“One of the Applicant’s arguments respecting imputation of income to the Respondent is that he has unreasonably deducted expenses from the income that he has generated from his rental property. It follows from the foregoing general comments that a party who claims that business expenses are being unreasonably deducted from income has the burden of proving that the expenses are unreasonable (Szitas v. Szitas, 2012 ONSC 1548 (CanLII), 2012 CarswellOnt 3501 (S.C.J.); Desormeaux v. Beauchamp, 2009 CarswellOnt 747 (S.C.J.); Bekkers v. Bekkers, 2008 CanLII 864 (ON SC), 2008 CarswellOnt 173 (S.C.J.); Joy v. Mullins, 2010 CarswellOnt 7477 (S.C.J.)). However, the parent who seeks to deduct expenses from their income for child support purposes must as part of their basic general disclosure obligation explain the reasons for the expenses and how they were calculated, and must provide documentary proof of significant expenses in an organized manner so that the court can make a proper determination as to the reasonableness of the expense from the standpoint of the child support calculation (Szitas; MacGillivray v. Ross, 2008 CarswellNS 631 (S.C.); R.(P.C.J.) v. R. (D.C.), 2003 CarswellBC 788 (C.A.); Manchester v. Zajac, 2011 CarswellOnt 13546 (S.C.J.); Williams v. Williams, 2011 CarswellOnt 6588 (S.C.J.); Meade v. Meade, 2002 CanLII 2806 (ON SC), 2002 CarswellOnt 2670 (S.C.J.); Wilcox v. Snow, 1999 NSCA 163 (C.A.) (CanLII); Izyuk v. Langley, 2015 ONSC 2409 (S.C.J.) (CanLII)). This is particularly important in situations where the expenses reported on the party’s income tax returns fluctuate from year to year (Armstrong v. Armstrong, 2010 CarswellBC 3252 (S.C.)). If the party seeking to deduct expenses from income fails to provide meaningful supporting documentation or other evidence in respect of those deductions, an adverse inference may be drawn by the court in making the income determination (Orser v. Grant, 2000 CarswellOnt 1354 (S.C.J.); Izyuk).
In order to impute expenses that have been deducted against income for tax purposes back into a parent’s income pursuant to section 19(1)(g) of the Guidelines, it is not necessary to establish that the party who claimed the deductions acted improperly or outside the norm for claiming expenses in the income tax context. Section 19(2) specifically provides that the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act (Canada). Rather, the issue is whether the full deduction of the expense results in a fair representation of the actual disposable income that should be available to the party for personal expenses and child support (Halliwell v. Halliwell, 2017 ONCA 349 (C.A.) (CanLII)). In determining whether expenses claimed by a party as against income are unreasonable, the court must balance the business necessity of the expense against the alternative of using those monies for the purposes of child support (Osmar v. Osmar, 2000 CanLII 22530 (ON SC), 2000 CarswellOnt 1928 (S.C.J.); Izyuk). In carrying out this analysis, the court must keep in mind the principle which the Supreme Court of Canada established in D.B.S. that payor parents should not be permitted to manipulate their financial affairs so as to prefer their own interests over those of their children.”