Rogers v. Rogers, 2015 ONSC 7794

This case addressed the question of whether a support payor’s Performance Bonuses and Transitional Loans Structured received from an employer are considered income for support purposes when structured as Forgivable Loans.

Background

The parties were married for 9 years before separating in 2014.  There were 3 young children of the marriage, ages 1, 5, and 6, and the wife was on maternity leave at the time of separation.

Approximately 2 months before separating, the husband secured a new position as a financial advisor at Raymond James for which his employment contract structured his pay as follows:

1. Commission (annualized income of approximately $100,000.00);
2. Signing bonus of $242,000.00 structured as a “transitional loan”
   1. 1\ 7 of which was forgiven each year and included in the husband’s taxable income for the year whereas any unforgiven portions were repayable on ending his employment with the company for any reason;
3.  Performance bonus of $44,000.00 structured as a forgivable loan, subject to meeting performance targets,
   1. 1\ 7 of which was forgiven each year and included in the husband’s taxable income for the year whereas any unforgiven portions were repayable on ending his employment with the company for any reason;

The wife sought interim child and spousal support and contribution toward the children’s section 7 expenses, however, the parties could not agree on the husband’s income for the purpose of determining support.

Neither party disputed that the husband’s income included $100,000.00 in commission and $34,570.00 which was the forgiven portion of the transitional loan, however, the wife claimed that the husband’s income was significantly higher than $134,570.00 which the husband stated as his income.

The wife argued that the husband’s annual commissions were likely much higher than $100,000.00 as he had already earned $107,000.00 by November of 2015.  She further argued that he was entitled to and received $44,000.00 in bonuses.

Conversely, the husband argued that his income for support purposes did not include unforgiven portions of the transitional loans.

Issue

If transitional loans and performance bonuses are structured as forgivable loans, do unforgiven portions constitute income for support purposes?

Conclusion

The Court held that the forgiven portions of the transitional loan and performance bonus must be included in income in the year in which the amount was forgiven, however, the husband’s current income did not include unforgiven portions of same.

Analysis

Transitional Loan

The Court clarified that loans are not income and noted that the evidence showed that the transitional loan funds were clearly treated as a loan until forgiven.  However, the Court agreed with the parties that amounts of the forgivable loans that were forgiven were not repayable and, thus, should count as income.

Performance Bonus

Unlike loans, bonuses can constitute income for support purposes.  As such, the Court considered whether the unforgiven portions of the performance bonus should be handled differently from the transitional loan.

The court noted the substantially similar treatment of the bonus compared with the loan and found that it would be inconsistent to count the full bonus as income and only the forgiven portion of the loan as income considering only 1/7 of each amount was forgiven each year.

Further, the Court found that the inclusion of the full performance bonus as income could be too complicated as parties would have to remember not to double count amounts forgiven in subsequent years.

Despite the husband in this case having access to the additional funds with which he could pay support, the fact remained that the amounts that were repayable were actually loans until forgiven.