2023 — which was, in fact, the precipitating event for the parties' separation and the filing of this matter — demonstrates continued active engagement in the industry and suggests earning capacity consistent with or exceeding the three-year average.
• Mr. Medrano's professional reputation and industry relationships position him to continue earning at a comparable level in the foreseeable future.
If Mr. Medrano contends that his income has declined or will decline below the three-year average, the burden will fall on him to substantiate that claim with credible evidence. In the absence of such evidence, the court is likely to adopt the three-year average or a figure close to it.
Self-Employment Deductions. Legitimate business expenses of Medrano Visuals, LLC will reduce gross income for guideline purposes. These may include equipment costs, insurance, business travel, professional dues, and similar expenses that are ordinary and necessary for the operation of a freelance cinematography business. However, it is not uncommon for self-employed individuals — and particularly those who operate through single-member LLCs — to run personal expenses through the business entity, thereby artificially deflating reported business income. YBL's forensic analysis will identify any personal expenses improperly characterized as business deductions and add those amounts back to Mr. Medrano's gross income for support purposes.
Tax Filing Status. Mr. Medrano files as single or possibly as head of household if he claims the children as dependents during his custodial time. The parties' tax returns do not clearly resolve this question, and Mr. Medrano's filing status needs to be confirmed through discovery or informal inquiry. For DissoMaster purposes, the filing status assumption materially affects the net disposable income calculation, and we have provisionally assumed single filing status for Mr. Medrano pending confirmation. If Mr. Medrano files as head of household, his net disposable income would be modestly higher due to the more favorable tax treatment, which could slightly increase the guideline support amount.
C. Combined Gross Monthly Income
The combined gross monthly income of the parties, based on the figures set forth above, is as follows:
Ms. Fonseca's share of the combined gross monthly income is $72,500 ÷ $100,833 ≈ 71.9%. Mr. Medrano's share is $28,333 ÷ $100,833 ≈ 28.1%. These proportional shares are relevant not only to the guideline calculation itself but also to the allocation of add-on expenses under Family Code section 4062, discussed in Section V.C below.
IV. Timeshare Inputs and Scenarios
The timeshare percentage — i.e., the proportion of custodial time allocated to each parent — is a critical variable in the guideline formula. As discussed in Section II.A above, the formula credits the higher-earning parent for time spent with the children, and even modest changes in the timeshare can produce meaningful shifts in the guideline support amount. This section sets forth the current temporary custody arrangement, the client's proposed timeshare, and a range of DissoMaster scenarios at varying timeshare percentages to assist in settlement planning.
A. Current Status — Temporary Custody Order
The temporary custody order entered on May 30, 2023 by the Honorable Sandra T. Alvarez in Department 7 of the Los Angeles County Superior Court, Stanley Mosk Courthouse, establishes a 60/40 timeshare in favor of Ms. Fonseca during the pendency of this matter. Under the temporary order, Ms. Fonseca has primary physical custody of both children, with Mr. Medrano exercising visitation on alternating weekends from Friday evening to Monday morning, one midweek overnight, and alternating holidays in accordance with the Los Angeles County standard holiday schedule.
This arrangement is expressly temporary and does not constitute a determination of the permanent custodial schedule. The final timeshare will depend on the outcome of custody evaluation, the parties' negotiations, and, if necessary, a contested hearing on custody and visitation. Accordingly, the guideline analysis in this memorandum focuses primarily on the anticipated timeshare under Ms. Fonseca's proposed custody arrangement, while also modeling the temporary 60/40 arrangement and other potential outcomes.
B. Anticipated Timeshare — Client's Proposed Arrangement
Ms. Fonseca's preferred custodial arrangement, which will be proposed in the custody phase of this matter, is as follows:
• During the school year (approximately 42 weeks, or 295 days): Ms. Fonseca would have 65% of custodial time, and Mr. Medrano would have 35%.
• During the summer break (approximately 10 weeks, or 70 days): The children would be on a 50/50 schedule, alternating weeks with each parent.
This arrangement reflects Ms. Fonseca's desire to maintain stability for the children during the school year — Isabela is enrolled at Ridgeview Academy and Mateo will begin preschool at the same institution in the fall — while allowing Mr. Medrano substantial and meaningful custodial time, particularly during the summer months when his professional schedule is often more flexible.
Calculation of Effective Annual Timeshare:
• School year (295 days): 65% to Fonseca = approximately 192 overnights; 35% to Medrano = approximately 103 overnights.
• Summer (70 days): 50/50 = 35 overnights each.
• Annual totals: Fonseca = 192 + 35 = 232 overnights; Medrano = 103 + 35 = 133 overnights (total: 365 overnights).
• Effective annual timeshare: Fonseca: 232 ÷ 365 ≈ 63.6%; Medrano: 133 ÷ 365 ≈ 36.4%.
The 63.6%/36.4% split is the timeshare used for the baseline guideline calculation in this memorandum.
C. DissoMaster Scenario Table
To illustrate the sensitivity of the guideline support amount to changes in the timeshare, the following table presents DissoMaster results at seven different timeshare allocations. All scenarios use the same income inputs: $72,500 per month gross for Ms. Fonseca and $28,333 per month gross for Mr. Medrano, with two minor children subject to the support order. Tax assumptions are consistent across all scenarios.
Note: Amounts marked with "~" are estimates based on DissoMaster projections. The Scenario 4 figure of $1,274 is the precise DissoMaster output at the proposed timeshare and income inputs. All figures are subject to revision if income inputs change.
Key observations from the scenario analysis:
1. Direction of payment is constant across all scenarios. In every scenario modeled, Ms. Fonseca is the obligor (payor) and Mr. Medrano is the obligee (payee). This is because Ms. Fonseca's income is sufficiently higher than Mr. Medrano's that, even at a 75/25 timeshare, the formula still requires a transfer from Fonseca to Medrano.
2. As Ms. Fonseca's timeshare increases, the guideline support payable by her decreases significantly. This inverse relationship between custodial time and support obligation is a built-in feature of the section 4055 formula. At a 50/50 split, guideline support is approximately $2,350 per month. At the proposed 63.6% split, it is $1,274 per month — a reduction of approximately $1,076 per month, or nearly 46%. At a 75/25 split, guideline support drops to approximately $475 per month. The formula credits the custodial parent for the direct expenditures incurred during custodial time (housing the children, feeding them, transporting them, and meeting their day-to-day needs), and correspondingly reduces the transfer payment to the non-custodial parent.
3. Even a modest shift of a few percentage points in either direction has a meaningful impact on the guideline amount. At the income levels involved in this case, a shift of approximately 3 to 5 percentage points in the timeshare translates to a change of approximately $100 to $200 per month in the guideline support amount. For example, the difference between the proposed 63.6% and a 65% timeshare is approximately $99 per month ($1,274 vs. ~$1,175). Over a full year, that differential amounts to approximately $1,188. This sensitivity underscores the importance of the timeshare determination — and, by extension, the custody evaluation — to the financial outcome in this case.
4. At the proposed 63.6%/36.4% split, guideline support is $1,274 per month payable by Fonseca to Medrano. This is the figure we recommend using as the baseline for settlement discussions.
V. Analysis of the Guideline Amount at Proposed Timeshare
A. DissoMaster Output at 63.6% / 36.4%
The following is a detailed breakdown of the DissoMaster calculation at the proposed timeshare of 63.6% for Ms. Fonseca and 36.4% for Mr. Medrano:
Gross Monthly Incomes:
• Ms. Fonseca's gross monthly income: $72,500
• Mr. Medrano's imputed gross monthly income: $28,333
• Combined gross monthly income: $100,833
Tax Adjustments and Net Disposable Income:
The DissoMaster program applies the following adjustments to convert gross monthly income to net monthly disposable income for each parent:
• Federal income tax withholding at the applicable marginal rates for each parent's income level and filing status (head of household for Ms. Fonseca; single for Mr. Medrano, pending confirmation).
• California state income tax withholding at the applicable marginal rates.
• FICA (Social Security and Medicare) contributions, including the additional Medicare tax applicable to income above the statutory threshold.
• California State Disability Insurance (SDI) contributions.
• Mandatory retirement contributions, if any (none identified for either party at this time).
• Health insurance premiums: The cost of dependent health coverage under the Luminos/Veridian Health Insurance Co. plan is deducted from Ms. Fonseca's gross income. The specific monthly premium amount for dependent coverage is to be confirmed; a provisional estimate has been used in the DissoMaster run.
• Union dues or mandatory professional association dues, if any (to be confirmed for Mr. Medrano, who may be a member of IATSE or a similar guild).
After application of these adjustments, the estimated net monthly disposable incomes are as follows (subject to refinement upon confirmation of deduction amounts):
• Ms. Fonseca's estimated net monthly disposable income: approximately $43,500 (estimated)
• Mr. Medrano's estimated net monthly disposable income: approximately $20,200 (estimated)
• Combined total net monthly disposable income (TN): approximately $63,700 (estimated)
Application of the § 4055 Formula:
With the net disposable income figures and the timeshare inputs, the DissoMaster applies the section 4055 formula as follows:
• HN (high earner's net monthly disposable income) = Ms. Fonseca's net disposable income ≈ $43,500
• H% (high earner's custodial time) = 63.6% (0.636)
• TN (combined total net monthly disposable income) ≈ $63,700
• K = calculated per section 4055(b)(3) for two children, incorporating the H% variable
• CS = K [HN – (H%)(TN)] = K [$43,500 – (0.636)($63,700)] = K [$43,500 – $40,513] = K [$2,987]
The K factor, as computed by DissoMaster for two children at a 63.6% high earner timeshare, when applied to the bracketed amount, yields a guideline child support amount of:
CS = $1,274 per month, payable by Ms. Fonseca to Mr. Medrano.
The full DissoMaster printout reflecting these inputs and calculations will be attached as Appendix A upon generation.
B. Why the Higher Earner Pays Despite Majority Custody
It may seem counterintuitive that Ms. Fonseca — who has the children for nearly two-thirds of the time — is required to pay child support to Mr. Medrano. The reason lies in the design and policy objectives of the guideline formula.
The California guideline formula is structured so that the higher-earning parent always transfers some income to the lower-earning parent for the children's benefit, regardless of the custodial arrangement. This transfer reflects the fundamental policy that children are entitled to benefit from both parents' incomes in a manner that approximates the standard of living the children would have enjoyed had the family remained intact. Even when the higher-earning parent has majority physical custody, the children spend a substantial portion of their time with the lower-earning parent, and that parent must be able to provide adequately for the children during custodial time. The guideline support payment helps ensure that the children's standard of living is reasonably comparable in both households.
However — and this is the critical point for Ms. Fonseca's case — the amount of the transfer is substantially reduced compared to what it would be if the lower-earning parent had majority custody or if custody were split equally. At a 50/50 timeshare, the guideline amount would be approximately $2,350 per month. At the proposed 63.6% timeshare for Ms. Fonseca, the amount is $1,274 per month — a reduction of approximately $1,076 per month, or roughly 46%. This reduction reflects the formula's recognition that Ms. Fonseca is already bearing the direct costs of supporting the children during her custodial time, and that those direct expenditures effectively reduce the amount that needs to be transferred to Mr. Medrano.
In practical terms, this means that securing and maintaining majority custodial time is not only a priority for Ms. Fonseca from a parenting perspective, but also carries significant financial implications for the guideline support calculation.
C. Add-On Expenses (Family Code § 4062)
It is important to note that the guideline amount of $1,274 per month represents base child support only. The guideline amount does not include mandatory or discretionary add-on expenses, which are addressed separately under Family Code section 4062.
Mandatory add-on expenses under section 4062(a) include:
1. Childcare costs related to employment or reasonably necessary education or training for employment. If either parent incurs childcare costs — such as after-school care, babysitting during work hours, or similar expenses — those costs are added to the base guideline support and apportioned between the parents.
2. Unreimbursed healthcare costs for the children. Medical, dental, vision, orthodontic, psychological, and other healthcare costs that are not covered by insurance are mandatory add-ons.
Discretionary add-on expenses under section 4062(b) include:
1. Costs of education at private schools. Both children are enrolled at or expected to enroll at Ridgeview Academy, a private school in the greater Los Angeles area. Current annual tuition is $32,400 for Isabela (first grade) and $26,800 for Mateo (preschool program), for a combined annual tuition of $59,200 (or approximately $4,933 per month). Private school tuition is a discretionary add-on, meaning the court has discretion to order it as an additional support obligation, but is not required to do so.
2. Extracurricular activities. These may include sports, music lessons, tutoring, summer camps, and similar activities. Isabela currently participates in ballet and swimming lessons; Mateo is not yet enrolled in formal extracurricular activities but may be in the near future.
3. Travel expenses for visitation. If the custodial schedule requires significant travel — for example, if Mr. Medrano accepts out-of-state or international work engagements — the travel costs associated with transporting the children may be treated as a discretionary add-on.
Add-on expenses are typically apportioned in proportion to each parent's respective income or by separate agreement of the parties. Given the parties' respective income shares (approximately 72% Fonseca / 28% Medrano), the default allocation would require Ms. Fonseca to bear approximately 72% of qualifying add-on expenses and Mr. Medrano to bear approximately 28%. A rounded allocation of 70%/30% would be a natural negotiating position and may be more palatable to both parties.
Recommendation: We recommend addressing tuition and extracurricular cost-sharing as a separate negotiation item, distinct from the base guideline support figure. Folding these costs into the base support number creates complexity and may obscure the parties' respective obligations. A separate cost-sharing provision — whether in a stipulated order or a marital settlement agreement — is cleaner, more transparent, and easier to enforce and modify as the children's needs change over time. We suggest proposing a 70%/30% allocation of private school tuition, unreimbursed medical expenses, and agreed-upon extracurricular activities, with a mechanism for advance notice and consent before either parent enrolls a child in a new activity or expense exceeding a specified threshold (e.g., $500 per activity per year).
VI. Preliminary Considerations for Deviation
A detailed analysis of potential deviation arguments will be prepared in a separate memorandum if the team determines that pursuing a deviation from guideline is strategically appropriate. However, a brief overview of the relevant considerations is warranted here.
Family Code section 4057(b) permits deviation from the presumptively correct guideline amount where the circumstances of the case warrant a different result. The party seeking deviation bears the burden of proof, and the court must make specific findings supporting any departure from the guideline.
In Ms. Fonseca's case, a potential basis for seeking a downward deviation in base support exists if Mr. Medrano can be persuaded to agree to shoulder a disproportionately higher share of extracurricular costs or educational expenses. For example, if Mr. Medrano were willing to assume 40% or 50% of private school tuition (as opposed to his 28% income share), a corresponding downward adjustment in the base guideline support could be negotiated as part of a global settlement. The economic effect would be revenue-neutral or near-neutral for Mr. Medrano — he would receive less in base support but bear a smaller net burden for the children's expenses — while Ms. Fonseca would benefit from a lower monthly transfer payment.
Any such deviation would need to be:
• Supported by a declaration of reasons filed with the court;
• Reviewed and approved by the court as consistent with the best interests of the children;
• Structured so as not to leave the children's needs unmet — the court will not approve a deviation that results in inadequate support for the children's reasonable needs.
We will explore these possibilities further in settlement discussions and prepare a separate deviation analysis memorandum if warranted.
VII. Open Issues and Next Steps
Several issues remain open and will require follow-up action before the guideline analysis can be finalized. This section identifies each issue, the responsible party, and the anticipated timeline.
A. Forensic Income Analysis
Harold K. Yamamoto, CPA/ABV/CFF, of the accounting firm Yamamoto Brace & Liu, LLP ("YBL"), has been retained to perform a forensic income analysis of Mr. Medrano's earnings through Medrano Visuals, LLC. The engagement is at a flat fee of $14,750, which has been approved by the client. The engagement scope letter was transmitted to Mr. Yamamoto on May 22, 2023 (see separate correspondence on file).
The YBL engagement encompasses the following:
• Review of Medrano Visuals, LLC tax returns (federal and California) for tax years 2020, 2021, and 2022;
• Review of Mr. Medrano's individual tax returns for the same period;
• Analysis of business bank statements and accounting records for Medrano Visuals, LLC;
• Identification of personal expenses improperly characterized as business deductions;
• Calculation of Mr. Medrano's actual and/or imputed income for each of the three tax years and a three-year average;
• Preparation of a written expert report suitable for use in court proceedings.
Once the YBL report is received, the income figures used in this memorandum should be reviewed and, if the three-year average differs materially from the $340,000 figure used here, the DissoMaster scenarios should be re-run with updated income inputs. Devon should calendar a follow-up date approximately six weeks from the engagement date (on or about July 3, 2023) to check on the status of the YBL report.
B. Custody Evaluation Impact
The custody evaluation by Dr. Elena V. Sorensen, Psy.D., was ordered by stipulation of the parties on July 14, 2023. The evaluation fee is $18,500, to be split equally at $9,250 per party. Dr. Sorensen is expected to conduct interviews with both parents, observe parent-child interactions, review relevant records, and prepare a written report with recommendations regarding legal and physical custody and a proposed timeshare schedule.
Dr. Sorensen's recommendations will significantly inform the final timeshare determination. If her recommendation differs from the proposed 63.6%/36.4% split — whether in favor of a more even split or a more lopsided one — the guideline calculation will need to be re-run at the recommended timeshare. As the scenario table in Section IV.C demonstrates, even a few percentage points of change in the timeshare can shift the guideline amount by $100 to $200 per month or more.
We anticipate receiving Dr. Sorensen's report within approximately 90 to 120 days of the commencement of the evaluation. Devon should ensure that the client is prepared for and cooperates fully with the evaluation process.
C. Tax Filing Status Confirmation
As noted in Section III.B above, Mr. Medrano's tax filing status needs to be confirmed. Whether he files as single or as head of household affects his net disposable income calculation in DissoMaster and, consequently, the guideline support amount. If Mr. Medrano claims one or both children as dependents on his tax return (for example, by agreement or by alternating years), his filing status and available deductions may differ from our provisional assumption.
We request that Devon Archer seek this information through formal discovery (interrogatories and/or request for production of tax returns) or, if preferable, through an informal meet-and-confer with Mr. Medrano's counsel, Gwendolyn R. Kwan of Kwan, Delacroix & Samuels LLP, located at 4400 Riverside Drive, Suite 700, Burbank, California 91505. If the information can be obtained informally, it will save the time and expense of formal discovery on this narrow point.
D. Employer Health Insurance Deduction
We need to confirm the specific monthly cost of dependent health insurance coverage under Ms. Fonseca's employer-sponsored plan with Luminos Entertainment Group / Veridian Health Insurance Co. The amount attributable to dependent coverage (i.e., the incremental cost of covering the two children, as distinct from Ms. Fonseca's own coverage) is deducted from Ms. Fonseca's gross income for guideline purposes under Family Code section 4059. This deduction reduces Ms. Fonseca's net disposable income and, consequently, the guideline support amount.
Devon should request that the client provide a current benefits statement or pay stub reflecting the dependent health insurance deduction. If the information is not readily available, we can obtain it directly from Luminos's human resources department with the client's authorization.
VIII. Conclusion
Based on the analysis set forth in this memorandum, the following conclusions and recommendations are offered:
1. Guideline Amount. At the proposed timeshare of 63.6% (Fonseca) / 36.4% (Medrano), using gross monthly incomes of $72,500 for Ms. Fonseca and $28,333 for Mr. Medrano, for a combined gross monthly income of $100,833, the California guideline child support for two minor children is $1,274 per month payable by Ms. Fonseca to Mr. Medrano. This figure is calculated using the Family Code section 4055 formula as implemented in the DissoMaster software program.
2. Presumptive Correctness. The guideline amount of $1,274 per month is presumptively correct under Family Code section 4057(a) and will serve as the starting point for any negotiation or court determination. Deviation from this amount is permissible only upon a showing of circumstances enumerated in section 4057(b), supported by a written declaration of reasons and approved by the court.
3. Timeshare Sensitivity. The scenario analysis presented in Section IV demonstrates that the timeshare percentage is a critical variable in the guideline calculation. Even modest changes in the timeshare allocation shift the support amount by several hundred dollars per month. This underscores the strategic importance of the custody evaluation and the negotiations surrounding the permanent custodial schedule. Specifically:
• At a 50/50 timeshare, guideline support would be approximately $2,350/month — an increase of approximately $1,076 over the proposed-timeshare figure.
• At a 65% timeshare for Ms. Fonseca, guideline support would be approximately $1,175/month — a decrease of approximately $99 from the proposed-timeshare figure.
• At a 70% timeshare for Ms. Fonseca, guideline support would be approximately $825/month.
4. Settlement Baseline. We recommend using the $1,274 per month figure as the baseline for settlement discussions with Mr. Medrano's counsel, while exploring the possibility of a downward deviation if favorable extracurricular cost-sharing terms can be negotiated. A potential structure — in which Mr. Medrano accepts a larger share of private school tuition and extracurricular costs in exchange for a slightly higher base support payment, or vice versa — should be evaluated in consultation with the client.
5. Pending Updates. This analysis will be updated upon receipt of the following:
• The YBL forensic income report (expected within approximately six to eight weeks);
• The Dr. Sorensen custody evaluation report (expected within approximately 90 to 120 days);
• Confirmation of Mr. Medrano's tax filing status and dependent coverage insurance costs.
I am available to discuss this memorandum and the scenarios at Devon's convenience. Please let me know if any additional analysis or scenarios would be helpful for the settlement strategy conference.
Appendix A: DissoMaster printout at 63.6%/36.4% timeshare (to be attached upon generation of formal printout)
Appendix B: Summary table of all scenario runs with input assumptions (to be attached upon generation of formal printout)
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT This document is intended for use solely in connection with the representation of Marguerite D. Fonseca in Fonseca v. Medrano, Case No. 22STFL09847, Superior Court of California, County of Los Angeles. Do not copy, distribute, or disclose without authorization.
Parent | Gross Monthly Income | Share of Combined Income
Marguerite D. Fonseca | $72,500 | 71.9%
Rafael J. Medrano | $28,333 | 28.1%
Combined | $100,833 | 100.0%
Scenario | Fonseca Timeshare | Medrano Timeshare | Guideline Support (Monthly) | Direction of Payment
Scenario 1 | 50.0% | 50.0% | ~$2,350 | Fonseca to Medrano
Scenario 2 | 55.0% | 45.0% | ~$1,950 | Fonseca to Medrano
Scenario 3 | 60.0% (temp order) | 40.0% | ~$1,575 | Fonseca to Medrano
Scenario 4 | 63.6% (proposed) | 36.4% | $1,274 | Fonseca to Medrano
Scenario 5 | 65.0% | 35.0% | ~$1,175 | Fonseca to Medrano
Scenario 6 | 70.0% | 30.0% | ~$825 | Fonseca to Medrano
Scenario 7 | 75.0% | 25.0% | ~$475 | Fonseca to Medrano

MEMORANDUM

MATTER NO.: 1035-00002

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