Vancouver Support Capital Gains Lawyers deal with cases where one-time capital gains income may or may not be part of the child support or spousal support guideline income calculation. Capital gains income is taxed at a lower rate than employment income so important corrections are required to capital gains income. Our top-rated* Vancouver Support Capital Gains Lawyers explain that key corrections have to be made to ensure that if capital gains income is included you don’t use the tax return amount as it is far too low. However, in other circumstances, a one-time capital gain may not be included in a guideline income calculation at all. Further, different rules may apply to capital gains income for spousal support and child support particularly if the capital asset was family property allocated to the selling spouse as part of a settlement agreement or court order.
Vancouver Support Capital Gains Lawyers 1 877 602 9900
In today’s blog, savvy senior family lawyer Tal Wolf explains some key points that could save a paying spouse thousands of dollars of child support.
Imagine this scenario: You just came to peace with the fact that you were going to have to start paying monthly child or spousal support for the next 19 years (or more!). You make under $100,000 per year. The user-friendly online calculator that you found online even told you how much support you were going to have to pay each month. After all, you only had to plug in your income, maybe your spouse’s income, a few details about your child, and then out pops a figure. Less than a thousand dollars per month! You are relieved once you sort out how you’ll work that into your regular budget. Maybe you’ll even have the funds withdrawn automatically with each paycheque, so you won’t even feel like the money is missing.
This goes on for a few years, before BAM! You are hit with a lawsuit out of nowhere by your supposed “co-parent” accusing you of underpaying support, and claiming you owe tens of thousands of dollars in arrears. You are devastated because you knew you’ve done right by your child through financial support. You thought you had a deal with the other parent. You thought you were following the law. And, after all, the online calculator told you what you had to pay! How could this happen? The answer is simple – you’ve sold something valuable and realized a taxable capital gain. Maybe it was stocks that you’ve had for many years. Maybe it was a business. Or maybe a property that you decided to flip.
The top-rated* Vancouver BC Family Lawyers at MacLean Law know that unless you’re selling stuff as your primary source of earning a living, it may not feel fair to have your Guideline Income for support purposes balloon up for a whole year just because you’ve cashed out an investment. We call these non-recurring capital gains. Section 17 of the Guidelines allows a court to make adjustments in appropriate cases to arrive at the fairest determination of your annual income. The CSG allows a court to use its discretion to adjust the amount of a “non-recurring capital or business investment loss”, including related expenses, carrying charges and interest expenses, if to do otherwise would not result in the fairest determination of your annual income. See our blog on this concept. So, know before you let it go by reading the following Vancouver Support Capital Gains Lawyers top 10 list!
Top 10 Capital Gains Income Support Scenarios
Here are the top 10 situations when selling off an asset is least likely to come back to bite your wallet when your spouse decides to review support:
- When you are forced to do the sale, such as under a “shotgun” clause giving your business partner the option to buy you out, because this is more a return of capital rather than a return “on” capital;
- When you transfer a professional practice from one corporate vehicle to another;
- When the asset was not an employment bonus or similar work-incentive;
- When the proceeds from the sale are going to be needed to maintain a new or going concern (“killing the goose that lays the golden eggs”);
- When the proceeds will form the basis of your retirement fund;
- When the sale would not have resulted in a change in the lifestyle of your spouse or children, had your family remained intact;
- When the asset sold already had been divided with your spouse, such that including it as income would cause a “double-dip”;
- When the sale does not generate cash, such as the restructuring of capital for tax or other legitimate business reasons;
- When the asset is simply converted into another investment generating similar returns, such that there is no real change to your standard of living;
- When the proceeds are invested in the child, either directly (trust fund) or indirectly (the purchase of a safe minivan to transport the child on access visits).
Top* Vancouver Family Lawyers 1 877 602 9900
If you’re concerned that selling something valuable may cause your spouse to come after a piece of it through increased support, call the Vancouver Support Capital Gains Lawyers Family at MacLean Law before you pull the trigger on the transaction. With some good advice and planning, we can help make sure the investment stays in your pocket. Or, if we advise you that the capital gain is likely to impact on support, we can formulate a plan that may allow you to average the extraordinary income over several years and thereby keep your payments smaller.