The recent case of Bekkers v. Bekkers of the Ontario Superior Court of Justice provides an interesting analysis of imputing income to a payor who is the majority shareholder and sole employee of their own small business. In this case, the parties were married for 17 years and the husband was an electrician who worked for and controlled his own company. The wife provided bookkeeping services to the said company and owned 49% of the shares in same. In 2007, the company paid the husband a salary of $82,560.00. Although Child Support and Spousal Support are normally based on the payor's total income according to their Income Tax Return, there are circumstances in which the Court will attribute additional income to a payor who owns a business and puts personal expenses through the business. In this case, the wife argued that the Court should impute additional income to the husband in the amount of 50% of the company's gross profits on this very basis.
The husband admitted that he had a truck, the expenses of which were paid by the company. Although the truck was used in the course of the husband's business, he also made personal use of same. The Court reviewed and reiterated the correct approach to be taken in determining whether or not additional income should be imputed to the husband on the basis of his truck and other personal expenses that the wife alleged were covered by the business. The Court stated that the first step in this approach is to determine the husband's income which is paid to him by the company as wages and/or salary. Next, the Court examines section 18(1)(a) of the Child Support Guidelines, which provides that, where this salary does not fairly reflect all money that the payor has available for the payment of child support, the court may consider including certain additional amounts in their annual income. This amount can come from a variety of sources, including all or part of the pre-tax income of the corporation for the most recent taxation year. The Court was also aided by section 19(1)(g) of the Child Support Guidelines which allows the Court to impute income which would be appropriate in the circumstances, which circumstances include where a payor unreasonably deducts expenses from income.
It was the wife's position that the company truck was partly for personal use and, as such, the deduction of these expenses were unreasonable. The Court found the wife's approach in this regard to be inappropriate. As the party alleging that a benefit has been paid to or on behalf of a spouse by a corporation controlled by that spouse has the onus of proving that such a benefit was in fact paid, the value of the said benefit, and the fact that deducting this expense from income was unreasonable. Only once these are established does the onus switch to the payor spouse to demonstrate that these payments were, in fact reasonable in the circumstances.
In the case at bar, the Court found that the wife had not discharged her onus of adducing evidence of the amount of any benefit and/or expense paid and, therefore, failed to prove to the Court that the husband's expenses were unreasonably deducted from income. Therefore, the Court awarded child and spousal support on the basis of his stated salary, namely $82,560.00.