Are Cash Gifts Income? Sometimes

Do cash gifts qualify as income for support in BC family law? Under the right circumstances, according to Justice Ross’s judgment in Todd v. Todd, 2016 BCSC 243.

The parties in this case led relatively aimless professional lives and relied primarily on cash and other gifts from Mr. Todd’s mother to fund their comfortable lifestyle. The question on the support analysis was whether these gifts qualified as income.

Justice Ross started with section 19 of the Guidelines which allows the Court to impute income under certain circumstances. She notes that the general policy of the Guidelines is to base child support upon money reasonably available to the payor. Although section 19 does not specifically reference gifts, the matter was addressed by the Ontario Court of Appeal in Bak v. Dobell, 2007 ONCA 304 (CanLII).

In Bak, the Ontario Court of Appeal reasoned that although the Legislature excluded gifts from section 19, that provision allows for income imputation so as to correct underemployment or anomalous income tax treatment. Therefore, gifts can serve as the basis for income imputation, and the legal analysis must focus on:

  • The regularity of the gifts;
  • The duration of the gifts;
  • Whether the gifts were part of the family’s income during cohabitation that entrenched a particular lifestyle;
  • The circumstances of the gifts that earmark them as exceptional;
  • Whether the gifts do more than provide a basic standard of living;
  • The income generated by the gifts in proportion to the payor’s entire income;
  • Whether they are paid to support an adult child through a crisis or period of disability;
  • Whether the gifts are likely to continue; and
  • The true purpose and nature of the gifts.

An assessment of these factors led the Bak Court to conclude that the gifts in question could not serve as a basis for imputing income.

Bak was adopted into BC law by the Court of Appeal in Nielsen v. Nielsen, 2007 BCSC 604 (CanLII), Johnson v. Johnson, 2011 BCCA 190 (CanLII), and S.R. v. B.E., 2011 BCSC 1589 (CanLII).

Ultimately, Justice Ross declined to impute income on the basis of gifts from Ms. Todd. The gifts were not trust income or wages in disguise. Ms. Todd was under no obligation to provide support, and did so out of generosity. Also, her ability to provide further gifts was doubtful.

Todd is an important case because it gives BC and Ontario family lawyers another arrow in their quiver of tools for imputing income.

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