Vancouver Non Recurring Income Support Lawyers handle cases where there are unusual, one time, or short-term gains that often total in the millions of dollars. Our Vancouver Non Recurring Income Support Lawyers know the stakes in these cases are high because awards that include these unusual income streams result in spousal and child support awards well over $10,000 each month. Sometimes this income is already shared as property between the spouses and sometimes it occurs after separation. Hiring a skilled high net worth family lawyer like Lorne N MacLean, QC makes solid sense.
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In the new BC Appeal decision in Dunnett v Dunnet the large capital gains income from the sale of the husband’s business was excluded from the calculation of his Guideline income for the purpose of determining the amount of an order for retroactive child support, as the gain was a non-recurring one that resulted from the sale of the appellant’s primary income-earning asset.
Vancouver Non Recurring Income Support Lawyers – The Test To Include Or Exclude Income For Child and Spousal Support
[21] In Brown, the court discussed ss. 17–20 of the Guidelines in the context of their objectives:
[22] Section 1 of the Guidelines explicitly sets out certain objectives:
1. The objectives of these Guidelines are
(a) to establish a fair standard of support for children that ensures that they continue to benefit from the financial means of both spouses after separation;
(b) to reduce conflict and tension between spouses by making the calculation of child support orders more objective;
(c) to improve the efficiency of the legal process by giving courts and spouses guidance in setting the levels of child support orders and encouraging settlement, and
(d) to ensure consistent treatment of spouses and children who are in similar circumstances.
[23]Sections 17-20 of the Guidelines allow courts a degree of flexibility in specific circumstances where parties have unusual forms or patterns of income, or where they are able to manipulate their income for tax purposes in a manner that might frustrate the goals of the Guidelines. It is important, however, in interpreting and applying those sections, that courts recognize the need for consistent and predictable results. Courts should interpret ss. 17-20 of the Guidelines with a view to advancing the objectives set out in s. 1.
The Decision
In Dunnett the court looked at the sale of the husband’s business pursuant to a shotgun buyout clause with his partner.
[22] Although the capital gains received by Mr. Dunnett were amortized over five years, they are of a non-recurring nature, as they were paid from a one-time sale of the shares of his business. Whether these gains should be excluded depends on an assessment of “the fairest determination” of income. What is fair is to be determined in accordance with the objectives set out in s. 1 of the Guidelines.
[23] There are many cases where the objective that children benefit from the financial means of their parents (s. 1(a)) is of primary importance. It was recognized in Mariangeli v. Mariangeli (2003), 66 O.R. (3d) 40, where Mr. Justice Weiler stated:
[30] While the courts have differed in their approach when dealing with non-recurring income, the recurring theme in that the child of the marriage should benefit from a sudden increase in lifestyle and money available to the family.
What Factors Should Apply?
[24] This statement of the law has been referred to with approval in this court, in Brown, and the Alberta Court of Appeal in Schick v. Schick, 2008 ABCA 196. However, there are numerous factors that should be taken into account in assessing whether the inclusion of a non-recurring capital gain should be included as a fair determination of income. In Ewing v. Ewing, 2009 ABCA 227, the court observed as follows:
[32] Determining whether a section 16 calculation is fair frequently involves consideration of non-recurring gains. Courts should be alert to the nature of any non-recurring gain and whether it is derived from the sale of capital. That is particularly true when the sale involves capital which forms the basis of a payor’s income, and whenever capital is sold the court should consider the effect of that sale on future income. In Kowalewich v. Kowalewich, 2001 BCCA 450 (CanLII), 155 B.C.A.C. 143, the British Columbia Court of Appeal noted that making money available for support purposes, when it may be needed to maintain a going concern, would be equivalent to killing the goose that laid the golden egg. Moreover, depending on a payor’s age, a sale of assets may be the basis of a payor’s retirement fund, which, in the usual case, is not used to increase a family’s lifestyle but is invested to provide future income. In that case, the investments of capital are available for future support.
[33]Thus, the nature of the sale of a capital asset, or other extraordinary gain or fluctuation in income, should always be considered when determining fair income. Frequently the fairest method of income may be to exclude the gain. On the other hand, where a non-recurring gain is in the nature of an employment bonus, in the sense that it is truly income for work done, its inclusion in section 16 income may not make that method of calculation unfair. The sale of stock options as part of annual compensation may be such an example.
[34]In addition to considering the nature of the non-recurring gain, or fluctuation of income, it is also important to consider the purpose of support orders when deciding whether a section 16 calculation of income is fair. Support orders are directed at ensuring that, to the extent possible, that children enjoy the same standard of living they would have experienced if the marriage had not broken down. Thus, when determining a fair and reasonable income, the day-to-day standard of living the family would have enjoyed, had it remained intact, is relevant. A court might want to consider whether a specific non-recurring gain would have resulted in a change in lifestyle of a particular family, had it remained intact.
Factors For And Against Inclusion
Hiring a high net worth family lawyer can help you frame a proper argument for incusion or exclusion of the income for child and spousal support purposes. Here are key factors DUNNETT identified as a guide:
[25] The court then set out a list of matters that a court might consider in assessing a fair determination of income at para. 35:
- Is the non-recurring gain or fluctuation actually in the nature of a bonus or other incentive payment akin to income for work done for that year?
- Is the non-recurring gain a sale of assets that formed the basis of the payor’s income?
- Will the capital generated from a sale provide a source of income for the future?
- Are the non-recurring gains received at an age when they constitute the payor’s retirement fund, or partial retirement fund, such that it may not be fair to consider the whole amount, or any of it, as income for child support purposes?
- Is the payor in the business of buying and selling capital assets year after year such that those amounts, while the sale of capital, are in actuality more in the nature of income?
- Is inclusion of the amount necessary to provide proper child support in all the circumstances?
- Is the increase in income due to the sale of assets which have already been divided between the spouses, so that including them as income might be akin to redistributing what has already been shared?
- Did the non-recurring gain even generate cash, or was it merely the result of a restructuring of capital for tax or other legitimate business reasons?
- Does the inclusion of the amount result in wealth distribution as opposed to proper support for the children?
