Obligations such as child support or spousal support can be significant. The amount that an individual may have to pay is based on the payor’s income, and in the case of child support, the amount of children the parties have. For most people, it can be easy to determine how much money they make. Someone with a typical job and salary simply makes what they make. However, for people who own a business, it can be more difficult. This is especially true if that business is something like a farm, which might have large spikes in income some years, and losses in other years. In a recent decision from the Ontario Superior Court of Justice, the court tried to impute the income of a farmer in order to determine how much child support he should pay.

A family farm trades hands

The parties separated in June 2012. At that time they agreed to an interim order requiring the father to pay $438 per month in child support. This amount was based on an imputed income of $30,000. However, it eventually became time to determine the father’s income. As a farmer, it was difficult to do.

The father’s father as well as his grandfather were farmers as well. He followed in their footsteps after high school. The father purchased a 100-acre farm from his uncle by borrowing $140,000 from his parents and through a Farm Credit Corporation loan. He also rents his father’s farm for an annual rent of $72,000. He also uses his father’s machinery, and while it was recorded as a purchase, he has not made any payments. Finally, he took out a loan to purchase his father’s dairy quota. That loan was for $800,000 but has been paid down to $599,000.

When the parties separated, the father’s net worth was $100,000. It was recorded at $1,641,652 at the time of the trial, while the mother’s net worth is $75,092.

Determining the father’s income

The father’s annual income varies greatly from year to year. It was $64,162 in 2016, $144,602 in 2017, $51,782 in 2018, he lost $26,098 in 2019, and made $182,258 in 2020.

The parties hired an accountant to look at the father’s income. He agreed with the amounts the father stated he made, but believed that the father had benefits which should be added to his income. This includes beef and dairy he consumes, but is generated from the farm. He also uses the truck he leases for the farm as a personal vehicle. Finally, he lives rent-free, which was valued at $,9600 per year.

The accountant also looked at the father’s ability to pay. He currently pays $728 per month on life insurance for himself as well as his father’s like (which would allow him to purchase the family farm). He also managed to pay his milk quota loan down by 25%. He leases a new truck every year rather than purchasing one to use for a longer period of time. Finally, he doesn’t use his entire milk quota, and can sell 10% of it for about $76,000. The court suggested the father should re-consider these expenses. Even the life insurance payments could be put in place later on in order to address his immediate support needs.

The court determined that the father’s income going forward should be imputed as the average income he had over the three years prior. The court added the benefits described by the accountant to this formula. Using this approach, the father’s 2021 income would be imputed as north of $70,000.

At NULaw we have years of experience guiding business owners and entrepreneurs through changes in their personal lives. Our goal is to fully understand the nuances of your venture, protect your assets, and safeguard your financial future as your circumstances evolve. Contact us online or at 416-481-5604 to book a consultation.