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  • Non-Recuring Income

    Hi everyone,

    This seems like a great resource so first, thank you to the creators of this forum

    I wanted to get some input regarding the topic "non-recurring income." My ex and I are working on figuring out child support and spousal support. The complication first is that I am self-employed however a further complication is that I sold part of my business last year. I have taken the funds out, half last year and half this year. My ex was with me when the first payment was made however we were separated when the second payment was made. I still gave her 50% of the second payment the day it was made.

    She feels this should be included in calculating child support and spousal support however I feel it should not considering she has already got half and it technically is non-recurring.

    The sale was my business running under my main corporation so what I sold technically was the business however I kept the corporation name. I have actually made no money this year in income aside from the capital gain from the sale.

    Her lawyer has stated it should be included but averaged over 3 years. This would mean the average is taken from $35k, $40k, $147k for 2012 and then $40k, $147k, $100k for 2013. My lawyer has stated she already got her half, it should not be included.

    I'm hoping some of you may offer some input as well. Can anyone here offer my some input?

    Thanks in advance for your help!

  • #2
    I would be in the 'she already got her share' camp, but you could maybe negotiate a bit with her. Don't use your accurate income, because as you say, she's already gotten her share of that. Instead of registering a zero income for the time you've been living off the sale, let an income be imputed to be around what you would have earned had you not sold the business. So consider your income around $37.5k instead of zero for the two years you got the payments.

    If she still argues, point out that if you are to pay her based on the full amount you received, then she needs to pay you back the half you already gave her so you can do that.

    Comment


    • #3
      I believe your ex, and her lawyer are trying to pull one on you. She already received proceeds from the sale of the business.

      As your business is still technically in operation, however, you will have to include your business income statements in years to come if you do annual recalculation of spousal support. (I cannot speak to CS as I personally have no experience.)

      In my case my ex and I were business partners and the previous 5 years' business income/expenses were scrutinized and due to long-term marriage I receive 50% of his net income (with pre-specified operating expenses) indefinitely. Each SS case is different and totally negotiable.

      You might want to look at recent SS awards for your province. Being self-employed there is definitely a bit more to the calculation.

      Comment


      • #4
        Thanks for your replies. The business is a corporation and she doesn't own any shares. She was a "director" for a year as she did my accounting but has been removed. Since it's a corporation, I pay myself through payroll so it is separate at tax time. Since the sale, the business has no value and has not done any business, aside from a few tiny projects which were hourly service.

        Yes, her viewpoint and her lawyers comments don't seem to match up with my my lawyer stated and what I'm reading online.

        I do want to keep things fair but I need to make sure I can still offer the same level of living to my kids.

        Comment


        • #5
          Just curious about something. You sold part of your business. The part of the business you sold is part of an incorporated company. Does the incorporated business generate revenue now or do you anticipate making revenue in the future? Was your selling off part of the business your way of doing equalization? Just curious as many people would strike the business from the corporate registry unless there was value. Maybe your ex is trying to tap into that value (good will, for example)?

          Comment


          • #6
            Hi again, yes it was an "asset" sale. Basically my corporation did web design and I started up a subsidiary company under the corporation. I stopped doing web design as the subsidiary was getting busy. I sold the subsidiary but will be going back to web design. I only recently started doing web design again so up to the separation date I didn't work but started working just about a month ago (5months approx. after our separation). I didn't close the corporation because I wanted to start it back up.

            Comment


            • #7
              So you are incorporated. Do you have any partners? Lots of employees?

              If not I'd be curious as to why you go to the expense of an incorporation when you can operate as a proprietorship. Having an accountant do your annual corporate tax return is quite a bit more expensive than if you were operating as a proprietorship.

              Comment


              • #8
                No partners no employees Just myself. Yes, right now it would be best to be sole proprietor however the incorporation does offer a bit more protection and at the time it was best for the company as I could take out dividends. I incorporated as the subsidiary got busy as I was planning on running it for a while and paying myself in dividends along with payroll.

                Comment


                • #9
                  So how does one set up a one-man payroll for oneself in an incorporated company?
                  Not to be a smart-ass but what part of your body did you sell off as an "asset" when you sold the subsidiary of the incorporated company?

                  Comment


                  • #10
                    Same way you set it up for multiple employees. Incorporating does have benefits once you surpass a certain personal income as dividends are taxed at a lower rate.

                    You can register "operating names" under a corporation and have it run as a "subsidiary" of an umbrella corporation. I did web design and created an ecommerce website selling products to US customers. It grew to the point where it should be a separate identity so I registered it as a subsidiary or "operating name". I was able to sell the subsidiary to a buyer in the US who didn't want to buy a Canadian corporation. Hope that clarifies it

                    Comment


                    • #11
                      Thanks for the info. Some people have come on this forum before and tried to convince others of one thing or another and they are just looking for ideas on how avoid paying CS or SS in questionable ways. I don't think you will have any problem with presenting a clear, concise offer to settle to your ex as you have quite succinctly explained your business operations.

                      Assuming you have all the documentation to corroborate your business activities, you should have no problem coming to a resolution with your ex. You realized the sale of a business asset, which would be considered marital asset, but you shared the profits with her. I believe the uncertain area would be the determination of your income for the purposes of determining support.

                      As you are undoubtedly aware, self-employed individuals have to provide a more in-depth litmus test of income than regular wage earners. This is simply because as a business owner you are not beyond arms-length in determining the the future of the business and ultimately you decide on what salary you pay yourself.

                      Your wife should get independent financial advice. For some it is advantageous to negotiate a lump sum payout in lieu of SS as receiving a monthly payment is good for you (tax deductible) it is fully taxable for her. I believe this is an important bargaining chip in terms of SS.

                      Depending upon her age, the length of your marriage, you can look at a gradual increase of imputed income over the term of the SS which is intended to encourage spouses to become self-sufficient. This may or may not be relative depending upon the circumstances of your marriage.

                      I will not address CS as I have no experience with that before the court but many members on here can assist you.

                      Depending upon the circumstances of your marriage (age, duration, etc.) you should be prepared to calculate 3 - 5 yrs of your average income. It might be very important, as it was in my case, to pre-determine reasonable business expenses. Expenses you can use in income tax preparation may or may not be considered by your ex's lawyer in determining your income. One example would be the purchase/lease of vehicles or any other substantial capital asset.

                      It is all negotiable but being well prepared is important. What you stated the other side has requested at this time is nothing more than double-dipping. I wouldn't be overly concerned about this as it's just posturing at this point and time.

                      Comment


                      • #12
                        to answer your non-recurring income, one time would be found here - section 17. Top of my head though is the income, I believe the onus on you is to prove that it was not used for support purposes (pay your bills, vacation, new car maybe....) It sounds like this is income, you shared your income with your ex before or after the seperation/valuation date? You did not go get work to survive - this money was your pay, last pay that you made last for 5 months.
                        forgot to add a liink, scroll to section 17 - determination of income
                        http://www.e-laws.gov.on.ca/html/reg...s_970391_e.htm
                        Last edited by ddol1; 12-02-2012, 02:50 AM.

                        Comment

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