Canadian Securities Course FP2 CSI Study Notes

Personal benefits paid through a self-employed individual's business are generally added back to income and grossed up when determining appropriate income for child-support purposes.

The purpose of the child-support income calculation is to identify the parent's true financial capacity rather than simply accept taxable income reported under the Income Tax Act. A business may legitimately deduct an expenditure for tax purposes while all or part of that expenditure provides a personal benefit to the owner—for example, personal vehicle use, housing expenses, meals, utilities, or other personal consumption paid by the business.

Where such expenditures effectively replace expenses the parent otherwise would have paid personally from after-tax income, the benefit is added back. A gross-up may then be necessary to express that tax-free or after-tax economic benefit as an equivalent amount of pre-tax income. Canadian child-support jurisprudence has repeatedly applied this approach to personal benefits funded through a business.

This prevents a self-employed support payor from artificially depressing guideline income by routing personal consumption through deductible business expenses.

Therefore, option D correctly reflects both required adjustments: add the personal benefit to income and gross it up where appropriate.

FPII reference/topic: Family Law — Federal Child Support Guidelines; determination of self-employment income; personal benefits; imputed income.

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For unmarried spouses, entitlement to spousal support arises under provincial family-law legislation, represented in this question by the Family Law Act.

The federal Divorce Act governs matters arising from the breakdown of a legally valid marriage, including spousal support between married spouses. It does not provide the general statutory basis for support claims between unmarried common-law partners.

Ontario's Family Law Act extends the support provisions to qualifying unmarried partners. Ontario guidance explains that a person may potentially qualify for spousal support where the couple lived together continuously for at least three years, or where they were in a relationship of some permanence and had a child together.

The Civil Marriage Act primarily concerns the legal capacity to marry and recognition of marriages; it is not the source of common-law spousal-support rights. The British North America Act—now principally known as the Constitution Act, 1867—allocates constitutional powers and likewise does not establish the substantive spousal-support entitlement described.

For FPII purposes, the key distinction is therefore jurisdictional: married spouses can rely on the federal Divorce Act in divorce proceedings, whereas unmarried spouses depend on applicable provincial or territorial family-law legislation.

FPII reference/topic: Family Law — common-law relationships; spousal support; Family Law Act; federal versus provincial jurisdiction.

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