What is the burden of proof in a case involving the imputing of income?

With respect to the burden of proof in a case involving the imputing of income, the burden is generally on the party asserting the request. While subsection 19(1)(g) of the Child Support Guidelines permits the court to impute income to a person who has included deductions in the calculation of his or her taxes which are established to be unreasonable deductions, such a finding can only be based on evidence presented to the court. In Bekkers v. Bekkers, 2008 CanLII 864 (Ont. S.C.), R.J. Smith J. confirmed that the burden in such cases is on the party claiming that the business deduction was unreasonable within the context of child support calculation. Although that case involved income from a corporation controlled by the spouse paying child support, the principle is applicable to the case before me.

In Bembridge v. Bembridge, 2009 NSSC 158 (CanLII), at paras. 14 and 33-39, MacDonald J. cautioned judges to be mindful that retained earnings are not cash ready to be withdrawn. Retained earnings are the cumulative net earnings of the company since the inception of the company less dividends paid out. Retained earnings do not necessarily represent money that the shareholder can take out as income. Failure to appreciate this may undermine the operation of the corporation. Corporations have quite legitimate business reasons to accumulate retained earnings. Further, s. 18 of the Guidelines does not refer to retained earnings. Rather, it refers to the pre-tax income of the corporation.