Calgary Family Business Imputed Support Income lawyers handle cases where the need for a company to remain healthy and strong for the benefit of all separated family members is balanced against the needs of recipients of Calgary spousal support and Calgary child maintenance. Meet with one our Senior Calgary family lawyers today by calling us at 403 444 5503
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Calgary Family Business Imputed Support Income 403 444 5503
Calgary Family Business Imputed Support Income“Imputing Income for Support Purposes Part 2 – Business Income”
In a previous article, I explained that if your ex-partner is regularly employed, it is relatively straightforward to determine the appropriate income on which they should pay child support or spousal support – take their total income before taxes (as set out in Line 150 of their annual Income Tax and Benefit Return or Notice of Assessment) and apply it to the Federal Child Support Guidelines (FCSGs) table for child support purposes, or the Spousal Support Advisory Guidelines (SSAGs) for spousal support purposes. In that article on Underemployed Spouses and Support Income, I explained what the courts can do if your ex-spouse is not earning as much as they could or should be earning, particularly that the Court can impute (ie. assign) a higher income if it is determined your ex-spouse is intentionally under or un-employed for the purpose of defeating their support obligations.
Calgary Family Business Imputed Support Income – Business Income And Personal Tax Returns Differ
But what are the other reasons the Court can impute a different (ie. higher) income to your ex-spouse for support purposes, especially if they earn income through a business or receive additional compensation from their employer? There are three (3) other ways a Court can impute a higher income to a support payer by looking at their business income, specifically where:
► their corporation has pre-tax income [s. 18(1) FCSGs];
► they unreasonable deduct expenses from income [s.19 (1) & (2) FCSGs], or;
► they do not fully disclose their business’ financial information [ss. 23 & 24 FCSGs].
Calgary Family Business Imputed Support Income Explained
Pre-tax Corporate Income – Section 18(1)(a) of the FCSGs says that if a spouse is a shareholder, director or officer of a corporation and their Line 150 income does not fairly reflect all the money available to the spouse for the payment of support, the Court may add in all (or a portion) of the corporation’s pre-tax (revenue less expenses) income for the most recent tax year to determine the spouse’s annual income for support purposes. Whether the Court will add-in all or a portion of the pre-tax income will depend on may factors including the percentage ownership of the spouse in the corporation and any outstanding obligations (ie. debts) of the corporation;
Unreasonably Deducted Business Expenses – Similarly, Sections 19(1)(g) & (2) of the FCSGs provide that where the spouse unreasonably deducts expenses from income (even if permitted under the Income Tax Act) for personal reasons, the Court can impute such amount as it considers appropriate under the circumstances to the income of the spouse for the payment of support. Rental or farming losses, housing allowances and expenses for such things as vehicles, computers, cellphones, travel expenses and entertainment may be added back in to income for support purposes. This approach has been supported in Alberta in the case of C.L.E. v. B.M.R. (2010, ABCA 187) where the Court of Appeal stated:
“In theory, a court fixing child support could simply adopt whatever figure the payor parent chose and actually filled in as the total (line 150) on his or her tax return. But that would be unreliable and could even be dangerous. A taxpayer who understates his or her income to the tax authorities should not get a second benefit: reduced child support obligations…”
Failure to Disclose Financial Information – Finally, Sections 23 & 24 of the FCSGs say that where the spouse fails to provide adequate financial information when ordered to do so, the Court can draw an adverse inference regarding the spouse’s actual income and impute an appropriate amount to the income of that spouse for the payment of support. This approach has also been recently supported by the Alberta Court of Appeal in the case of Cunningham v Seveny (2017 ABCA 4), where the Court specifically applied the fundamental principle of full and honest financial disclosure in family law matters (for more information on this topic, please see my article on Calgary Family Financial Disclosure to those with self-employment or corporate income, stating:
“[Disclosure] includes not only a requirement to provide a statement of all payments or benefits, but also a sufficient explanation to facilitate the recipient’s assessment of the reasonableness of these payments or benefits in the context of determining income available for discharge of child support obligations… The content of the disclosure must be sufficient to allow meaningful review by the recipient parent, and must be sufficiently completed and comprehensive that, if called upon, a court can readily discharge its duty to decide what amount of the disclosing parent’s annual income fairly reflects income for child support purposes”.
Calgary Family Business Imputed Support Income – Call 403 444 5503
Calgary Imputed Business Income Support Lawyers advise their clients of the many possible ways to impute additional income to an ex-spouse who earns income from business sources (or is not fully employed to their possible extent) to determine the proper amount of their income for support purposes, and assist their clients in bringing the appropriate court applications to make sure their ex-spouse pays a fair and reasonable amount of support to their family. Call Peter Graburn to get things sorted out properly.
