Imputing Income: An art or a science?

“Imputed income matters. The reason why income had to be imputed matters.”¹ The imputation of income is a determination of fact, not a guess or a provisional amount while waiting for better disclosure or further review.² While the goal of the Federal Child Support Guidelines is to maximize objectivity, predictability and consistency, Section 19(1) is one of the most litigated areas of the Guidelines. The law of imputation of income is a continuously evolving area in family law.

The methodology for imputing income for child support purposes applies equally for spousal support purposes.³ Section 19(1) of the Guidelines includes a non-exhaustive list of nine enumerated categories to impute income, which include:

1. the spouse is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of the marriage or any child under the age of majority or by the reasonable educational or health needs of the spouse;
2. the spouse is exempt from paying federal or provincial income tax;
3. the spouse lives in a country that has effective rates of income tax that are significantly lower than those in Canada;
4. it appears that income has been diverted which would affect the level of child support to be determined under these Guidelines;
5. the spouse’s property is not reasonably utilized to generate income;
6. the spouse has failed to provide income information when under a legal obligation to do so;
7. the spouse unreasonably deducts expenses from income;
8. the spouse derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income or that are exempt from tax; and
9. the spouse is a beneficiary under a trust and is or will be in receipt of income or other benefits from the trust.

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