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PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

MEMORANDUM

TO: Devon Archer, Lead Associate

FROM: Nadia Petrov, Associate

DATE: June 30, 2023

RE: Imputation of Income to Respondent Rafael J. Medrano — Freelance Earnings Through Loan-Out Entity

MATTER: Fonseca Custody & Parenting Plan — C&H Matter No. 1035-00002

CASE: In re Fonseca / Medrano, Case No. 22STFL09847, Superior Court of California, County of Los Angeles

I. Executive Summary

The purpose of this memorandum is to analyze the legal basis for imputing annual gross income of $340,000 to Respondent Rafael J. Medrano for purposes of the California guideline child support calculation in this matter. This analysis is intended to support the preparation of our client's position in connection with the pending Request for Order re Custody and Child Support, as well as in any mediation or settlement discussions that may follow.

Mr. Medrano is a freelance cinematographer and director of photography who operates through a California limited liability company, Medrano Visuals, LLC, which functions as a loan-out entity — a structure common in the entertainment industry for key creative talent. Because Mr. Medrano's income is inherently variable from year to year, depending on the number, type, and budget level of the film and television projects he accepts, the court must determine what income figure should be used for the guideline support calculation. A single year's income may be unrepresentative, as it could reflect an unusually lucrative period or an unusually lean one.

Based on the three-year average of Mr. Medrano's earnings as reflected in his individual and entity tax returns and related financial records, the forensic analysis currently being prepared by Harold K. Yamamoto, CPA/ABV/CFF, of Yamamoto Brace & Liu, LLP ("YBL") supports imputation of gross annual income of $340,000, equivalent to a gross monthly income of approximately $28,333 ($340,000 ÷ 12). This figure represents the arithmetic mean of Mr. Medrano's gross earnings over the 2020, 2021, and 2022 tax years, after adjustment for legitimate business expenses but before any deductions for personal or non-necessary expenditures routed through the LLC.

This memorandum concludes that imputation at the three-year average is well-supported by California Family Code § 4058(b) and relevant appellate authority governing the treatment of variable-income, freelance, and self-employed earners in family law proceedings. The three-year average methodology is widely accepted by California family courts, particularly in the entertainment industry context where project-based work and seasonal production schedules produce natural fluctuations in annual income. It is the figure we believe the court would most likely adopt if the issue is contested at a support hearing.

The imputed income figure for Mr. Medrano, combined with Petitioner Marguerite D. Fonseca's gross monthly income of $72,500 ($870,000 annually, inclusive of base salary, discretionary bonuses, and vesting RSU equity grants), will produce a combined gross monthly income of $100,833 for purposes of the DissoMaster guideline calculation under Family Code § 4055. A separate guideline analysis memorandum addressing the DissoMaster computation in detail was prepared on May 15, 2023, and should be read in conjunction with this memorandum.

II. Factual Background

A. The Parties and Their Income

Petitioner — Marguerite D. Fonseca. Ms. Fonseca is Senior Vice President, Original Content Development at Luminos Entertainment Group, Inc., a Delaware corporation headquartered at 3200 West Olive Avenue, Burbank, California 91505. Ms. Fonseca has been employed at Luminos since 2017, beginning as a Vice President before being promoted to her current role in 2020. Her position is salaried, full-time, and affords a high degree of income stability relative to Mr. Medrano's freelance work.

Ms. Fonseca's total annual compensation consists of three principal components:

(1) Annual base salary: $485,000, paid on a semi-monthly basis in accordance with Luminos's standard payroll cycle.

(2) Discretionary performance bonuses: Averaging $210,000 per year over the most recent three-year period (2020–2022). These bonuses are determined annually by Luminos's executive compensation committee and are tied to both individual performance and company financial results. While not guaranteed, Ms. Fonseca has received a bonus in each of the past five years, and the three-year average provides a reasonable expectation of future bonus income.

(3) Restricted Stock Unit ("RSU") equity grants: Vesting annually at approximately $175,000 in value. Ms. Fonseca's RSU grants are part of her executive compensation package and vest over a four-year schedule with annual cliff vesting. For support calculation purposes, the annual vesting amount is treated as income in the year of vesting, consistent with California Family Code § 4058(a) and In re Marriage of Cheriton (2001) 92 Cal.App.4th 269.

Ms. Fonseca's total annual compensation is therefore approximately $870,000. Her gross monthly income for child support calculation purposes is $72,500 ($870,000 ÷ 12).

Respondent — Rafael J. Medrano. Mr. Medrano is a freelance cinematographer and director of photography. He works primarily on feature films and episodic television productions, accepting engagements of varying duration through his loan-out entity, Medrano Visuals, LLC, a California limited liability company. Under the standard loan-out arrangement, production companies contract with Medrano Visuals, LLC to secure Mr. Medrano's services; the LLC invoices the production company and receives payment, from which Mr. Medrano is then compensated. This structure is industry-standard for cinematographers and other above-the-line and key below-the-line talent in the entertainment industry, and is utilized for liability, tax, and guild compliance purposes.

Mr. Medrano's income is inherently variable due to the project-based nature of his work. In any given year, the number of engagements, the budget levels of the productions involved, and the duration of principal photography and pre-production commitments all affect his gross earnings. While Mr. Medrano has maintained a consistent level of professional activity, the specific dollar amounts he earns fluctuate meaningfully from year to year.

Notably, in early 2023, Mr. Medrano accepted a seven-week on-location shoot in Vancouver, British Columbia, for an undisclosed episodic television production. This extended absence from the Los Angeles area precipitated the breakdown of the informal custody arrangement that the parties had maintained following entry of the dissolution judgment, and directly prompted Ms. Fonseca's filing of the Request for Order re Custody and Child Support on May 2, 2023. The Vancouver engagement is relevant to this analysis both because it demonstrates Mr. Medrano's continued marketability and willingness to accept work, and because it illustrates the logistical challenges that his freelance schedule can impose on the parenting plan.

Domestic Partnership and Dissolution. The parties registered their domestic partnership on September 12, 2015, with the California Secretary of State (File No. DP-2015-038741). They are the parents of two minor children, as discussed in Section VI below. The dissolution judgment was entered on November 3, 2022, by the Superior Court of California, County of Los Angeles. The judgment resolved the parties' property division and terminated the domestic partnership, but the court expressly reserved jurisdiction over custody, visitation, and child support. The current proceedings arise under that reservation.

Pending Proceedings. Ms. Fonseca filed the Request for Order re Custody and Child Support on May 2, 2023. A temporary custody order was entered on May 30, 2023, establishing a 60/40 timeshare in favor of Ms. Fonseca pending further proceedings. The timeshare and child support issues remain pending.

B. Mr. Medrano's Earnings History (Summary of Available Data)

The following is a summary of Mr. Medrano's earnings over the most recent three calendar and tax years (2020, 2021, and 2022), as reflected in his individual federal and California state income tax returns and the financial records of Medrano Visuals, LLC. These records have been reviewed in preliminary fashion by our office and are currently subject to detailed forensic analysis by Harold K. Yamamoto of YBL.

Mr. Medrano's annual income has fluctuated over the three-year period. In certain years, he has been engaged on multiple high-budget projects — including feature films in wide theatrical release and high-profile episodic series for major streaming platforms — which have produced commensurately higher income. In other years, he has accepted fewer engagements or has worked on lower-budget independent productions, resulting in reduced earnings. This pattern is typical for freelance cinematographers operating at Mr. Medrano's career level and does not, by itself, indicate underemployment or a deliberate effort to suppress income.

The three-year average of Mr. Medrano's annual gross income is approximately $340,000. This figure is derived from the preliminary analysis conducted by our office and is subject to confirmation by the YBL forensic report, which will perform a more granular reconciliation of reported income with bank statements and 1099 records, and will evaluate the propriety of business deductions claimed through Medrano Visuals, LLC. We expect the final YBL figure to closely approximate, and potentially support, the $340,000 average.

As noted, Mr. Medrano's income flows through Medrano Visuals, LLC as a loan-out entity. Production companies issue 1099 forms to Medrano Visuals, LLC (or, in some cases, to Mr. Medrano individually where he has worked outside the LLC structure). The LLC then pays Mr. Medrano, either as guaranteed payments, salary (if the LLC has elected S-corporation treatment), or as distributions. For child support purposes, the critical question is the total economic benefit Mr. Medrano derives from the LLC, not the technical form of the payments. This issue is addressed in greater detail in Section III.C below.

C. Forensic Accounting Engagement

Calderwood & Harkness LLP retained Harold K. Yamamoto, CPA/ABV/CFF, of Yamamoto Brace & Liu, LLP ("YBL") to conduct a forensic income analysis of Mr. Medrano's freelance earnings and the income flowing through Medrano Visuals, LLC. YBL is located at 333 South Grand Avenue, Suite 2800, Los Angeles, California 90071. Mr. Yamamoto holds the Accredited in Business Valuation (ABV) and Certified in Financial Forensics (CFF) credentials from the American Institute of Certified Public Accountants, and has extensive experience providing forensic accounting services in family law proceedings in Los Angeles County and throughout Southern California.

The engagement was scoped in a letter dated May 22, 2023, from Devon Archer to Mr. Yamamoto, outlining the materials to be reviewed and the opinions to be rendered. The engagement is structured as a flat-fee arrangement at $14,750, inclusive of the review, analysis, report preparation, and one round of revisions. Deposition and hearing testimony, if required, will be billed separately at Mr. Yamamoto's standard hourly rate.

The scope of YBL's analysis encompasses the following:

(a) Review of Mr. Medrano's individual federal and California state income tax returns (Forms 1040 and 540) for the tax years 2020, 2021, and 2022, including all schedules and attachments;

(b) Review of Medrano Visuals, LLC tax returns (Form 1065 or Form 1120-S, as applicable) for the same three-year period;

(c) Analysis of 1099 income reported to Medrano Visuals, LLC and, separately, to Mr. Medrano individually, to identify total gross receipts;

(d) Analysis of business deductions and expenses claimed through Medrano Visuals, LLC, including but not limited to equipment purchases, depreciation, insurance, crew costs, travel, vehicle expenses, home office deductions, and professional development expenses, to determine which deductions are ordinary, necessary, and actually incurred within the meaning of Family Code § 4058(a);

(e) Analysis of distributions, guaranteed payments, salary, and other transfers from Medrano Visuals, LLC to Mr. Medrano, to determine the total economic benefit derived by Mr. Medrano from the entity;

(f) Reconciliation of reported income with bank statements for both Medrano Visuals, LLC and Mr. Medrano's personal accounts, to identify any unreported income or undisclosed financial flows; and

(g) Determination of Mr. Medrano's actual earning capacity versus his reported taxable income, including an opinion on the appropriate income figure to be used for guideline child support purposes.

The YBL report is expected to confirm the three-year average of approximately $340,000 per year as the appropriate income figure for Mr. Medrano. This memorandum proceeds on that preliminary figure, with the understanding that the final YBL analysis may result in minor adjustments.

III. Legal Framework: Imputation of Income Under California Law

A. California Family Code § 4058 — Definition of Income for Support Purposes

The starting point for any child support calculation in California is the determination of each parent's gross income under Family Code § 4058. Subdivision (a) of § 4058 provides that "[t]he annual gross income of each parent means income from whatever source derived," and sets forth a non-exclusive list of income types that are to be included. The statutory list encompasses:

Salaries, wages, tips, commissions, bonuses, rents, dividends, pensions, interest, trust income, annuities, workers' compensation benefits, unemployment insurance benefits, disability insurance benefits, social security benefits, and spousal support actually received from a person not a party to the proceeding.

The breadth of this definition is intentional. The Legislature's use of the phrase "from whatever source derived" Signals that courts are to take a comprehensive view of a parent's financial resources. Income that is routed through a business entity, received in non-cash form, or otherwise structured to reduce apparent earnings is nonetheless includable if it represents an actual economic benefit to the parent.

For self-employed individuals, § 4058(a) further provides that gross income includes "the gross receipts from a business minus the costs of goods sold, minus costs incurred in the operation of the business." The statute specifies, however, that deductions must be for expenses that are "actually incurred" and "necessary" to produce the business income. This qualification is significant because it authorizes the court to disallow deductions that are excessive, personal in nature, or otherwise not genuinely required for the operation of the business. Depreciation schedules, for example, may be adjusted if they do not accurately reflect the actual consumption of business assets.

B. California Family Code § 4058(b) — Earning Capacity Standard

Subdivision (b) of § 4058 provides the court with discretion to consider a parent's earning capacity in lieu of actual income:

"The court may, in its discretion, consider the earning capacity of a parent in lieu of the parent's income, consistent with the best interests of the children."

This provision is the primary statutory authority for imputation of income. It recognizes that actual reported income may not always be the best measure of a parent's financial ability to contribute to child support. There are at least two common scenarios in which earning capacity may be more appropriate than actual income: (1) where a parent is voluntarily unemployed or underemployed, such that actual income understates what the parent could earn if exercising reasonable effort; and (2) where a parent's income is inherently variable, such that any single year's income may be unrepresentative of the parent's ongoing earning ability. Both scenarios are relevant here, though the second is the primary basis for imputation in this matter.

Under established California appellate authority, imputation of earning capacity under § 4058(b) requires the court to consider three factors:

(1) Ability to earn. The parent's skills, training, education, work history, and professional credentials. The court examines whether the parent possesses the qualifications necessary to earn at the imputed level.

(2) Opportunity to earn. The availability of employment or engagement opportunities in the parent's field, taking into account local and regional labor market conditions, industry trends, and the parent's geographic flexibility.

(3) Willingness to earn. Whether the parent is making reasonable efforts to secure and maintain employment or engagement at a level consistent with his or her ability and opportunity. This factor is most commonly at issue in cases involving allegations of voluntary underemployment or unemployment, but it is also relevant in cases where the parent's work patterns are irregular or seasonal.

These factors were articulated by the Court of Appeal in In re Marriage of Regnery (1989) 214 Cal.App.3d 1367, 1372, and have been consistently applied in subsequent decisions. The three-part framework provides a structured basis for the court's exercise of discretion and ensures that imputation is grounded in evidence of the parent's actual capacity to earn, rather than in speculation or punitive assumptions.

In this case, Mr. Medrano is not unemployed or underemployed in the traditional sense. He is actively working as a freelance cinematographer and has maintained a steady volume of engagements over the three-year period analyzed. The imputation issue arises not from a failure to work, but from the inherent variability of his income stream. The court must select an income figure that reasonably approximates Mr. Medrano's ongoing earning capacity so that the guideline support calculation is based on a stable and representative figure rather than on the happenstance of one particular year's earnings.

Even where a parent is currently employed and actively earning income, the court retains discretion under § 4058(b) to impute earning capacity if the parent's actual income is not a reliable indicator of ongoing financial resources. See In re Marriage of Loh (2001) 93 Cal.App.4th 325, 332 (affirming trial court's imputation of earning capacity where the obligor's actual income fluctuated due to the episodic nature of his work). The court's discretion in this regard is broad, and its determination will be upheld on appeal absent an abuse of that discretion.

C. Relevance of Loan-Out Entity Structure

Medrano Visuals, LLC operates as a pass-through entity for federal and California state tax purposes. Depending on the LLC's tax election, the income earned by the entity is reported either on Mr. Medrano's individual tax return through Schedule C (if treated as a sole proprietorship) or on Schedule K-1 (if the LLC has elected S-corporation treatment under Subchapter S of the Internal Revenue Code). In either case, the net income or loss of the LLC flows through to Mr. Medrano's individual return and is subject to individual income tax.

For child support purposes, California courts consistently look through loan-out entities and other pass-through business structures to reach the individual's actual economic benefit. The existence of a loan-out LLC does not insulate a parent from the full imputation of income that would otherwise be appropriate. The court will consider the gross receipts of the LLC, subtract only those business expenses that are legitimate, ordinary, and necessary within the meaning of Family Code § 4058(a), and treat the resulting figure as the parent's income for guideline purposes.

Family Code § 4058(a)(1) specifically includes income from "self-employment" within the definition of gross income for support purposes, and requires the court to evaluate business expenses with care. The court is not bound by the deductions claimed on the parent's tax return, and may disallow deductions that are excessive, duplicative, personal in nature, or not genuinely required for the production of business income. Common areas of scrutiny include:

• Vehicle expenses for personal-use vehicles characterized as business assets;

• Home office deductions that exceed the portion of the home actually and exclusively used for business purposes;

• Depreciation schedules that accelerate deductions beyond the actual economic useful life of the asset;

• Equipment purchases that are primarily personal in nature (e.g., consumer electronics, personal cameras, or other equipment not used exclusively for professional engagements);

• Travel and entertainment expenses that include a personal component; and

• Payments to family members or related parties for services not actually rendered or not rendered at fair market rates.

The forensic accounting analysis by YBL is specifically designed to identify any deductions claimed through Medrano Visuals, LLC that may overstate the entity's expenses and thereby understate Mr. Medrano's actual available income. To the extent that YBL identifies such deductions, the imputed income figure may be adjusted upward to reflect Mr. Medrano's true economic benefit from the LLC.

IV. Case Law on Imputation of Income to Freelance and Variable-Income Earners

A. Averaging of Variable Income

California appellate authority broadly supports the use of a multi-year averaging methodology when a parent's income fluctuates significantly from year to year. The rationale for averaging is straightforward: where annual income is volatile, any single year may overstate or understate the parent's actual earning capacity. A multi-year average smooths these fluctuations and provides a more reliable baseline for the guideline calculation.

The three-year average is the most widely accepted and commonly employed averaging period in California family courts. In In re Marriage of Riddle (2005) 125 Cal.App.4th 1075, 1084, the Court of Appeal upheld the trial court's use of a three-year average to determine the earning capacity of a self-employed parent whose income had varied substantially from year to year. The court reasoned that the three-year average "provide[d] a reasonable approximation of [the parent's] ongoing ability to generate income" and was "well within the court's discretion under Family Code section 4058, subdivision (b)."

Similarly, in In re Marriage of Loh, supra, 93 Cal.App.4th at 334, the Court of Appeal affirmed the use of an averaging methodology for an entertainment-industry professional whose income was project-dependent. The court noted that "the episodic and unpredictable nature of [the parent's] work makes a single year's income an unreliable measure of earning capacity" and endorsed the trial court's use of a multi-year average as a "reasonable exercise of discretion."

Courts retain discretion to select the averaging period that best reflects a parent's true earning capacity under the particular circumstances of the case. Some courts have used two-year averages where the parent's career trajectory is relatively stable, while others have used five-year averages where longer-term trends are relevant or where the parent's income has been affected by unusual events (such as a strike, a recession, or a career transition). The selection of the averaging period is committed to the trial court's sound discretion and will not be disturbed on appeal absent a showing that the chosen period is arbitrary or unsupported by the evidence.

In this case, the three-year average of $340,000 per year is proposed as the most reliable and appropriate measure of Mr. Medrano's earning capacity. The three-year period (2020–2022) encompasses a range of economic conditions — including the COVID-19 pandemic production shutdowns and subsequent recovery — and captures both higher-earning and lower-earning years. The resulting average smooths year-to-year volatility while reflecting Mr. Medrano's established career trajectory, market position, and professional reputation as a cinematographer working on feature and episodic projects at established budget levels. There is no basis for selecting a shorter or longer averaging period that would produce a materially different result.

B. Entertainment Industry Considerations

California courts have developed a body of precedent addressing income imputation for entertainment-industry professionals whose work is inherently episodic and project-dependent. The seasonal and project-based nature of film and television production — driven by development cycles, production schedules, network and studio ordering patterns, and post-production timelines — means that substantial gaps between engagements are a normal and expected feature of the work. These gaps do not, by themselves, indicate underemployment, nor do they suggest that the parent is failing to exercise reasonable efforts to secure work.

Courts recognize that an entertainment-industry professional's earning capacity should reflect both active engagement periods (when the parent is working on a production and earning fees) and anticipated gaps between projects (when the parent is not actively earning but is developing relationships, reviewing scripts, meeting with producers, and otherwise positioning for future engagements). The averaging methodology is particularly well-suited to this context because it captures the full economic reality of the parent's work cycle, rather than artificially inflating income by focusing on an active period or depressing it by focusing on a gap period.

In In re Marriage of Loh, the Court of Appeal explicitly addressed this issue in the context of a film-industry professional. The court observed that "the nature of the entertainment industry is such that periods of high earnings are typically followed by periods of lower or no earnings," and concluded that "the trial court did not abuse its discretion in averaging [the parent's] income over the relevant period to arrive at a reasonable approximation of earning capacity." Id. at 335.

Mr. Medrano's work history is consistent with this pattern. His active work schedule — including the recent seven-week Vancouver shoot for an episodic television production in early 2023 — demonstrates that he continues to be in demand as a cinematographer and is not voluntarily reducing his workload. The fact that his annual income varies from year to year is a natural consequence of the freelance, project-based structure of his career, not an indication of declining capacity or reduced effort.

C. Burden of Proof and Evidentiary Standards

The party seeking to impute income bears the initial burden of presenting evidence of the other parent's earning capacity. In re Marriage of Bardzik (2008) 165 Cal.App.4th 1291, 1301. This burden requires the moving party to present competent evidence establishing the three factors discussed in Section III.B above — ability, opportunity, and willingness to earn — and to demonstrate that the proposed imputed income figure is reasonable and supported by the record.

Ms. Fonseca's position on imputation is strengthened by several categories of evidence:

(1) Documented three-year earnings history. Mr. Medrano's individual and entity tax returns, 1099 records, and bank statements establish a documented track record of earnings averaging approximately $340,000 per year. This earnings history provides a concrete, verifiable foundation for the imputation figure, rather than relying on speculation or hypothetical earning scenarios.

(2) Established professional reputation and active engagement. Mr. Medrano is an established cinematographer and director of photography with credits on feature films and episodic television productions. His ongoing acceptance of engagements, including the recent Vancouver shoot, demonstrates that he remains active and in demand in his field.

(3) Independent forensic accounting analysis. The YBL forensic accounting report, when finalized, will provide an independent, expert analysis of Mr. Medrano's income and earning capacity. Mr. Yamamoto's credentials — including the ABV and CFF designations — and his experience in family law forensic accounting lend significant credibility to the analysis. The court will be able to rely on the YBL report as a neutral, data-driven assessment of Mr. Medrano's financial situation.

Mr. Medrano may argue in response that a different time period or methodology should be used for the averaging calculation, or that certain business expenses properly reduce his actual available income below $340,000. These anticipated counterarguments, and our responses, are addressed in detail in Section VII below. To the extent Mr. Medrano advances such arguments, the burden will shift to him to present evidence supporting the alternative approach. Our evidentiary position — grounded in documented tax returns, financial records, and expert forensic analysis — places us on strong footing to sustain the $340,000 figure.

Anticipated counterarguments and rebuttals should be fully prepared in advance of the support hearing or mediation session. The preparation should include a detailed review of the YBL report upon its delivery, supplemental research on any specific arguments raised by opposing counsel Gwendolyn R. Kwan of Kwan, Delacroix & Samuels LLP, and coordination with Mr. Yamamoto regarding his potential testimony.

V. Application to Mr. Medrano's Circumstances

A. Mr. Medrano's Ability to Earn

Mr. Medrano is an established cinematographer and director of photography with a professional career spanning more than a decade. He holds credits on feature films and episodic television productions, including both studio-level and independent projects. His skills are specialized, requiring expertise in camera operation, lighting design, visual storytelling, and post-production supervision that is developed through years of on-set experience and professional training. Cinematographers of Mr. Medrano's caliber command substantial fees for their services, reflecting the critical importance of the director of photography role to the quality and commercial viability of a production.

Mr. Medrano has maintained a consistent volume of work over the three-year period analyzed. While the specific projects and fee levels have varied, there has been no year in which Mr. Medrano failed to secure multiple professional engagements. His continued ability to book work at the levels reflected in his earnings history demonstrates that his professional skills remain current and marketable.

There is no evidence in the record of any disability, health limitation, or other factor that would reduce Mr. Medrano's ability to earn at or near his historical income levels. He has not claimed any physical or mental health condition affecting his capacity to work, nor has he suggested that any external factor limits his professional activities. His ability to earn at the imputed level is therefore well-established.

B. Mr. Medrano's Opportunity to Earn

The Los Angeles-area film and television production market remains robust, notwithstanding periodic fluctuations in production volume related to economic conditions, labor actions, and content-cycle shifts. Los Angeles is the primary center of domestic film and television production, and cinematographers based in the Los Angeles area have access to the largest and most diverse pool of production opportunities in the country.

Mr. Medrano's credentials and professional reputation position him for continued engagement at or near his historical income levels. His established relationships with producers, directors, and production companies — reflected in the recurring nature of some of his engagements — provide a foundation for ongoing work. The entertainment industry relies heavily on professional networks and reputation, and Mr. Medrano's demonstrated track record is a significant asset in securing future engagements.

Moreover, the Vancouver shoot demonstrates Mr. Medrano's willingness to accept out-of-state and international work, which expands his opportunity set beyond California-based productions. Many film and television productions are shot on location outside California, in jurisdictions offering competitive tax incentives, favorable exchange rates, or specific geographic settings. A cinematographer who is willing and able to travel for on-location work has access to a broader range of opportunities than one who is geographically constrained. Mr. Medrano's acceptance of the Vancouver engagement reflects both his professional flexibility and the breadth of opportunities available to him.

C. Mr. Medrano's Willingness to Earn

There is no indication in the record that Mr. Medrano is voluntarily underemployed or that he is deliberately suppressing his income to reduce a potential child support obligation. He is actively accepting professional engagements and continues to work at a pace consistent with his historical pattern. The imputation analysis in this matter is not predicated on a finding of voluntary underemployment or bad faith; rather, it is a methodological tool for normalizing Mr. Medrano's variable freelance income to arrive at a stable and representative figure for guideline calculation purposes.

This distinction is important. In cases involving voluntary underemployment, imputation of earning capacity carries an implicit finding that the parent is not making reasonable efforts to earn at his or her potential. Here, no such finding is necessary or appropriate. Mr. Medrano is working and earning income. The question is simply how to translate his variable annual earnings into a fixed monthly income figure for the DissoMaster calculation. The three-year average serves this purpose without any implication that Mr. Medrano is shirking his professional obligations or manipulating his income.

D. Proposed Imputed Income Figure

Based on the foregoing analysis, the proposed imputed gross annual income for Mr. Medrano is $340,000. This figure is derived from the three-year average of his documented earnings for the 2020, 2021, and 2022 tax years, is supported by the preliminary review of his tax returns and financial records, and will be confirmed by the YBL forensic accounting report.

For purposes of the DissoMaster guideline calculation, Mr. Medrano's gross monthly income is $28,333 ($340,000 ÷ 12, rounded to the nearest dollar).

Combined with Ms. Fonseca's gross monthly income of $72,500 ($870,000 ÷ 12), the combined gross monthly income for the guideline calculation is $100,833. These figures should be used as the income inputs for all subsequent DissoMaster runs and settlement analyses unless and until the YBL report indicates that an adjustment is warranted.

VI. Impact on the Guideline Child Support Calculation

The imputed income figure feeds directly into the guideline child support calculation under Family Code § 4055, which establishes the algebraic formula for determining the presumptively correct amount of child support. The calculation is performed using the DissoMaster software program, which is the standard tool employed by California family courts and practitioners for this purpose.

The parties have two minor children:

(1) Isabela Luz Fonseca-Medrano, born February 11, 2017 (age 6 at the time of this memorandum); and

(2) Mateo Elías Fonseca-Medrano, born August 29, 2019 (age 3 at the time of this memorandum).

Both children are currently residing with Ms. Fonseca under the temporary custody order entered on May 30, 2023, which established a 60/40 timeshare in favor of Ms. Fonseca. The proposed parenting plan, which is subject to ongoing negotiation and will be addressed at mediation or hearing, contemplates a custodial timeshare of approximately 63.6% to Ms. Fonseca and 36.4% to Mr. Medrano. This corresponds to an overnight distribution of approximately 232 overnights per year with Ms. Fonseca and 133 overnights per year with Mr. Medrano. The timeshare percentage is a critical input to the DissoMaster calculation, as it directly affects the allocation of support obligations between the parties.

At the anticipated timeshare split of approximately 63.6% / 36.4% (Fonseca / Medrano), and using the imputed gross monthly incomes of $72,500 for Ms. Fonseca and $28,333 for Mr. Medrano, the preliminary DissoMaster guideline amount is approximately $1,274 per month payable by Ms. Fonseca to Mr. Medrano.

This result — in which the higher-earning parent pays support to the lower-earning parent — is consistent with the structure of the Family Code § 4055 formula, which is designed to equalize the standard of living for the children across both households. Despite Ms. Fonseca's substantially higher income, the guideline amount is moderated by her majority timeshare. The § 4055 formula allocates a larger portion of the total child support obligation to the parent with the higher income but reduces the transfer payment to the extent that the higher-earning parent has the children for a greater share of the time, on the theory that the higher-earning parent is already bearing a proportionally larger share of the children's day-to-day expenses through direct custodial spending.

A separate and more detailed guideline analysis memorandum was prepared on May 15, 2023 (Petrov to Archer), which addresses the DissoMaster inputs, assumptions, and outputs in full. That memorandum should be read in conjunction with this one to provide a complete picture of the support calculation. The income figures used in this memorandum are consistent with those used in the May 15 memorandum, and any adjustments resulting from the YBL report should be applied to both analyses.

VII. Anticipated Respondent Arguments and Counterpoints

A. Argument: Income Should Be Based on Most Recent Year Rather Than Three-Year Average

Mr. Medrano may argue that his most recent year's income — whether for tax year 2022 or, as data becomes available, for the current 2023 tax year — is a more accurate reflection of his current earning capacity than a three-year average. If the most recent year's income is lower than the three-year average, he may contend that the average overstates his present ability to earn. Conversely, if the most recent year's income is higher, Ms. Fonseca may wish to consider whether the higher figure would produce a more favorable result for our client, though this would require departing from the averaging methodology.

Counterpoint. California courts routinely use multi-year averaging for variable-income earners precisely because any single year may be unrepresentative of the parent's ongoing earning capacity. As discussed in Section IV.A above, the Court of Appeal has affirmed the use of three-year averages in multiple cases involving freelance and self-employed parents. See In re Marriage of Riddle, supra, 125 Cal.App.4th at 1084; In re Marriage of Loh, supra, 93 Cal.App.4th at 334.

The three-year average smooths annual fluctuations — whether upward or downward — and provides a more reliable baseline for the guideline calculation. Selecting a single year invites manipulation and produces a support figure that may not accurately reflect the parent's long-term financial situation. This is particularly true in the entertainment industry, where a single year's earnings can be dramatically affected by the timing of project starts and wrap dates, the availability of suitable projects, and other factors that have no bearing on the parent's underlying earning capacity.

If Mr. Medrano advocates for the use of a single year, our response should emphasize the volatility of his income history and the well-established precedent favoring multi-year averages for freelance earners. We should also note that the three-year period includes both higher-earning and lower-earning years, and therefore does not systematically overstate or understate his capacity.

B. Argument: Business Expenses Should Further Reduce Income

Mr. Medrano may claim that Medrano Visuals, LLC incurs substantial business expenses that further reduce his net available income below the $340,000 figure. Potential categories of claimed business expenses include equipment purchases and depreciation (cameras, lenses, lighting rigs, grip equipment), professional liability and equipment insurance, crew costs for assistants and operators hired by the LLC, travel and transportation expenses for on-location shoots, professional development and continuing education, union and guild dues, and marketing and promotional costs.

Counterpoint. Family Code § 4058(a) requires the court to consider gross business income minus only those expenses that are ordinary, necessary, and actually incurred in the operation of the business. The statute does not permit a parent to reduce available income through excessive or personal deductions.

The YBL forensic analysis is specifically designed to evaluate each category of business expense claimed through Medrano Visuals, LLC and to determine whether those expenses are legitimate, properly classified, and reasonable in amount. Mr. Yamamoto's report will identify any expenses that are:

(a) Personal in nature but improperly characterized as business expenses (e.g., personal vehicle use, personal travel, meals and entertainment with no business nexus);

(b) Excessive in amount relative to industry norms for a cinematographer operating at Mr. Medrano's career level (e.g., equipment purchases that significantly exceed what is required for the projects he undertakes);

(c) Depreciation deductions that accelerate the write-off of assets beyond their actual economic useful life, thereby reducing reported income in the near term at the expense of future periods; or

(d) Payments to related parties (if any) for services not actually rendered or not rendered at fair market rates.

To the extent that YBL identifies improperly claimed or excessive deductions, those amounts will be added back to Mr. Medrano's gross income for support purposes, potentially increasing the imputed income figure above $340,000. Our position is that only genuinely necessary business expenses should reduce Mr. Medrano's available income, and that any attempt to inflate deductions to suppress the support calculation will be identified and challenged.

C. Argument: Earning Capacity Is Declining

Mr. Medrano may argue that his earning capacity is declining due to one or more of the following factors: changing market conditions in the film and television industry; an alleged shift in production patterns away from the types of projects on which he has historically worked; aging out of certain project types or losing competitive advantage to younger cinematographers; or a deliberate decision to reduce his workload for quality-of-life or parenting reasons.

Counterpoint. Mr. Medrano's recent professional activity directly contradicts any claim of declining earning capacity. His acceptance of the seven-week Vancouver shoot in early 2023 — a substantial engagement on an episodic television production — demonstrates that he continues to be sought after by production companies and is willing to accept significant commitments. His ongoing active engagement in the industry, including the cultivation of professional relationships and the regular acceptance of projects, is inconsistent with a narrative of decline.

Moreover, the three-year average already accounts for natural year-to-year variation in Mr. Medrano's income. If his earnings in any particular year were lower than the average, that data point is already reflected in the computation and has the effect of pulling the average downward. The averaging methodology is, by design, responsive to trends in the underlying data. A declining earning trajectory would produce a lower average, while a stable or increasing trajectory would produce a higher one. The $340,000 figure is the mathematical result of the three-year computation and already incorporates whatever trend, if any, is present in the data.

If Mr. Medrano wishes to argue that his earning capacity has declined to a level below the three-year average, he will bear the burden of presenting competent evidence to support that claim — such as evidence of a specific health condition, a demonstrable industry contraction affecting cinematographers at his level, or other concrete factors beyond normal year-to-year variability. Speculative assertions of future decline are insufficient. See In re Marriage of Bardzik, supra, 165 Cal.App.4th at 1302 (holding that "the court is entitled to rely on historical earnings data as the best available evidence of earning capacity absent a showing of changed circumstances").

VIII. Recommendations

Based on the analysis set forth in this memorandum, the following recommendations are presented for consideration:

1. Proceed with the proposed imputed income figure. We recommend proceeding with the $340,000 annual / $28,333 monthly imputed gross income figure for Mr. Medrano in all child support calculations, DissoMaster runs, and negotiation positions. This figure is well-supported by the three-year average of his documented earnings, is consistent with California Family Code § 4058(b) and applicable appellate authority, and represents the figure we believe the court would most likely adopt if the issue is contested.

2. Await the YBL forensic income analysis report. The final delivery of the forensic income analysis report from Harold K. Yamamoto of Yamamoto Brace & Liu, LLP is expected in the coming weeks. Upon receipt, the report should be reviewed carefully to confirm the three-year average and to identify any adjustments to claimed business expenses that could affect the imputed income figure. If the YBL analysis produces a figure materially different from $340,000 — whether higher or lower — the support calculations and negotiation positions should be adjusted accordingly.

3. Prepare to present the imputation analysis at mediation or hearing. The first mediation session is expected to be scheduled following delivery of the custody evaluation report, which is anticipated in early October 2023. We should be fully prepared to present the imputation analysis and the YBL report at mediation. If the matter cannot be resolved through mediation and proceeds to a contested support hearing, Mr. Yamamoto should be prepared to testify as an expert witness in support of the imputed income figure. Preparation for testimony should include a review of Mr. Yamamoto's report, a pre-hearing conference to discuss anticipated cross-examination topics, and coordination on the presentation of supporting exhibits.

4. Pursue discovery or informal exchange if Mr. Medrano disputes the imputed figure. If Mr. Medrano or his counsel, Gwendolyn R. Kwan of Kwan, Delacroix & Samuels LLP, disputes the $340,000 imputed income figure, we should consider requesting updated tax returns, bank statements, and Medrano Visuals, LLC financial statements through formal discovery (interrogatories, requests for production of documents, and/or subpoenas) or through informal exchange with opposing counsel. Early and complete disclosure of Mr. Medrano's financial records will strengthen our evidentiary position and may facilitate resolution without the need for a contested hearing.

5. Coordinate with the guideline analysis memorandum. The income figures used in this memorandum should be cross-referenced with the California child support guideline analysis memorandum dated May 15, 2023 (Petrov to Archer) to ensure that consistent figures are used across all work product in this matter. Any adjustments resulting from the YBL report should be applied to both the imputation analysis and the guideline calculation to maintain internal consistency.

IX. Conclusion

Imputation of $340,000 in annual gross income to Respondent Rafael J. Medrano is well-grounded in California Family Code § 4058(b), supported by his documented three-year earnings history as reflected in individual and entity tax returns and financial records, and consistent with California appellate authority on the treatment of variable-income and freelance earners in family support proceedings. The three-year averaging methodology is the standard approach employed by California family courts for parents whose income fluctuates due to the project-based nature of their work, and is particularly well-suited to the entertainment industry context in which Mr. Medrano operates.

The loan-out entity structure of Medrano Visuals, LLC does not insulate Mr. Medrano from imputation or otherwise reduce the income attributable to him for support purposes. California courts routinely look through pass-through business entities to the individual's actual economic benefit, and the forensic accounting analysis by Yamamoto Brace & Liu, LLP is designed to ensure that only legitimate, ordinary, and necessary business expenses are deducted from the LLC's gross receipts in computing Mr. Medrano's available income.

The YBL forensic income analysis report, upon its completion and delivery, will provide the evidentiary foundation needed to support this position in mediation or at a contested support hearing. Mr. Yamamoto's independent expert analysis, combined with the documentary record of Mr. Medrano's tax returns and financial records, will present a compelling case for imputation at the three-year average.

The $340,000 annual / $28,333 monthly gross income figure should be used as the basis for all subsequent DissoMaster guideline calculations and settlement negotiations in this matter. In conjunction with Ms. Fonseca's gross monthly income of $72,500 and the proposed timeshare allocation, this figure will produce a guideline support amount that accurately reflects the parties' respective financial contributions and custodial responsibilities.

This memorandum is prepared as privileged and confidential attorney work product in anticipation of litigation and for purposes of providing legal advice to the client. It is not intended for disclosure to any party outside Calderwood & Harkness LLP without the express authorization of the responsible partner. Distribution is limited to members of the Fonseca matter team.

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
MEMORANDUM
TO: Devon Archer, Lead Associate
FROM: Nadia Petrov, Associate
DATE: June 30, 2023
RE: Imputation of Income to Respondent Rafael J. Medrano — Freelance Earnings Through Loan-Out Entity
MATTER: Fonseca Custody & Parenting Plan — C&H Matter No. 1035-00002
CASE: In re Fonseca / Medrano, Case No. 22STFL09847, Superior Court of California, County of Los Angeles
I. Executive Summary
The purpose of this memorandum is to analyze the legal basis for imputing annual gross income of $340,000 to Respondent Rafael J. Medrano for purposes of the California guideline child support calculation in this matter. This analysis is intended to support the preparation of our client's position in connection with the pending Request for Order re Custody and Child Support, as well as in any mediation or settlement discussions that may follow.
Mr. Medrano is a freelance cinematographer and director of photography who operates through a California limited liability company, Medrano Visuals, LLC, which functions as a loan-out entity — a structure common in the entertainment industry for key creative talent. Because Mr. Medrano's income is inherently variable from year to year, depending on the number, type, and budget level of the film and television projects he accepts, the court must determine what income figure should be used for the guideline support calculation. A single year's income may be unrepresentative, as it could reflect an unusually lucrative period or an unusually lean one.
Based on the three-year average of Mr. Medrano's earnings as reflected in his individual and entity tax returns and related financial records, the forensic analysis currently being prepared by Harold K. Yamamoto, CPA/ABV/CFF, of Yamamoto Brace & Liu, LLP ("YBL") supports imputation of gross annual income of $340,000, equivalent to a gross monthly income of approximately $28,333 ($340,000 ÷ 12). This figure represents the arithmetic mean of Mr. Medrano's gross earnings over the 2020, 2021, and 2022 tax years, after adjustment for legitimate business expenses but before any deductions for personal or non-necessary expenditures routed through the LLC.
This memorandum concludes that imputation at the three-year average is well-supported by California Family Code § 4058(b) and relevant appellate authority governing the treatment of variable-income, freelance, and self-employed earners in family law proceedings. The three-year average methodology is widely accepted by California family courts, particularly in the entertainment industry context where project-based work and seasonal production schedules produce natural fluctuations in annual income. It is the figure we believe the court would most likely adopt if the issue is contested at a support hearing.
The imputed income figure for Mr. Medrano, combined with Petitioner Marguerite D. Fonseca's gross monthly income of $72,500 ($870,000 annually, inclusive of base salary, discretionary bonuses, and vesting RSU equity grants), will produce a combined gross monthly income of $100,833 for purposes of the DissoMaster guideline calculation under Family Code § 4055. A separate guideline analysis memorandum addressing the DissoMaster computation in detail was prepared on May 15, 2023, and should be read in conjunction with this memorandum.
II. Factual Background
A. The Parties and Their Income
Petitioner — Marguerite D. Fonseca. Ms. Fonseca is Senior Vice President, Original Content Development at Luminos Entertainment Group, Inc., a Delaware corporation headquartered at 3200 West Olive Avenue, Burbank, California 91505. Ms. Fonseca has been employed at Luminos since 2017, beginning as a Vice President before being promoted to her current role in 2020. Her position is salaried, full-time, and affords a high degree of income stability relative to Mr. Medrano's freelance work.
Ms. Fonseca's total annual compensation consists of three principal components:
(1) Annual base salary: $485,000, paid on a semi-monthly basis in accordance with Luminos's standard payroll cycle.
(2) Discretionary performance bonuses: Averaging $210,000 per year over the most recent three-year period (2020–2022). These bonuses are determined annually by Luminos's executive compensation committee and are tied to both individual performance and company financial results. While not guaranteed, Ms. Fonseca has received a bonus in each of the past five years, and the three-year average provides a reasonable expectation of future bonus income.
(3) Restricted Stock Unit ("RSU") equity grants: Vesting annually at approximately $175,000 in value. Ms. Fonseca's RSU grants are part of her executive compensation package and vest over a four-year schedule with annual cliff vesting. For support calculation purposes, the annual vesting amount is treated as income in the year of vesting, consistent with California Family Code § 4058(a) and In re Marriage of Cheriton (2001) 92 Cal.App.4th 269.
Ms. Fonseca's total annual compensation is therefore approximately $870,000. Her gross monthly income for child support calculation purposes is $72,500 ($870,000 ÷ 12).
Respondent — Rafael J. Medrano. Mr. Medrano is a freelance cinematographer and director of photography. He works primarily on feature films and episodic television productions, accepting engagements of varying duration through his loan-out entity, Medrano Visuals, LLC, a California limited liability company. Under the standard loan-out arrangement, production companies contract with Medrano Visuals, LLC to secure Mr. Medrano's services; the LLC invoices the production company and receives payment, from which Mr. Medrano is then compensated. This structure is industry-standard for cinematographers and other above-the-line and key below-the-line talent in the entertainment industry, and is utilized for liability, tax, and guild compliance purposes.
Mr. Medrano's income is inherently variable due to the project-based nature of his work. In any given year, the number of engagements, the budget levels of the productions involved, and the duration of principal photography and pre-production commitments all affect his gross earnings. While Mr. Medrano has maintained a consistent level of professional activity, the specific dollar amounts he earns fluctuate meaningfully from year to year.
Notably, in early 2023, Mr. Medrano accepted a seven-week on-location shoot in Vancouver, British Columbia, for an undisclosed episodic television production. This extended absence from the Los Angeles area precipitated the breakdown of the informal custody arrangement that the parties had maintained following entry of the dissolution judgment, and directly prompted Ms. Fonseca's filing of the Request for Order re Custody and Child Support on May 2, 2023. The Vancouver engagement is relevant to this analysis both because it demonstrates Mr. Medrano's continued marketability and willingness to accept work, and because it illustrates the logistical challenges that his freelance schedule can impose on the parenting plan.
Domestic Partnership and Dissolution. The parties registered their domestic partnership on September 12, 2015, with the California Secretary of State (File No. DP-2015-038741). They are the parents of two minor children, as discussed in Section VI below. The dissolution judgment was entered on November 3, 2022, by the Superior Court of California, County of Los Angeles. The judgment resolved the parties' property division and terminated the domestic partnership, but the court expressly reserved jurisdiction over custody, visitation, and child support. The current proceedings arise under that reservation.
Pending Proceedings. Ms. Fonseca filed the Request for Order re Custody and Child Support on May 2, 2023. A temporary custody order was entered on May 30, 2023, establishing a 60/40 timeshare in favor of Ms. Fonseca pending further proceedings. The timeshare and child support issues remain pending.
B. Mr. Medrano's Earnings History (Summary of Available Data)
The following is a summary of Mr. Medrano's earnings over the most recent three calendar and tax years (2020, 2021, and 2022), as reflected in his individual federal and California state income tax returns and the financial records of Medrano Visuals, LLC. These records have been reviewed in preliminary fashion by our office and are currently subject to detailed forensic analysis by Harold K. Yamamoto of YBL.
Mr. Medrano's annual income has fluctuated over the three-year period. In certain years, he has been engaged on multiple high-budget projects — including feature films in wide theatrical release and high-profile episodic series for major streaming platforms — which have produced commensurately higher income. In other years, he has accepted fewer engagements or has worked on lower-budget independent productions, resulting in reduced earnings. This pattern is typical for freelance cinematographers operating at Mr. Medrano's career level and does not, by itself, indicate underemployment or a deliberate effort to suppress income.
The three-year average of Mr. Medrano's annual gross income is approximately $340,000. This figure is derived from the preliminary analysis conducted by our office and is subject to confirmation by the YBL forensic report, which will perform a more granular reconciliation of reported income with bank statements and 1099 records, and will evaluate the propriety of business deductions claimed through Medrano Visuals, LLC. We expect the final YBL figure to closely approximate, and potentially support, the $340,000 average.
As noted, Mr. Medrano's income flows through Medrano Visuals, LLC as a loan-out entity. Production companies issue 1099 forms to Medrano Visuals, LLC (or, in some cases, to Mr. Medrano individually where he has worked outside the LLC structure). The LLC then pays Mr. Medrano, either as guaranteed payments, salary (if the LLC has elected S-corporation treatment), or as distributions. For child support purposes, the critical question is the total economic benefit Mr. Medrano derives from the LLC, not the technical form of the payments. This issue is addressed in greater detail in Section III.C below.
C. Forensic Accounting Engagement
Calderwood & Harkness LLP retained Harold K. Yamamoto, CPA/ABV/CFF, of Yamamoto Brace & Liu, LLP ("YBL") to conduct a forensic income analysis of Mr. Medrano's freelance earnings and the income flowing through Medrano Visuals, LLC. YBL is located at 333 South Grand Avenue, Suite 2800, Los Angeles, California 90071. Mr. Yamamoto holds the Accredited in Business Valuation (ABV) and Certified in Financial Forensics (CFF) credentials from the American Institute of Certified Public Accountants, and has extensive experience providing forensic accounting services in family law proceedings in Los Angeles County and throughout Southern California.
The engagement was scoped in a letter dated May 22, 2023, from Devon Archer to Mr. Yamamoto, outlining the materials to be reviewed and the opinions to be rendered. The engagement is structured as a flat-fee arrangement at $14,750, inclusive of the review, analysis, report preparation, and one round of revisions. Deposition and hearing testimony, if required, will be billed separately at Mr. Yamamoto's standard hourly rate.
The scope of YBL's analysis encompasses the following:
(a) Review of Mr. Medrano's individual federal and California state income tax returns (Forms 1040 and 540) for the tax years 2020, 2021, and 2022, including all schedules and attachments;
(b) Review of Medrano Visuals, LLC tax returns (Form 1065 or Form 1120-S, as applicable) for the same three-year period;
(c) Analysis of 1099 income reported to Medrano Visuals, LLC and, separately, to Mr. Medrano individually, to identify total gross receipts;
(d) Analysis of business deductions and expenses claimed through Medrano Visuals, LLC, including but not limited to equipment purchases, depreciation, insurance, crew costs, travel, vehicle expenses, home office deductions, and professional development expenses, to determine which deductions are ordinary, necessary, and actually incurred within the meaning of Family Code § 4058(a);
(e) Analysis of distributions, guaranteed payments, salary, and other transfers from Medrano Visuals, LLC to Mr. Medrano, to determine the total economic benefit derived by Mr. Medrano from the entity;
(f) Reconciliation of reported income with bank statements for both Medrano Visuals, LLC and Mr. Medrano's personal accounts, to identify any unreported income or undisclosed financial flows; and
(g) Determination of Mr. Medrano's actual earning capacity versus his reported taxable income, including an opinion on the appropriate income figure to be used for guideline child support purposes.
The YBL report is expected to confirm the three-year average of approximately $340,000 per year as the appropriate income figure for Mr. Medrano. This memorandum proceeds on that preliminary figure, with the understanding that the final YBL analysis may result in minor adjustments.
III. Legal Framework: Imputation of Income Under California Law
A. California Family Code § 4058 — Definition of Income for Support Purposes
The starting point for any child support calculation in California is the determination of each parent's gross income under Family Code § 4058. Subdivision (a) of § 4058 provides that "[t]he annual gross income of each parent means income from whatever source derived," and sets forth a non-exclusive list of income types that are to be included. The statutory list encompasses:
Salaries, wages, tips, commissions, bonuses, rents, dividends, pensions, interest, trust income, annuities, workers' compensation benefits, unemployment insurance benefits, disability insurance benefits, social security benefits, and spousal support actually received from a person not a party to the proceeding.
The breadth of this definition is intentional. The Legislature's use of the phrase "from whatever source derived" Signals that courts are to take a comprehensive view of a parent's financial resources. Income that is routed through a business entity, received in non-cash form, or otherwise structured to reduce apparent earnings is nonetheless includable if it represents an actual economic benefit to the parent.
For self-employed individuals, § 4058(a) further provides that gross income includes "the gross receipts from a business minus the costs of goods sold, minus costs incurred in the operation of the business." The statute specifies, however, that deductions must be for expenses that are "actually incurred" and "necessary" to produce the business income. This qualification is significant because it authorizes the court to disallow deductions that are excessive, personal in nature, or otherwise not genuinely required for the operation of the business. Depreciation schedules, for example, may be adjusted if they do not accurately reflect the actual consumption of business assets.
B. California Family Code § 4058(b) — Earning Capacity Standard
Subdivision (b) of § 4058 provides the court with discretion to consider a parent's earning capacity in lieu of actual income:
"The court may, in its discretion, consider the earning capacity of a parent in lieu of the parent's income, consistent with the best interests of the children."
This provision is the primary statutory authority for imputation of income. It recognizes that actual reported income may not always be the best measure of a parent's financial ability to contribute to child support. There are at least two common scenarios in which earning capacity may be more appropriate than actual income: (1) where a parent is voluntarily unemployed or underemployed, such that actual income understates what the parent could earn if exercising reasonable effort; and (2) where a parent's income is inherently variable, such that any single year's income may be unrepresentative of the parent's ongoing earning ability. Both scenarios are relevant here, though the second is the primary basis for imputation in this matter.
Under established California appellate authority, imputation of earning capacity under § 4058(b) requires the court to consider three factors:
(1) Ability to earn. The parent's skills, training, education, work history, and professional credentials. The court examines whether the parent possesses the qualifications necessary to earn at the imputed level.
(2) Opportunity to earn. The availability of employment or engagement opportunities in the parent's field, taking into account local and regional labor market conditions, industry trends, and the parent's geographic flexibility.
(3) Willingness to earn. Whether the parent is making reasonable efforts to secure and maintain employment or engagement at a level consistent with his or her ability and opportunity. This factor is most commonly at issue in cases involving allegations of voluntary underemployment or unemployment, but it is also relevant in cases where the parent's work patterns are irregular or seasonal.
These factors were articulated by the Court of Appeal in In re Marriage of Regnery (1989) 214 Cal.App.3d 1367, 1372, and have been consistently applied in subsequent decisions. The three-part framework provides a structured basis for the court's exercise of discretion and ensures that imputation is grounded in evidence of the parent's actual capacity to earn, rather than in speculation or punitive assumptions.
In this case, Mr. Medrano is not unemployed or underemployed in the traditional sense. He is actively working as a freelance cinematographer and has maintained a steady volume of engagements over the three-year period analyzed. The imputation issue arises not from a failure to work, but from the inherent variability of his income stream. The court must select an income figure that reasonably approximates Mr. Medrano's ongoing earning capacity so that the guideline support calculation is based on a stable and representative figure rather than on the happenstance of one particular year's earnings.
Even where a parent is currently employed and actively earning income, the court retains discretion under § 4058(b) to impute earning capacity if the parent's actual income is not a reliable indicator of ongoing financial resources. See In re Marriage of Loh (2001) 93 Cal.App.4th 325, 332 (affirming trial court's imputation of earning capacity where the obligor's actual income fluctuated due to the episodic nature of his work). The court's discretion in this regard is broad, and its determination will be upheld on appeal absent an abuse of that discretion.
C. Relevance of Loan-Out Entity Structure
Medrano Visuals, LLC operates as a pass-through entity for federal and California state tax purposes. Depending on the LLC's tax election, the income earned by the entity is reported either on Mr. Medrano's individual tax return through Schedule C (if treated as a sole proprietorship) or on Schedule K-1 (if the LLC has elected S-corporation treatment under Subchapter S of the Internal Revenue Code). In either case, the net income or loss of the LLC flows through to Mr. Medrano's individual return and is subject to individual income tax.
For child support purposes, California courts consistently look through loan-out entities and other pass-through business structures to reach the individual's actual economic benefit. The existence of a loan-out LLC does not insulate a parent from the full imputation of income that would otherwise be appropriate. The court will consider the gross receipts of the LLC, subtract only those business expenses that are legitimate, ordinary, and necessary within the meaning of Family Code § 4058(a), and treat the resulting figure as the parent's income for guideline purposes.
Family Code § 4058(a)(1) specifically includes income from "self-employment" within the definition of gross income for support purposes, and requires the court to evaluate business expenses with care. The court is not bound by the deductions claimed on the parent's tax return, and may disallow deductions that are excessive, duplicative, personal in nature, or not genuinely required for the production of business income. Common areas of scrutiny include:
• Vehicle expenses for personal-use vehicles characterized as business assets;
• Home office deductions that exceed the portion of the home actually and exclusively used for business purposes;
• Depreciation schedules that accelerate deductions beyond the actual economic useful life of the asset;
• Equipment purchases that are primarily personal in nature (e.g., consumer electronics, personal cameras, or other equipment not used exclusively for professional engagements);
• Travel and entertainment expenses that include a personal component; and
• Payments to family members or related parties for services not actually rendered or not rendered at fair market rates.
The forensic accounting analysis by YBL is specifically designed to identify any deductions claimed through Medrano Visuals, LLC that may overstate the entity's expenses and thereby understate Mr. Medrano's actual available income. To the extent that YBL identifies such deductions, the imputed income figure may be adjusted upward to reflect Mr. Medrano's true economic benefit from the LLC.
IV. Case Law on Imputation of Income to Freelance and Variable-Income Earners
A. Averaging of Variable Income
California appellate authority broadly supports the use of a multi-year averaging methodology when a parent's income fluctuates significantly from year to year. The rationale for averaging is straightforward: where annual income is volatile, any single year may overstate or understate the parent's actual earning capacity. A multi-year average smooths these fluctuations and provides a more reliable baseline for the guideline calculation.
The three-year average is the most widely accepted and commonly employed averaging period in California family courts. In In re Marriage of Riddle (2005) 125 Cal.App.4th 1075, 1084, the Court of Appeal upheld the trial court's use of a three-year average to determine the earning capacity of a self-employed parent whose income had varied substantially from year to year. The court reasoned that the three-year average "provide[d] a reasonable approximation of [the parent's] ongoing ability to generate income" and was "well within the court's discretion under Family Code section 4058, subdivision (b)."
Similarly, in In re Marriage of Loh, supra, 93 Cal.App.4th at 334, the Court of Appeal affirmed the use of an averaging methodology for an entertainment-industry professional whose income was project-dependent. The court noted that "the episodic and unpredictable nature of [the parent's] work makes a single year's income an unreliable measure of earning capacity" and endorsed the trial court's use of a multi-year average as a "reasonable exercise of discretion."
Courts retain discretion to select the averaging period that best reflects a parent's true earning capacity under the particular circumstances of the case. Some courts have used two-year averages where the parent's career trajectory is relatively stable, while others have used five-year averages where longer-term trends are relevant or where the parent's income has been affected by unusual events (such as a strike, a recession, or a career transition). The selection of the averaging period is committed to the trial court's sound discretion and will not be disturbed on appeal absent a showing that the chosen period is arbitrary or unsupported by the evidence.
In this case, the three-year average of $340,000 per year is proposed as the most reliable and appropriate measure of Mr. Medrano's earning capacity. The three-year period (2020–2022) encompasses a range of economic conditions — including the COVID-19 pandemic production shutdowns and subsequent recovery — and captures both higher-earning and lower-earning years. The resulting average smooths year-to-year volatility while reflecting Mr. Medrano's established career trajectory, market position, and professional reputation as a cinematographer working on feature and episodic projects at established budget levels. There is no basis for selecting a shorter or longer averaging period that would produce a materially different result.
B. Entertainment Industry Considerations
California courts have developed a body of precedent addressing income imputation for entertainment-industry professionals whose work is inherently episodic and project-dependent. The seasonal and project-based nature of film and television production — driven by development cycles, production schedules, network and studio ordering patterns, and post-production timelines — means that substantial gaps between engagements are a normal and expected feature of the work. These gaps do not, by themselves, indicate underemployment, nor do they suggest that the parent is failing to exercise reasonable efforts to secure work.
Courts recognize that an entertainment-industry professional's earning capacity should reflect both active engagement periods (when the parent is working on a production and earning fees) and anticipated gaps between projects (when the parent is not actively earning but is developing relationships, reviewing scripts, meeting with producers, and otherwise positioning for future engagements). The averaging methodology is particularly well-suited to this context because it captures the full economic reality of the parent's work cycle, rather than artificially inflating income by focusing on an active period or depressing it by focusing on a gap period.
In In re Marriage of Loh, the Court of Appeal explicitly addressed this issue in the context of a film-industry professional. The court observed that "the nature of the entertainment industry is such that periods of high earnings are typically followed by periods of lower or no earnings," and concluded that "the trial court did not abuse its discretion in averaging [the parent's] income over the relevant period to arrive at a reasonable approximation of earning capacity." Id. at 335.
Mr. Medrano's work history is consistent with this pattern. His active work schedule — including the recent seven-week Vancouver shoot for an episodic television production in early 2023 — demonstrates that he continues to be in demand as a cinematographer and is not voluntarily reducing his workload. The fact that his annual income varies from year to year is a natural consequence of the freelance, project-based structure of his career, not an indication of declining capacity or reduced effort.
C. Burden of Proof and Evidentiary Standards
The party seeking to impute income bears the initial burden of presenting evidence of the other parent's earning capacity. In re Marriage of Bardzik (2008) 165 Cal.App.4th 1291, 1301. This burden requires the moving party to present competent evidence establishing the three factors discussed in Section III.B above — ability, opportunity, and willingness to earn — and to demonstrate that the proposed imputed income figure is reasonable and supported by the record.
Ms. Fonseca's position on imputation is strengthened by several categories of evidence:
(1) Documented three-year earnings history. Mr. Medrano's individual and entity tax returns, 1099 records, and bank statements establish a documented track record of earnings averaging approximately $340,000 per year. This earnings history provides a concrete, verifiable foundation for the imputation figure, rather than relying on speculation or hypothetical earning scenarios.
(2) Established professional reputation and active engagement. Mr. Medrano is an established cinematographer and director of photography with credits on feature films and episodic television productions. His ongoing acceptance of engagements, including the recent Vancouver shoot, demonstrates that he remains active and in demand in his field.
(3) Independent forensic accounting analysis. The YBL forensic accounting report, when finalized, will provide an independent, expert analysis of Mr. Medrano's income and earning capacity. Mr. Yamamoto's credentials — including the ABV and CFF designations — and his experience in family law forensic accounting lend significant credibility to the analysis. The court will be able to rely on the YBL report as a neutral, data-driven assessment of Mr. Medrano's financial situation.
Mr. Medrano may argue in response that a different time period or methodology should be used for the averaging calculation, or that certain business expenses properly reduce his actual available income below $340,000. These anticipated counterarguments, and our responses, are addressed in detail in Section VII below. To the extent Mr. Medrano advances such arguments, the burden will shift to him to present evidence supporting the alternative approach. Our evidentiary position — grounded in documented tax returns, financial records, and expert forensic analysis — places us on strong footing to sustain the $340,000 figure.
Anticipated counterarguments and rebuttals should be fully prepared in advance of the support hearing or mediation session. The preparation should include a detailed review of the YBL report upon its delivery, supplemental research on any specific arguments raised by opposing counsel Gwendolyn R. Kwan of Kwan, Delacroix & Samuels LLP, and coordination with Mr. Yamamoto regarding his potential testimony.
V. Application to Mr. Medrano's Circumstances
A. Mr. Medrano's Ability to Earn
Mr. Medrano is an established cinematographer and director of photography with a professional career spanning more than a decade. He holds credits on feature films and episodic television productions, including both studio-level and independent projects. His skills are specialized, requiring expertise in camera operation, lighting design, visual storytelling, and post-production supervision that is developed through years of on-set experience and professional training. Cinematographers of Mr. Medrano's caliber command substantial fees for their services, reflecting the critical importance of the director of photography role to the quality and commercial viability of a production.
Mr. Medrano has maintained a consistent volume of work over the three-year period analyzed. While the specific projects and fee levels have varied, there has been no year in which Mr. Medrano failed to secure multiple professional engagements. His continued ability to book work at the levels reflected in his earnings history demonstrates that his professional skills remain current and marketable.
There is no evidence in the record of any disability, health limitation, or other factor that would reduce Mr. Medrano's ability to earn at or near his historical income levels. He has not claimed any physical or mental health condition affecting his capacity to work, nor has he suggested that any external factor limits his professional activities. His ability to earn at the imputed level is therefore well-established.
B. Mr. Medrano's Opportunity to Earn
The Los Angeles-area film and television production market remains robust, notwithstanding periodic fluctuations in production volume related to economic conditions, labor actions, and content-cycle shifts. Los Angeles is the primary center of domestic film and television production, and cinematographers based in the Los Angeles area have access to the largest and most diverse pool of production opportunities in the country.
Mr. Medrano's credentials and professional reputation position him for continued engagement at or near his historical income levels. His established relationships with producers, directors, and production companies — reflected in the recurring nature of some of his engagements — provide a foundation for ongoing work. The entertainment industry relies heavily on professional networks and reputation, and Mr. Medrano's demonstrated track record is a significant asset in securing future engagements.
Moreover, the Vancouver shoot demonstrates Mr. Medrano's willingness to accept out-of-state and international work, which expands his opportunity set beyond California-based productions. Many film and television productions are shot on location outside California, in jurisdictions offering competitive tax incentives, favorable exchange rates, or specific geographic settings. A cinematographer who is willing and able to travel for on-location work has access to a broader range of opportunities than one who is geographically constrained. Mr. Medrano's acceptance of the Vancouver engagement reflects both his professional flexibility and the breadth of opportunities available to him.
C. Mr. Medrano's Willingness to Earn
There is no indication in the record that Mr. Medrano is voluntarily underemployed or that he is deliberately suppressing his income to reduce a potential child support obligation. He is actively accepting professional engagements and continues to work at a pace consistent with his historical pattern. The imputation analysis in this matter is not predicated on a finding of voluntary underemployment or bad faith; rather, it is a methodological tool for normalizing Mr. Medrano's variable freelance income to arrive at a stable and representative figure for guideline calculation purposes.
This distinction is important. In cases involving voluntary underemployment, imputation of earning capacity carries an implicit finding that the parent is not making reasonable efforts to earn at his or her potential. Here, no such finding is necessary or appropriate. Mr. Medrano is working and earning income. The question is simply how to translate his variable annual earnings into a fixed monthly income figure for the DissoMaster calculation. The three-year average serves this purpose without any implication that Mr. Medrano is shirking his professional obligations or manipulating his income.
D. Proposed Imputed Income Figure
Based on the foregoing analysis, the proposed imputed gross annual income for Mr. Medrano is $340,000. This figure is derived from the three-year average of his documented earnings for the 2020, 2021, and 2022 tax years, is supported by the preliminary review of his tax returns and financial records, and will be confirmed by the YBL forensic accounting report.
For purposes of the DissoMaster guideline calculation, Mr. Medrano's gross monthly income is $28,333 ($340,000 ÷ 12, rounded to the nearest dollar).
Combined with Ms. Fonseca's gross monthly income of $72,500 ($870,000 ÷ 12), the combined gross monthly income for the guideline calculation is $100,833. These figures should be used as the income inputs for all subsequent DissoMaster runs and settlement analyses unless and until the YBL report indicates that an adjustment is warranted.
VI. Impact on the Guideline Child Support Calculation
The imputed income figure feeds directly into the guideline child support calculation under Family Code § 4055, which establishes the algebraic formula for determining the presumptively correct amount of child support. The calculation is performed using the DissoMaster software program, which is the standard tool employed by California family courts and practitioners for this purpose.
The parties have two minor children:
(1) Isabela Luz Fonseca-Medrano, born February 11, 2017 (age 6 at the time of this memorandum); and
(2) Mateo Elías Fonseca-Medrano, born August 29, 2019 (age 3 at the time of this memorandum).
Both children are currently residing with Ms. Fonseca under the temporary custody order entered on May 30, 2023, which established a 60/40 timeshare in favor of Ms. Fonseca. The proposed parenting plan, which is subject to ongoing negotiation and will be addressed at mediation or hearing, contemplates a custodial timeshare of approximately 63.6% to Ms. Fonseca and 36.4% to Mr. Medrano. This corresponds to an overnight distribution of approximately 232 overnights per year with Ms. Fonseca and 133 overnights per year with Mr. Medrano. The timeshare percentage is a critical input to the DissoMaster calculation, as it directly affects the allocation of support obligations between the parties.
At the anticipated timeshare split of approximately 63.6% / 36.4% (Fonseca / Medrano), and using the imputed gross monthly incomes of $72,500 for Ms. Fonseca and $28,333 for Mr. Medrano, the preliminary DissoMaster guideline amount is approximately $1,274 per month payable by Ms. Fonseca to Mr. Medrano.
This result — in which the higher-earning parent pays support to the lower-earning parent — is consistent with the structure of the Family Code § 4055 formula, which is designed to equalize the standard of living for the children across both households. Despite Ms. Fonseca's substantially higher income, the guideline amount is moderated by her majority timeshare. The § 4055 formula allocates a larger portion of the total child support obligation to the parent with the higher income but reduces the transfer payment to the extent that the higher-earning parent has the children for a greater share of the time, on the theory that the higher-earning parent is already bearing a proportionally larger share of the children's day-to-day expenses through direct custodial spending.
A separate and more detailed guideline analysis memorandum was prepared on May 15, 2023 (Petrov to Archer), which addresses the DissoMaster inputs, assumptions, and outputs in full. That memorandum should be read in conjunction with this one to provide a complete picture of the support calculation. The income figures used in this memorandum are consistent with those used in the May 15 memorandum, and any adjustments resulting from the YBL report should be applied to both analyses.
VII. Anticipated Respondent Arguments and Counterpoints
A. Argument: Income Should Be Based on Most Recent Year Rather Than Three-Year Average
Mr. Medrano may argue that his most recent year's income — whether for tax year 2022 or, as data becomes available, for the current 2023 tax year — is a more accurate reflection of his current earning capacity than a three-year average. If the most recent year's income is lower than the three-year average, he may contend that the average overstates his present ability to earn. Conversely, if the most recent year's income is higher, Ms. Fonseca may wish to consider whether the higher figure would produce a more favorable result for our client, though this would require departing from the averaging methodology.
Counterpoint. California courts routinely use multi-year averaging for variable-income earners precisely because any single year may be unrepresentative of the parent's ongoing earning capacity. As discussed in Section IV.A above, the Court of Appeal has affirmed the use of three-year averages in multiple cases involving freelance and self-employed parents. See In re Marriage of Riddle, supra, 125 Cal.App.4th at 1084; In re Marriage of Loh, supra, 93 Cal.App.4th at 334.
The three-year average smooths annual fluctuations — whether upward or downward — and provides a more reliable baseline for the guideline calculation. Selecting a single year invites manipulation and produces a support figure that may not accurately reflect the parent's long-term financial situation. This is particularly true in the entertainment industry, where a single year's earnings can be dramatically affected by the timing of project starts and wrap dates, the availability of suitable projects, and other factors that have no bearing on the parent's underlying earning capacity.
If Mr. Medrano advocates for the use of a single year, our response should emphasize the volatility of his income history and the well-established precedent favoring multi-year averages for freelance earners. We should also note that the three-year period includes both higher-earning and lower-earning years, and therefore does not systematically overstate or understate his capacity.
B. Argument: Business Expenses Should Further Reduce Income
Mr. Medrano may claim that Medrano Visuals, LLC incurs substantial business expenses that further reduce his net available income below the $340,000 figure. Potential categories of claimed business expenses include equipment purchases and depreciation (cameras, lenses, lighting rigs, grip equipment), professional liability and equipment insurance, crew costs for assistants and operators hired by the LLC, travel and transportation expenses for on-location shoots, professional development and continuing education, union and guild dues, and marketing and promotional costs.
Counterpoint. Family Code § 4058(a) requires the court to consider gross business income minus only those expenses that are ordinary, necessary, and actually incurred in the operation of the business. The statute does not permit a parent to reduce available income through excessive or personal deductions.
The YBL forensic analysis is specifically designed to evaluate each category of business expense claimed through Medrano Visuals, LLC and to determine whether those expenses are legitimate, properly classified, and reasonable in amount. Mr. Yamamoto's report will identify any expenses that are:
(a) Personal in nature but improperly characterized as business expenses (e.g., personal vehicle use, personal travel, meals and entertainment with no business nexus);
(b) Excessive in amount relative to industry norms for a cinematographer operating at Mr. Medrano's career level (e.g., equipment purchases that significantly exceed what is required for the projects he undertakes);
(c) Depreciation deductions that accelerate the write-off of assets beyond their actual economic useful life, thereby reducing reported income in the near term at the expense of future periods; or
(d) Payments to related parties (if any) for services not actually rendered or not rendered at fair market rates.
To the extent that YBL identifies improperly claimed or excessive deductions, those amounts will be added back to Mr. Medrano's gross income for support purposes, potentially increasing the imputed income figure above $340,000. Our position is that only genuinely necessary business expenses should reduce Mr. Medrano's available income, and that any attempt to inflate deductions to suppress the support calculation will be identified and challenged.
C. Argument: Earning Capacity Is Declining
Mr. Medrano may argue that his earning capacity is declining due to one or more of the following factors: changing market conditions in the film and television industry; an alleged shift in production patterns away from the types of projects on which he has historically worked; aging out of certain project types or losing competitive advantage to younger cinematographers; or a deliberate decision to reduce his workload for quality-of-life or parenting reasons.
Counterpoint. Mr. Medrano's recent professional activity directly contradicts any claim of declining earning capacity. His acceptance of the seven-week Vancouver shoot in early 2023 — a substantial engagement on an episodic television production — demonstrates that he continues to be sought after by production companies and is willing to accept significant commitments. His ongoing active engagement in the industry, including the cultivation of professional relationships and the regular acceptance of projects, is inconsistent with a narrative of decline.
Moreover, the three-year average already accounts for natural year-to-year variation in Mr. Medrano's income. If his earnings in any particular year were lower than the average, that data point is already reflected in the computation and has the effect of pulling the average downward. The averaging methodology is, by design, responsive to trends in the underlying data. A declining earning trajectory would produce a lower average, while a stable or increasing trajectory would produce a higher one. The $340,000 figure is the mathematical result of the three-year computation and already incorporates whatever trend, if any, is present in the data.
If Mr. Medrano wishes to argue that his earning capacity has declined to a level below the three-year average, he will bear the burden of presenting competent evidence to support that claim — such as evidence of a specific health condition, a demonstrable industry contraction affecting cinematographers at his level, or other concrete factors beyond normal year-to-year variability. Speculative assertions of future decline are insufficient. See In re Marriage of Bardzik, supra, 165 Cal.App.4th at 1302 (holding that "the court is entitled to rely on historical earnings data as the best available evidence of earning capacity absent a showing of changed circumstances").
VIII. Recommendations
Based on the analysis set forth in this memorandum, the following recommendations are presented for consideration:
1. Proceed with the proposed imputed income figure. We recommend proceeding with the $340,000 annual / $28,333 monthly imputed gross income figure for Mr. Medrano in all child support calculations, DissoMaster runs, and negotiation positions. This figure is well-supported by the three-year average of his documented earnings, is consistent with California Family Code § 4058(b) and applicable appellate authority, and represents the figure we believe the court would most likely adopt if the issue is contested.
2. Await the YBL forensic income analysis report. The final delivery of the forensic income analysis report from Harold K. Yamamoto of Yamamoto Brace & Liu, LLP is expected in the coming weeks. Upon receipt, the report should be reviewed carefully to confirm the three-year average and to identify any adjustments to claimed business expenses that could affect the imputed income figure. If the YBL analysis produces a figure materially different from $340,000 — whether higher or lower — the support calculations and negotiation positions should be adjusted accordingly.
3. Prepare to present the imputation analysis at mediation or hearing. The first mediation session is expected to be scheduled following delivery of the custody evaluation report, which is anticipated in early October 2023. We should be fully prepared to present the imputation analysis and the YBL report at mediation. If the matter cannot be resolved through mediation and proceeds to a contested support hearing, Mr. Yamamoto should be prepared to testify as an expert witness in support of the imputed income figure. Preparation for testimony should include a review of Mr. Yamamoto's report, a pre-hearing conference to discuss anticipated cross-examination topics, and coordination on the presentation of supporting exhibits.
4. Pursue discovery or informal exchange if Mr. Medrano disputes the imputed figure. If Mr. Medrano or his counsel, Gwendolyn R. Kwan of Kwan, Delacroix & Samuels LLP, disputes the $340,000 imputed income figure, we should consider requesting updated tax returns, bank statements, and Medrano Visuals, LLC financial statements through formal discovery (interrogatories, requests for production of documents, and/or subpoenas) or through informal exchange with opposing counsel. Early and complete disclosure of Mr. Medrano's financial records will strengthen our evidentiary position and may facilitate resolution without the need for a contested hearing.
5. Coordinate with the guideline analysis memorandum. The income figures used in this memorandum should be cross-referenced with the California child support guideline analysis memorandum dated May 15, 2023 (Petrov to Archer) to ensure that consistent figures are used across all work product in this matter. Any adjustments resulting from the YBL report should be applied to both the imputation analysis and the guideline calculation to maintain internal consistency.
IX. Conclusion
Imputation of $340,000 in annual gross income to Respondent Rafael J. Medrano is well-grounded in California Family Code § 4058(b), supported by his documented three-year earnings history as reflected in individual and entity tax returns and financial records, and consistent with California appellate authority on the treatment of variable-income and freelance earners in family support proceedings. The three-year averaging methodology is the standard approach employed by California family courts for parents whose income fluctuates due to the project-based nature of their work, and is particularly well-suited to the entertainment industry context in which Mr. Medrano operates.
The loan-out entity structure of Medrano Visuals, LLC does not insulate Mr. Medrano from imputation or otherwise reduce the income attributable to him for support purposes. California courts routinely look through pass-through business entities to the individual's actual economic benefit, and the forensic accounting analysis by Yamamoto Brace & Liu, LLP is designed to ensure that only legitimate, ordinary, and necessary business expenses are deducted from the LLC's gross receipts in computing Mr. Medrano's available income.
The YBL forensic income analysis report, upon its completion and delivery, will provide the evidentiary foundation needed to support this position in mediation or at a contested support hearing. Mr. Yamamoto's independent expert analysis, combined with the documentary record of Mr. Medrano's tax returns and financial records, will present a compelling case for imputation at the three-year average.
The $340,000 annual / $28,333 monthly gross income figure should be used as the basis for all subsequent DissoMaster guideline calculations and settlement negotiations in this matter. In conjunction with Ms. Fonseca's gross monthly income of $72,500 and the proposed timeshare allocation, this figure will produce a guideline support amount that accurately reflects the parties' respective financial contributions and custodial responsibilities.
This memorandum is prepared as privileged and confidential attorney work product in anticipation of litigation and for purposes of providing legal advice to the client. It is not intended for disclosure to any party outside Calderwood & Harkness LLP without the express authorization of the responsible partner. Distribution is limited to members of the Fonseca matter team.

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

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