Imputing True Income From a Cash-Heavy Construction Business

The situation

Hanna and Meron separated after eleven years together, with one daughter, Kavya, then nine. Hanna worked as a surgeon at a Scarborough hospital, with a T4 income that showed up in full on every tax return. Meron owned a mid-sized construction company that took on residential and small commercial jobs across the east end of the city, and his reported income told a very different story: about $78,000 a year, filed through the corporation he had built over the previous decade.

On paper, Hanna earned nearly three times what Meron did. In life, it looked nothing like that. The family had carried a home worth roughly $1.6 million, two vehicles bought outright, a boat kept at a marina, and regular renovations paid for in ways that never seemed to touch a bank account either of them used for household bills. Meron habitually paid subcontractors and suppliers in cash, kept a second phone for job quotes, and told Hanna for years that the business was "cash tight" even as it kept growing. When they separated, Meron offered to pay child support based on his tax return. Hanna came to Treadstone Law certain that figure was not real, but unsure how to prove it.

The problem

Under the Federal Child Support Guidelines, the parent paying support usually pays a table amount set by their income and the number of children. For salaried employees, that income is easy to verify — it is the number on the T4. For a business owner who controls what the corporation pays out, reports, and deducts, the number on the tax return can be whatever the corporation's bookkeeping makes it.

Courts are alive to this gap. Where a payor is self-employed or controls a corporation, the guidelines allow a court to impute income — to set support based on what the evidence shows the person actually earns or could reasonably earn, rather than the figure on their tax return. Common grounds include personal expenses run through the company as business deductions, income diverted to family members or held inside the corporation instead of being paid out, and — most relevant here — a pattern of cash transactions that never appears in the company's books at all. None of this requires proving fraud in a criminal sense. It requires building a picture, through financial disclosure and lifestyle evidence, that the reported income does not reflect economic reality.

The difficulty for Hanna was that she had never handled the business's finances and had no access to its records. Everything she knew came from years of living beside it: contractors paid in envelopes, cash deposits she'd occasionally seen, a lifestyle the reported income could never have supported. That kind of knowledge is useful, but it is not evidence a court can rely on by itself. It needed to be turned into a documented case.

What we did

1. Demanded full corporate and personal financial disclosure. The Family Law Rules require a support payor who owns or controls a corporation to produce not just personal tax returns but the corporation's financial statements, its own tax filings, and a breakdown of any income, benefits, or loans the payor drew from it. We sent a formal request covering three years of records for both Meron personally and his company, rather than accepting the personal return he had already offered.
2. Built a lifestyle analysis. Working from bank and credit card statements, the mortgage file, and vehicle and property records, we set out, month by month, what the household had actually spent — mortgage payments, renovation costs, vehicle purchases, the boat, family travel — against what $78,000 a year could plausibly fund after tax. The gap was the core of the case: a household cannot spend well beyond its declared income indefinitely without another source of money.
3. Engaged a business valuator to review the company's books. Once the corporate records arrived, a valuator examined the company's revenue against industry norms for a construction business of its size, flagged deduction categories that looked more personal than business, and identified patterns consistent with unreported cash receipts — jobs invoiced at amounts that didn't match materials purchased or crew size for the work described.
4. Cross-referenced the company's own quotes and job records. Meron's business kept written quotes for clients, even when the eventual payment arrangement was informal. Comparing quoted job values against what the books showed as revenue for the same period made the shortfall concrete rather than speculative — real numbers from the business's own files, not estimates.
5. Prepared and served a motion to impute income. With the lifestyle analysis and the valuator's report assembled, we brought a motion asking the court to set Meron's income for support purposes based on the evidence of his actual earning capacity, rather than his reported income, and to order child support and a retroactive adjustment back to the date of separation.
6. Negotiated a resolution once the evidence was on the table. Facing a valuator's report and a motion record built on his own company's documents, Meron's position changed. Rather than litigate the motion through to a hearing, his lawyer proposed a settlement built around an imputed income figure close to what our evidence supported.

The outcome

Meron agreed to child support calculated on an imputed income of roughly $340,000 a year — a figure the valuator's report and the lifestyle evidence supported as consistent with the company's real revenue and Meron's draws from it, rather than the $78,000 his tax return had shown. That changed the monthly table amount for Kavya's support several times over, and the agreement included a retroactive payment covering the period since separation, along with a mechanism requiring Meron to produce corporate financial disclosure annually going forward so any future income changes could be tracked rather than simply asserted.

The couple's broader financial separation was resolved alongside the support issue. Their net family property — the home, the business's value, savings, and vehicles, netted against debts — came in at just over $2 million, and the equalization payment Meron owed Hanna reflected the corrected, higher value the valuator had placed on the construction company once its true revenue was accounted for. A business that looks modest on its tax return often looks quite different once someone actually values it, and that difference mattered for both the support calculation and the property division.

Hanna did not get everything she initially believed the business might be worth — negotiated settlements rarely land exactly where a best-case estimate would put them, and some categories of expense in the valuator's report remained genuinely disputed rather than conclusively proven. But the outcome corrected the core problem: support and equalization built on Meron's actual financial position, not the version his corporation's bookkeeping had been arranged to show.

The whole process took about ten months from the first disclosure request to a signed agreement, most of it spent waiting on document production and the valuator's review rather than in front of a judge. That timeline is typical for cases involving a private business: gathering three years of corporate records, reconciling them against bank statements and job files, and producing a defensible report takes real time, and rushing it tends to produce a weaker number that is easier for the other side to challenge. Hanna also kept a running log of household spending during the marriage, dated and organized by category, which turned out to matter as much as the formal disclosure — it gave the valuator a concrete starting point rather than a vague impression of what the family's life had actually cost.

What you can learn from this