Are gifts “income” for support purposes?
In a previous article, I set out a list of common situations wherein a court may impute income to a support payor, as set out in the Child Support Guidelines. One situation not specifically included in that list is the situation of “gifts”, which are non-taxable payments that do not appear on a support payor’s income tax return. Could gifts still be included as part of a support payor’s income for the purpose of determining his or her support obligation?
The answer to this question, as with many questions in law, is “it depends”. It is a situation that must be analyzed on a case-by-case basis. If you think about it, it does make sense that someone receiving a one-time gift from a friend in a time of need is a much different position than someone who is given regular monthly gifts from his parents, which fund his lifestyle.
As discussed in my previous article, the list of situations wherein a court may impute income to a support payor is not exhaustive, and it is open to the court to find new circumstances in which it is appropriate to impute income, including situations of a support payor receiving “gifts”. In considering whether it is appropriate to include the receipt of unusual gifts in income, the court will consider a number of factors, including:
- the regularity of the gifts (how often gifts were given);
- the duration of their receipt (how long has the gifting gone on);
- whether the gifts were part of the family’s income during cohabitation that entrenched a particular lifestyle;
- the circumstances of the gifts that earmark them as exceptional;
- whether the gifts do more than provide a basic standard of living;
- the income generated by the gifts in proportion to the payor’s entire income;
- whether they are paid to support an adult child through a crisis or period of disability;
- whether the gifts are likely to continue; and
- the true purpose and nature of the gifts.
A good example of the court applying these factors is the Ontario Court of Appeal’s decision Korman v Korman, 2015 ONCA 578. In this case, the Husband’s parents assisted the parties financially by helping pay for their matrimonial home, gifting the Husband money to help him pursue business ventures, paying for the children’s camp and private school expenses, and paying the Husband’s legal fees. The Husband’s mother also declared dividends to the Husband and his three sisters from her corporation, however these dividends were only declared to reduce the mother’s income tax, and the money was never actually paid to the Husband.
The trial judge imputed income to the Husband, finding that it was likely the Husband would continue to receive funds from his mother, “whether through gifts or some other tax-friendly plan”. The Husband appealed this decision, arguing that the court impermissibly shifted the burden of sustaining the support obligation onto his mother.
The Court of Appeal agreed with the Husband that his income for support purposes should not include the dividends that were declared “on paper” but never actually received. However, the Court dismissed the Husband’s appeal, finding that the trial judge was correct in imputing the income it did to the Husband. The Court of Appeal found that it was perfectly appropriate for the trial judge to take into consideration the gifts given to the Husband by his parents. The gifts were substantial in size, and they were “neither irregular not infrequent”. The gifts received by the family helped them to establish the lifestyle they enjoyed, which was well in excess of a basic standard of living. The trial judge, in determining an income that was fair, tried to “strike a reasonable balance” between the Husband’s actual earnings, and the other cash flow he was likely to receive, and imputed his income at $120,000.00 per year, and the Court of Appeal found that there was ample evidence to support these findings. The Husband’s average income according to line 150 of his income tax returns was $173,359.70, and his average income not including the dividends declared but not received was $96,834.00 per year. Only $120,000.00 in income was imputed to the Husband, even though his parents gifted at least $986,000.00 to him over the course of the 19-year marriage (an average of $51,894.74 per year).
It is important to keep in mind that each case presents its own unique factual matrix, and is analyzed by the Court on a case-by-case basis. A lawyer who specializes in family law is in the best position to assist in analyzing how these criteria might be applied to your specific situation.
Posted in Family