If you owned an incorporated business and you were an employee, sole owner and shareholer of your business. What would be your income be based on the following scenerio:
You spent $47,000 on personal items that were paid through your business bank account. Your employee wage was $40,000 per year. You did not write yourself a paycheck. Instead you injected into your shareholers account.
At the end of the year you had $44,000 owing to you from your business.

Hello c:

You need an accountant to set your books up right.. Once that's done, your income can easily be ascertained.. So, I can't do that here.

But, I can tell you that, from a tax perspective, you're probably better off by NOT taking a salary.

excon

There is serious issues here, the purchase of all of those "personal" items really moves that corporation bank account to the status of a personal one, This could easily destroy the protection of business from personal debts since debtors could show that the business is being used as a personal bank account.

I agree, this is a very bad situation at this point and they need to hire an accountant.

there is serious issues here, the purchase of all of those "personal" items really moves that corporation bank account to the status of a personal one, This could easily destroy the protection of business from personal debts since debtors could show that the business is being used as a personal bank account.

I agree, this is a very bad situation at this point and they need to hire an accountant.

Not to worry, OP starts this hypothetical question with "If you owned an Incorporated business and you were an employee, sole owner and shareholer of your business... " It's an oxymoron to suggest that the owner is a shareholder of an unincorporate business. It's a sole proprietorshiip, in other words.

But I agree, the owner really needs an accountant.

And the OP needs to do his/her own homework.

So, based only on these numbers given in my original post, can anyone give a guess as to income. The $40,000 was left in the business.

Is this homework?

Is this homework?

In a sense this is homework. I had to represent myself in a family law matter regarding child support. The payer owns his own business and is essentially hiding his income and getting away with it while grossly underpaying. I am a single mom with 3 children. Their father has made little attempt to have a meaningful relationship with his children in 7 years...
My question relates to imputing income on the information that was available to the judge. The judge admitted that his findings were arbitrary and artificial based on the evidence that was available in trial. I am appealing the decision.

Hello again, c:

I am appealing the decision.You can DEMAND, (and I don't know WHY your previous judge didn't) an AUDITED financial statement, that ANSWERS your question.

In these situations, GUESSING hurts people.

Excon

Yes I agree with you. The Judge accepted his T1 general, and unaudited financial statement.
As proof of income. I objected because he had not provided information on his personal expenses, which he was clearly paying through the business. I had an affidavit from my accountant which provided an expert opinion based on the information that was given as well as the information that was requested and not given. The judge ruled this as inadmissable hearsay, because I had agreed not to attend a hearing regarding a compliance endorsement that was granted previously, for better disclosure. I agreed with the applicant to forego the hearing because I was lead to believe that it was quicker to go directly to trial and argue the disclosure issues at that time. Par for the course, he filed the compliance endorsement stopping me from presenting my argument. Even so, I was able to get my point across. The judge stated on record that it was clear that he had not provided information that he was obligated to do so. I brought up that his business income doubled each year while his wage stayed the same and in fact he paid his employees a higher wage than he paid himself. I brought up that he never sought to vary an original separation agreement for child support nor had he ever supplied his income information.In the end it didn't seem to matter. The judge made an order reducing his child support payments and giving him credit for amounts he claimed he had overpaid. Reducing his arrears from $46,000 to $4,000. Note: one of the reasons he gave for allegedly over paying his child support was because he did not want me to involve the family responsibility office.

... I had an affidavit from my accountant which provided an expert opinion based on the information that was given as well as the information that was requested and not given. The judge ruled this as inadmissable hearsay, ...

It appears that the judge was correct on that point. An affidavit from an absent witness is generally inadmissable at trial unless there is an applicable hearsy rule exception.

I apologize. Earlier I mis-read "incorporated" and thought you were indicating it was unincorporated.

Anyway, income can definitely be attributed to a sole owner of an incorporated business. You say that he had set his wage at $40 K per year. The question to ask here is whether that is a reasonable wage, considering all aspects of the business. That, of course, is where your expert might have made a difference.

If you can prove that the corporation "spent $47,000 on [his] personal items", that would also be attributable as income. If so, that would make his income at least $87,000 per year.

It appears that the judge was correct on that point. An affidavit from an absent witness is generally inadmissable at trial unless there is an applicable hearsy rule exception.

I apologize. Earlier I mis-read "incorporated" and thought you were indicating it was unincorporated.

Anyway, income can definitely be attributed to a sole owner of an incorporated business. You say that he had set his wage at $40 K per year. The question to ask here is whether that is a reasonable wage, considering all aspects of the business. That, of course, is where your expert might have made a difference.

If you can prove that the corporation "spent $47,000 on [his] personal items", that would also be attributable as income. If so, that would make his income at least $87,000 per year.

Thank You, that was my point in trial, I documented every one of his personal credit card expenses and as well I offered evidence of jobs available in the area that ranged between $52,000 and $85,000 plus benefits. I added on other personal expenses like a bad debt of $15,000 that was never verified, his personal expenses that he never verified and in the end I reasonably sought an income of $ 81,000 to be attributed. The judge ignored it all and imputed income of $50,000 cross board over previous 7 years and in doing so lowered his income in 2 of those years by $28,000 as reported on his T1 general. I am told that the appellate court will not entertain any of this on appeal because the errors are not palable and judges resist overturning the descretion of a trial judge. I am terrified to get trampled on again in another court room. But again thank you for the confidence in knowing I was right. I can't help second guessing myself after all of this.