Court to consider crypto trading gains and child support

An Ontario court may soon be considering whether to include cryptocurrency trading gains in annual income for the purposes of determining child support.

The Superior Court of Justice heard an application from a mother seeking an increase in monthly child support to $23,800, based on the father’s average annual income over five years of $3.3 million.

According to the decision, the father argued that his income over that period was inflated by non-recurring capital gains generated from trading Bitcoin and other cryptocurrencies, and that this shouldn’t be included in calculating his actual income for determining child support.

Instead, he argued that if the court requires increased child support (he was paying $2,500 per month, along with tuition and other expenses), it should be based on his estimated income for 2020 of $750,000 — which was largely generated by liquidating Bitcoin, as his business had been disrupted by Covid-19.

In its decision, the court rejected both positions, ruling instead that the father’s income for 2019 — rather than a five-year average or estimate for 2020 — be used to determine child support.

“I find that 2019 is the most current income information that is available,” the judge said in the reasons for decision.

Based on expert evidence from both sides, the court found that the father’s 2019 income was $1.225 million.

The court noted that it has discretion to use an average income over a three-year period, but this is triggered only if a “fair” determination of income can’t be made.

In this case, the court found that the 2019 income was fair to use for a temporary child support motion, and it ordered that monthly support payments be raised to just over $9,000.

“While not necessary to my decision, I add that the father’s characterization of the capital gains is an important issue,” the judge said. “It is best considered at trial in conjunction with the retroactive child support claim and the issue of the father’s income going forward.”

The court also ordered that a settlement conference be scheduled to take place by the end of March 2021, with a view to having the case heard at trial next year.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.