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Investment Property and Imputed Income

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  • Investment Property and Imputed Income

    Hi all,

    I have an investment property where I am breaking even on. In fact, due to COVID, I have started losing money.

    However, my ex was able to convince the Judge that I am making as much rental income as I used to pre-COVID and hence, my rental income is now imputed and I am paying much higher child support.

    My question is if I 'sell' the property to a family member, whom I owe money to for helping with my legal bills, will I still be required to pay the higher child support based on imputed rental income?

    Said another way, will my ex be able to argue that since it was a transfer to my family member (who will now be collecting all the rental income), will I still be responsible to pay the 'imputed income'? What are my options here?

    I would appreciate some direction in this area or any judgement.

    Thanks in advance.

  • #2
    Selling it right after the order will be a flag. Not to mention you will have to go through a whole new process to get it updated by the court who will scrutinize both the decision and the sale itself.

    I have a feeling the judge didnít accept certain expenses as well as the idea that you are losing money when rental income is going up. Rent has gone up and I expect that your ex was able to prove this in her claim.

    A judge doesnít just make a decision based on what they think is happening. Your ex has made a very believable argument and probably had a lot of proof. The decision was based on this. Time to start living with this and getting on with your life without the resentment.


    • #3
      I did not know selling it could be a flag. So if that's the case, I should wait a while before selling it? And you're saying if I sell too soon, I could still be imputed income despite not having rental income anymore.

      You're right, rents have gone up, but I have long-term tenants who don't pay utilities. So for me, it hasn't.


      • #4
        Then you need to reassess your rental and increase as necessary. If you have an annual contract, you can review and modify. Rents have gone up. Your tenants should have been subject to an inflationary increase in the last few years as well as the increase to hydro. Most rental contracts have clauses in there to allow for potential adjustments. Your ex is not responsible for your poor business decisions.

        First issue is selling it to family. The question of value and how much you made will be looked at. Then they will look at your sale so close to the decision.

        The bottom line is you didnít like the order and are making moves to change it. She would have argued for the imputed income at trial which you would have known about before it started. Why didnít you sell it then? Suddenly its losing money and you need to sell? Thats a big flag.


        • #5
          Also- if you sell the property your capital gains will be considered income for support purposes. You'll have a jump in your income and need to pay more support for that next year. If you try to sell under market value - then she could argue that the money you borrowed was later earned in exchange for the house.


          • #6
            Donít sell to family. Sell to a stranger. Pay a property appraisal company to appraise the value before you sell.

            If you keep the property, have a third party property management company manage it for you. Itís well worth the 6-7% of rent they will charge to have an independent version of facts.


            • #7
              Some terrible advice here and some good advice.

              Just because rent prices have increased doesn't mean your rent prices have to increase. There is this thing called Rent Increase Guidlines that has been at virtual standstill for the last few years.

              It often sounds like there is fishy stuff going on with your situation. I don't understand why a judge wouldn't accept that you were currently at a financial lost. Another poster (some guys said) that their investment on Mutual Funds increased and they shouldn't have to pay on that because their ex wasn't paying the increase on the house investment. They decided to invest in different things. Take that with a grain of salt until you find a ruling.

              You are going to have to owe your relative a ton of money or have some business deal that gives them part of a property. Need a lawyer.

              Appraisals are most often high maybe not in all markets or this market we have right now.

              Yeah, if they argue you undersold it and are successful, like if you sold it to a relative the only thing protecting you is that appraisal.

              I really don't understand how you lost on that because you have long term tenants and you are taking a bath on utilities. What did your ex argue, you should break the law and go for illegal rent increases?


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