Vancouver Spousal Support Pre Tax Profits Lawyer 604-602-9000
The Vancouver Spousal Support Pre Tax Profits lawyers at MacLean Family Law have noticed that courts are becoming more attuned to ensuring support orders involving self employed business owners, entrepreneurs and professionals do not harm or destroy the financial health of the business. Unlike employed persons whose T-4 is reasonably accurate as far as their declared income is concerned, a business owners tax return often differs substantially from the real income the business generates.
Vancouver Spousal Support Pre Tax Profits Mean You Don’t Just Look at The Personal Tax Return
MacLean Law’s experienced Vancouver Spousal Support Pre Tax Profits lawyers warn the last thing you want to focus on in a case involving a self employed person is their personal tax return. You need to assess the financial statements of the company, personal expenses paid by the company, tax free shareholder loans that may be available, cash flow needs of the company and income splitting corrections that need to be made after separation to find the true income for child and spousal support purposes. You cannot have a business owner earning $1,000,000 of profit hoarding it in the company and taking only a small amount out that shows up on the personal tax return. Conversely, you can’t financially pillage the company and destroy it with an overreaching support obligation.
Vancouver Spousal Support Pre Tax Profits Ensure Golden Goose Not Killed
BC Courts in Vancouver Spousal Support Pre Tax Profits cases are sensitive to ensuring someone doesn’t refuse to draw money out of their company or practice to artificially reduce their income to defeat a child or spousal support claim. However, courts will balance the need to ensure the company survives in aVancouver Spousal Support Pre Tax Profits dispute. Do you know many business owners in today’s economy who take every penny out of their business? Working capital is needed, cash cushions for dry spells or downturns may be prudently saved and if a sound management plan isn’t in place or is ignored by the courts then there is a risk of “killing the goose that lays the golden egg”. If a business is stripped of all of its profits in the short term it may not survive in the long term.
Vancouver Spousal Support Pre Tax Profits Recent Case Respects Management Decisions
Vancouver Spousal Support Pre Tax Profits summarize the key parts of this weeks Sigurdson v Sigurdson where a wife sought to have her husband’s half share of additional pre tax profits earned by a business he owned with his brother added to his income to increase the spousal support he had to pay her. Her claim was unsuccessful and here is why:
[11] The claimant uses $395,000 as a starting point for her submission as to the respondent’s income for support purposes. She would add to that figure certain personal expenses paid on his behalf with respect to, at least, a vehicle, some meals, a cell phone, gasoline for vehicles and, on occasion for the family boat, and for some travel and accommodation. In addition, she submits that SFP’s May 31, 2015 year-end financial statements indicate that SFP had pre-tax corporate income of over $1,300,000, half of which she says should be included in the respondent’s guideline income for spousal support purposes.
[12] The claimant relies on the discussion of the inclusion of all or part of corporate pre-tax income for child support purposes in Hausmann v. Klukas, 2009 BCCA 32. In particular, the claimant argues that the onus is on the respondent to rebut, with clear evidence, the “emerging presumption” that pre-tax corporate income is assumed to be available to a payor unless there is evidence to the contrary (Hausmann, para. 51 citing Jeffery v. Motherwell, 2006 BCSC 140, at para. 13).
[13] In addition, the claimant relies on Professor James McLeod’s comments as cited in Hausmann at para. 54, in particular:
…A spouse who controls the business and chooses to leave the money in the business must be prepared to explain why his or her decision is reasonable from a business point of view.
…Whatever the reason alleged for retaining earnings in a business, most courts assume that a spouse should take as much money as is available as income from his or her business and a spouse who does not do so is trying to avoid his or her family obligations.
[14] In response, the respondent submits that Hausmann and the cases referred to in it, are considering a parent’s obligation to pay child support and that there are public policy reasons for casting a wide net to include as much available income as possible to support children of a relationship. Similar policy considerations do not apply to spousal support.
[15] Further, the respondent submits that the available evidence on this application rebuts the presumption of inclusion if it applies. That evidence is from Brian Sigurdson, the respondent’s brother, who says that he has been primarily responsible for SFP’s finances while the respondent has been primarily responsible for its’ operations.
[16] Brian Sigurdson says that SFP’s financial survival depends largely on securing future inventory by way of timber sale deposits, logs and lumber. As a result, at any given time, SFP may be sitting on timber sale deposits, logs and lumber worth between $4.5 and $8.0 million. Therefore, any “profit” on SFP’s income statement which appears on the year-end snapshot reflected in the financial statements is generally already sunk into inventory. Thus, although SFP’s 2015 Financial Statements show earnings before taxes of $1,333,431, SFP did not have that money in a bank account at the end of the fiscal year. Rather that amount was tied up in timber sales deposits and a sufficient cushion of logs and lumber to meet the mill’s requirements and to provide flexibility to ramp up production in the event of peaks in the lumber market.
[17] I have concluded, based on the evidence currently available to me, and which is not yet the subject of expert evidence, that it would be inappropriate to determine that 50% of SFP’s pre-tax income should be allocated as income to the respondent for spousal support purposes. Brian Sigurdson has provided an explanation of why SFP must retain earnings for operational purposes. That evidence has not been refuted by evidence from the claimant or otherwise.
Hire A Skilled Vancouver Spousal Support Pre Tax Profits Lawyer
Vancouver Spousal Support Pre Tax Profits cases are tricky. Cash flow requirements versus proper child and spousal support require a thorough analysis of what the real income is a proper support calculation. Our firm is Vancouver’s top rated family law firm according to Top Choice Awards and we have offices in Vancouver, Surrey, Kelowna, Richmond and Fort St John, BC. 1-877-602-9900.
