NEWFOUNDLAND REGULATION 40/98

Short title

1. These regulations may be cited as the Child Support Guidelines Regulations.

Interpretation

2. (1) In these regulations

(a) "Act" means the Family Law Act;

(b) "child support" means, unless the context indicates otherwise, monetary support for a child paid or payable in accordance with an order for support or a variation of an order for support of a child under the Act;

(d) "income" means the annual income determined under sections 13 to 18;

(e) "order for support" has the meaning assigned to it under section 35 of the Act;

(f) "spouse" has the meaning assigned to it under section 35 of the Act; and

(g) "table" means a child support table set out in Schedule I of the Federal Child Support Guidelines enacted under the Divorce Act (Canada).

(2) Words and expressions that are used in sections 13 to 19 that are not defined in this section have the meanings assigned to them under the Income Tax Act (Canada).

(3) Where, under the guidelines, an amount is determined on the basis of specified information, the most current information shall be used.

Presumptive rule

3. (1) Unless otherwise provided under the guidelines, the amount of an order for support of a child under the age of majority is

(a) the amount set out in the applicable table, according to the number of children under the age of majority to whom the order relates and the income of the parent against whom the order is sought; and

(b) the amount, if any, determined under section 7.

(2) Unless otherwise provided under the guidelines, where a child to whom an order for support relates has attained the age of majority, that order is

(a) the amount determined by applying the guidelines as if the child were under the age of majority; or

(b) the amount that the court considers appropriate, having regard to the condition, means, needs and other circumstance of the child and the financial ability of each parent to contribute to the support of that child.

(3) The applicable table is

(a) if the parent against whom an order is sought resides in Canada,

(i) the table for the province in which that parent ordinarily resides at the time the application for an order for support of a child, or for a variation of an order for support of a child is made or the amount is to be recalculated in accordance with the Act,

(ii) where the court is satisfied that the province in which that parent ordinarily resides has changed since the time described in subparagraph (i), the table for the province in which the parent ordinarily resides at the time of determining the amount of support, or

(iii) where the court is satisfied that, in the near future after determination of the amount of support, that parent shall ordinarily reside in a given province other than the province in which the parent ordinarily resides at the time of that determination, the table for the given province; and

(b) if the parent against whom an order for support of a child is sought resides outside Canada, or if the residence of that parent is unknown, the table for the province where the other parent ordinarily resides at the time the application for an order for support of a child or a variation of an order for support of a child is made or the amount is to be recalculated in accordance with the Act.

Income over $150,000

4. Where the income of the parent against whom an order for support of a child is sought is over $150,000, the amount of that order shall be

(a) the amount determined under section 3; or

(b) if the court considers that amount to be inappropriate,

(i) in respect of the first $150,000 of that parent's income, the amount set out in the applicable table for the number of children under the age of majority to whom the order relates,

(ii) in respect of the balance of that parent's income, the amount that the court considers appropriate, having regard to the condition, means, needs and other circumstances of the children who are entitled to support and the financial ability of each parent to contribute to the support of the children, and

(iii) the amount determined under section 7.

Standing in place of parent

5. Where a parent against whom an order for support of a child is sought is a person who stands in the place of a parent for that child, the amount of the order is, in respect of that parent, an amount that the court considers appropriate having regard to these guidelines and another parent's legal duty to support the child.

Medical and dental insurance

6. In making an order for support of a child, the court may order that medical or dental insurance coverage be acquired or continued where coverage for the child is available to either parent through his or her employer or otherwise at a reasonable rate.

Special or extraordinary expenses

7. (1) In an order for support of a child the court may, on either parent's request, provide for an amount to cover the following expenses, or a portion of those expenses, taking into account the necessity of the expense in relation to the best interests of the child and the reasonableness of the expense, having regard to the means of the parents and those of the child and to the parents' spending pattern with respect to the child during their cohabitation, including

(a) child care expenses incurred as a result of the custodial parent's employment, illness, disability or education or training for employment;

(b) the portion of medical and dental insurance premiums attributable to the child;

(c) health related expenses that exceed insurance reimbursement by at least $100 annually per illness or event, including orthodontic treatment, professional counselling provided by a psychologist, social worker, psychiatrist or other person, physiotherapy, occupational therapy, speech therapy and prescription drugs, hearing aids, orthotic and other similar devices, glasses and contact lenses;

(d) extraordinary expenses for primary or secondary school education or for educational programs that meet the child's particular needs;

(e) expenses for post secondary education; and

(f) extraordinary expenses for extracurricular activities.

(2) The guiding principle in determining the amount of an expense referred to in subsection (1) is that the expense is shared by the parents in proportion to their respective incomes after deducting from the expense, the contribution, if any, from the child.

(3) In determining the amount of an expense referred to in subsection (1), the court shall take into account subsidies, benefits or income tax deductions or credits relating to the expense, and eligibility to claim a subsidy, benefit or income tax deduction or credit relating to the expense.

Split custody

8. Where each parent has custody of one or more children, the amount of an order for support of a child is the difference between the amount that each parent would otherwise pay if an order for support of a child were sought against each of the parents of those children.

Shared custody

9. Where a parent exercises a right of access to, or has physical custody of, a child for not less than 40% of the time over the course of a year, the amount of the order for support of the child shall be determined by taking into account

(a) the amounts set out in the applicable tables for each of the parents of the child;

(b) the increased costs of shared custody arrangements; and

Undue hardship

10. (1) On application of either parent, a court may award an amount of child support that is different from the amount determined under sections 3 to 5, 8 or 9 if the court finds that the parent making the request, or a child in respect of whom the request is made, would otherwise suffer undue hardship.

(2) Circumstances that may cause a parent or child to suffer undue hardship include

(a) the parent has responsibility for an unusually high level of debts reasonably incurred to support the parents and their children before their separation or to earn a living;

(b) the parent has unusually high expenses in relation to exercising access to a child;

(d) the parent has a legal duty to support a child other than a child for whom an order for support is being sought, who

(i) is under the age of majority, or

(ii) has attained the age of majority but is unable, by reason of illness, disability or other cause, to obtain the necessaries if life; and

(e) the parent has a legal duty to support a person who is unable to obtain the necessaries of life due to an illness or disability.

(3) Despite a determination of undue hardship under subsection (1), an application under that subsection shall be denied by the court if it is of the opinion that the household of the parent who claims undue hardship would, after determining the amount of child support under section 3 to 5, 8 or 9, have a higher standard of living than the household of the other parent.

(4) In comparing standards of living for the purpose of subsection (3), the court may use the comparison of household standards of living set out in Schedule A.

(5) Where the court awards a different amount of child support under subsection (1), it may specify, in the order for support of a child, a reasonable time for the satisfaction of an obligation arising from circumstances that cause undue hardship and the amount payable at the end of that time.

(6) Where the court makes an order for support of a child in a different amount under this section, it shall state its reasons for doing so.

Information to be specified in order

11. An order for support of a child shall include the following:

(a) the name and birth date of each child to whom the order relates;

(b) the income of a parent whose income is used to determine the amount of the order for support of a child;

(d) the amount determined under paragraph 3(2)(b) for a child who has attained the age of majority;

(e) the particulars of an expense described in subsection 7(1), the child to whom the expense relates, and the amount of the expense or, where that amount cannot be determined, the proportion to be paid in relation to the expense; and

(f) the date on which the lump sum or first payment is payable and the day of the month or other time period on which all subsequent payments are to be made.

Circumstances for variation

12. For the purposes of paragraph 47(1)(a) of the Act, any one of the following constitutes a material change in circumstances

(a) in the case where the amount of child support includes a determination made in accordance with the applicable table, a change in circumstances that would result in a different order for support of a child or a different provision of that order for support;

(b) in the case where the amount of child support does not include a determination made in accordance with a table, a change in the condition, means, needs or other circumstances of either parent or of a child who is entitled to support; and

Determination of annual income

13. (1) A parent's annual income shall be determined by the court in accordance with sections 14 to 18.

(2) Notwithstanding subsection (1), where both parents agree in writing on the annual income of a parent, the court may consider that amount to be the parent's income for the purposes of these guidelines if the court thinks that the amount is reasonable having regard to the income information provided under section 19.

Calculation of annual income

14. Subject to sections 15 to 18, a parent's annual income shall be determined using the sources of income set out under the heading "Total Income" in the T-1 General form issued by Revenue Canada and is adjusted in accordance with Schedule B.

Pattern of income

15. (1) Where the court is of the opinion that the determination of a parent's income under section 14 would not provide the fairest determination of the annual income from that source, the court may determine the annual income from that source

(a) where the amount in respect of the source of income has increased in each of the 3 most recent taxation years or has decreased in each of those 3 years, to be the amount from that source of income in the parent's most recent taxation year;

(b) where the amount in respect of the source of the income has not increased or decreased as described in paragraph (a), to be the average of the amount received by the parent from that source of income in the 3 most recent taxation years, or another amount that the court considers appropriate; or

(c) where the parent has received a non recurring amount in any of the 3 most recent taxation years, to be a portion of the amount that the court considers appropriate.

(2) Where a parent has incurred a non recurring capital or business investment loss, the court may, if it is of the opinion that the determination of the parent's annual income under section 14 would not provide the fairest determination of the annual income, choose not to apply sections 6 and 7 of Schedule B, and adjust the amount of the loss, including related expenses and carrying charges and interest expenses, to arrive at an amount that the court considers appropriate.

Shareholder, director or officer

16. (1) Where a parent is a shareholder, director or officer of a corporation and the court is of the opinion that the amount of the parent's annual income as determined under section 14 does not fairly reflect all the money available to the parent for the payment of child support, the court may consider the situations described in section 15 and determine the parent's annual income to include

(a) all or part of the pre-tax income of the corporation, and of any corporation that is related to that corporation, for the most recent taxation year; or

(b) an amount commensurate with the services that the parent provides to the corporation, provided that the amount does not exceed the corporation's pre-tax income.

(2) In determining the pre-tax income of a corporation for the purposes of subsection (1), all amounts paid by the corporation as salaries, wages or management fees, or other payments or benefits, to or on behalf of persons with whom the corporation does not deal at arm's length shall be added to the pre-tax income, unless the parent establishes that the payments were reasonable in the circumstances.

Imputing income

17. (1) The court may impute an amount of income to a parent that it considers reasonable in the circumstances, which circumstances include the following:

(a) the parent is intentionally under-employed or unemployed, other than where the under-employment or unemployment is required by the needs of a child of that parent and the parent against whom an order for support of a child is sought or another child under the age of majority or by the reasonable educational or health needs of the parent;

(b) the parent is exempt from paying federal or provincial income tax;

(c) the parent lives in a country that has effective rates of income tax that are significantly lower than those in Canada;

(d) it appears that income has been diverted which would affect the level of child support to be determined under these guidelines;

(e) the parent's property is not reasonably utilized to generate income;

(f) the parent has failed to provide income information when under a legal obligation to do so;

(g) the parent unreasonably deducts expenses from income;

(h) the parent derives a significant portion of income from dividends, capital gains or other sources that are taxed at a lower rate than employment or business income; and

(i) the parent is a beneficiary under a trust and is or shall be in receipt of income or other benefits from the trust.

(2) For the purposes of paragraph (1)(g), the reasonableness of an expense deduction is not solely governed by whether the deduction is permitted under the Income Tax Act (Canada).

Non-resident

18. Where a parent is a non resident of Canada, that parent's annual income is determined as though he or she were a resident of Canada.

Obligation

19. (1) An applicant, upon making an application, and a respondent, within 10 days or another time that the court specifies after the application is served upon him or her, shall provide to the court and the opposing respondent or applicant

(a) a copy of every personal income tax return filed by him or her for each of the 3 most recent taxation years;

(b) a copy of every notice of assessment or reassessment issued to him or her for each of the 3 most recent taxation years;

(c) where he or she is an employee, the most recent statement of earnings indicating the total earnings paid in the year to date, including overtime or, where a statement is not provided by the employer, a letter from his or her employer setting out that information including his or her rate of annual salary or remuneration;

(d) where he or she is self employed, for the 3 most recent taxation years

(i) the financial statements of his or her business or professional practice, other than a partnership, and

(ii) a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to or on behalf of, persons or corporations with whom he or she does not deal at arm's length;

(e) where he or she is a partner in a partnership, confirmation of his or her income and draw from, and capital in, the partnership for its 3 most recent taxation years;

(f) where he or she controls a corporation, for the 3 most recent taxation years

(i) the financial statements of the corporation and it subsidiaries, and

(ii) a statement showing a breakdown of all salaries, wages, management fees or other payments or benefits paid to, or on behalf of, persons or corporations with whom the corporation, and every related corporation, does not deal at arm's length; and

(g) where he or she is a beneficiary under a trust, a copy of the trust settlement agreement and copies of the trust's 3 most recent financial statements.

(2) Notwithstanding subsection (1), where the respondent resides in another province of Canada or in the United States of America, the respondent shall provide to the court and the applicant the documents required under subsection (1) within 30 days after the application for an order for support of a child is served on the respondent.

(3) Notwithstanding subsection (1), where the respondent resides outside Canada and the United States of America, the respondent shall provide to the court and the applicant the documents required under subsection (1) within 60 days after the application for an order for support of a child is served on the respondent.

(4) Where, in the course of proceedings in respect of an application for support of a child, it is established that the income of the parent who would be paying the amount of child support is greater than $150,000, the other parent shall, within 10 days after the income is established to be greater than $150,000 if the other parent resides in the province, within 30 days if the other parent resides in another province of Canada or the in United States of America or within 60 days if the other parent resides elsewhere, or another time limit that the court specifies, provide the court and the parent with the documents referred to in subsection (1).

(5) Nothing in this section precludes the making of rules by a competent authority respecting the disclosure of income information that is considered necessary for the purposes of the determination of an amount for an order for support of a child.

(6) In this section

(a) "applicant" means a parent or other person who applies under Part III of the Act for an order for support of a child;

(b) "application" means an application for an order for support of a child made under Part III of the Act; and

Failure to comply

20. (1) Where a parent fails to comply with section 19, the other parent may apply

(a) to have the application for an order for support of a child set down for a hearing, or move for judgment; or

(b) for an order requiring the parent who failed to comply to provide the court as well as the other parent or assignee of an order for support of a child, with the required documents.

(2) Where a court makes an order under subsection (1), the court may award costs in favour of the other parent up to an amount that fully compensates the other parent for all costs incurred in the proceedings.

Adverse inference

21. Where the court proceeds to a hearing on the basis of an application under paragraph 20(1)(a), the court may draw an adverse inference against the parent who failed to comply and impute income to that spouse in an amount that it considers appropriate.

Failure to comply with court order

22. Where a parent fails to comply with an order issued on the basis of an application under paragraph 20(1)(b), the court may

(a) strike out any of that parent's pleadings;

(b) make a contempt order against that parent;

(c) proceed to a hearing, in the course of which it may draw an adverse inference against that parent and impute income to that parent in an amount that in an amount that it considers appropriate; and

(d) award costs in the favour of the other parent up to an amount that fully compensates the other parent for all costs incurred in the proceedings.

Continuing obligation to provide income information

23. (1) A parent against whom an order for support of a child has been made shall, on the written request of the other parent or an assignee of the order for support of a child, not more than once a year after the making of that order and as long as the child is a child within the meaning of section 37 of the Act and these guidelines, provide that other parent or the assignee of that order for support of a child with

(a) the documents referred to in subsection 19(1) for any of the 3 most recent taxation years for which the parent has not previously provided the documents;

(b) as applicable, current information, in writing, about the status of expenses included in the order for support under subsection 7(1); and

(c) as applicable, any current information, in writing, about the circumstances relied on by the court in a determination of undue hardship.

(2) Where a court has determined that the parent against whom an order for support of a child is sought does not have to pay child support because his or her income level is below the minimum amount required for the application of the tables, that parent shall, on the written request of the other parent and not more than once a year after the determination as long as the child is a child within the meaning of section 37 of the Act and these guidelines, provide the other parent with the documents referred to in subsection 19(1) for any of the 3 most recent taxation years for which the parent has not previously provided the documents.

(3) Where the income information of the parent in favour of whom an order for support of a child is made is used to determine the amount of the order for support of a child, the parent shall, not more than once a year after the making of the order and as long as the child is a child within the meaning of section 37 of the Act and these guidelines, on the written request of the other parent, provide the other parent with the documents and information referred to in subsection (1).

(4) Where a parent or an assignee of an order for support of a child requests information from the other parent under subsections (1), (2) or (3), and the income information of the requesting parent is used to determine the amount of the order for support of a child, the requesting parent or assignee shall include the documents and information referred to in subsection (1) with the request.

(5) A parent who receives a request under subsection (1), (2) or (3) shall provide the required documents within 30 days after the request's receipt if the parent resides in Canada or the United States of America and within 60 days after the request's receipt if the parent resides elsewhere.

(6) A request made under subsection (1), (2) or (3) is considered to have been received 10 days after it is sent.

(7) A court may, on application by either parent or an assignee of an order for support of a child, where the other parent has failed to comply with subsection (1), (2) or (3)

(a) consider the other parent to be in contempt of court and award costs in favour of the applicant up to an amount that fully compensates the applicant for all costs incurred in the proceedings; or

(b) make an order requiring the other parent to provide the required documents to the court, as well as to the parent or assignee of the order for support of a child.

(8) A provision in a judgment, order or agreement purporting to limit a parent's obligation to provide documents under this section is unenforceable.

Child support service

24. A parent or an assignee of an order for support of a child may appoint a child support service to act on their behalf for the purpose of requesting and receiving income information under subsection 23(1), (2) or (3) as well as for the purposes of an application under subsection 23 (7).

Commencement

25. These regulations shall come into force on April 1, 1998.

Schedule A

Comparison of Household Standards of Living Test

1. In this Schedule

(a) "average tax rate" means the rate determined by dividing the federal and provincial taxes payable on a person's annual income determined under sections 13 to 18 of the guidelines by the person's taxable income;

(b) "child" means, in addition to the meaning attributed to it under the Act,

(i) a child under the age of majority, or

(ii) a child who has attained the age of majority and who is under the charge of his or her parent and is unable by reason of illness, disability or other cause to obtain the necessaries of life;

(i) a person who has a legal duty to support the parent or whom the parent has a legal duty to support,

(ii) a person who shares living expenses with the parent or from whom the parent otherwise receives an economic benefit as a result of living with that person, if the court considers it reasonable for that person to be considered part of the household, and

(iii) a child whom the parent or the person described in paragraph (a) or (b) has a legal duty to support; and

(d) "taxable income' means the annual taxable income determined using the calculations required to determine "Taxable Income" in the T-1 General form issued by Revenue Canada under the Income Tax Act (Canada).

2. The comparison of household standards of living test is as follows:

STEP 1

Establish the annual income of each person in each household by applying the formula

A - B

where

A = is the person's income determined under sections 13 to 18 of these guidelines; and

B = is the federal and provincial taxes payable on the person's taxable income, and

where the information on which to base the income determination is not provided, the court may impute income in the amount it considers appropriate.

STEP 2

Adjust the annual income of each person in each household by

(a) deducting the following amounts, calculated on an annual basis:

(i) an amount relied on by the court as a factor that resulted in a determination of undue hardship, except an amount attributable to the support of a member of the household that is not incurred due to a disability or serious illness of that member,

(ii) the amount that would otherwise be payable by the person in respect of a child to whom the order for support relates, if the pleading of undue hardship was not made, under these guidelines if the pleading of undue hardship was not made,

(A) under the applicable table, or

(B) as is considered by the court to be appropriate, where the court considers the table amount to be inappropriate, and

(iii) an amount of support that is paid by the person under a judgment, order or written separation agreement, except

(A) an amount already deducted under subparagraph (i), and

(B) an amount paid by the person in respect of a person other than a child to whom the order referred to in subparagraph (ii) relates; and

(b) adding the following amounts, calculated on an annual basis

(i) an amount that would otherwise be receivable by the person in respect of a child to whom the order for support relates, if the pleading of undue hardship was not made,

(A) under the applicable table, or

(B) as is considered by the court to be appropriate, where the court considers the table amount to be inappropriate, and

(ii) any amount of child support that the person has received for any child under a judgment, order or written separation agreement.

STEP 3

Add the amounts of adjusted annual income for all the persons in each household to determine the total household income for each household.

STEP 4

Determine the applicable low-income measures amount for each household based on the following:

Low Income Measure

Household Size	Low-income Measures Amount
One person
1 adult	$10,382
Two persons
2 adults	$14,535
1 adult and 1 child	14,535
Three persons
3 adults	$18,688
2 adults and 1 child	17,649
1 adult and 2 children	17,649
Four persons
4 adults	$22,840
3 adults and 1 child	21,802
2 adults and 2 children	20,764
1 adult and 3 children	20,764
Five persons
5 adults	$26,993
4 adults and 1 child	25,955
3 adults and 2 children	24,917
2 adults and 3 children	23,879
1 adult and 4 children	23,879

Six persons
6 adults	$31,145
5 adults and 1 child	30,108
4 adults and 2 children	29,070
3 adults and 3 children	28,031
2 adults and 4 children	26,993
1 adult and 5 children	26,993
Seven persons
7 adults	$34,261
6 adults and 1 child	33,222
5 adults and 2 children	32,184
4 adults and 3 children	31,146
3 adults and 4 children	30,108
2 adults and 5 children	29,070
1 adult and 6 children	29,070
Eight persons
8 adults	$38,413
7 adults and 1 child	37,375
6 adults and 2 children	36,337
5 adults and 3 children	35,299
4 adults and 4 children	34,261
3 adults and 5 children	33,222
2 adults and 6 children	32,184
1 adult and 7 children	32,184

STEP 5

Divide the household income amount, Step 3, by the low income measures amount, Step 4, to get a household income ratio for each household.

STEP 6

Compare the household income ratios. The household that has the higher ratio has the higher standard of living.

Schedule B

Section 14

ADJUSTMENTS TO INCOME

Deductions

1. Where the parent is an employee, the parent's applicable employment expenses described in the following provisions of the Income Tax Act (Canada) are deducted

(a) paragraph 8(1)(c) concerning expenses of clergyman's residence;

(b) paragraph 8(1)(d) concerning expenses of teacher's exchange fund contribution;

(d) paragraph 8(1)(f) concerning sales expenses;

(e) paragraph 8(1)(g) concerning transport employees expenses;

(f) paragraph 8(1)(h) concerning travel expenses;

(g) paragraph 8(1)(i) concerning dues and other expenses of performing duties;

(h) paragraph 8(1)(j) concerning motor vehicle and aircraft costs;

(i) paragraph 8(1)(l.1) concerning Canada Pension Plan contributions and Employment Insurance Act (Canada) premiums paid in respect of another employee who acts as an assistant or substitute for the spouse;

(j) paragraph 8(1)(n) concerning salary reimbursement;

(k) paragraph 8(1)(o) concerning forfeited amounts;

(l) paragraph 8(1)(p) concerning musical instrument costs; and

(m) paragraph 8(1)(q) concerning artists' employment expenses.

Child support

2. Deduct any child support received that is included to determine total income in the T-1 General form issued by Revenue Canada.

Support

3. (1)To calculate income for the purpose of determining an amount under an applicable table, deduct the support received from the other parent.

(2) To calculate income for the purpose of determining an amount under section 7 of the guidelines, deduct the support paid to the other parent.

Social assistance

4. Adjust social assistance income to include the amount determined to be attributable to the spouse or other parent.

Dividends from taxable Canadian corporation

5. Replace the taxable amount of dividends from taxable Canadian corporations received by the parent by the actual amount of those dividends received by the parent.

Capital gains and capital losses

6. Replace the taxable capital gains realized in a year by the parent by the actual amount of capital gains realized by the parent in excess of the parent's actual capital losses in that year.

Business investment losses

7. Deduct the actual amount of business investment losses suffered by the parent during the year.

Carrying charges

8. Deduct the parent's carrying charges and interest expenses that are paid by the parent and that would be deductible under the Income Tax Act (Canada).

Net self-employment income

9. Where the parent's net self-employment income is determined by deducting an amount for salaries, benefits, wages or management fees, or other payments, paid to or on behalf of persons with whom the parent does not deal at arm's length, include that amount, unless the parent establishes that the payments were necessary to earn the self-employment income and were reasonable in the circumstances.

Additional amount

10. Where the parent reports income from self-employment that includes the self-employment income for the 12 months ending on December 31 of the reporting year plus an additional amount earned in the prior period, net of reserves.

Capital cost allowance for property

11. Include the parent's deduction for an allowable capital cost allowance with respect to real property.

Partnership or sole proprietorship income

12. Where the parent earns enough income through a partnership or sole proprietorship, deduct an amount included in income that is properly required by the partnership or sole proprietorship for purposes of capitalization.

Share options

13. (1) Where the parent has received, as an employee benefit, options to purchase shares of a Canadian controlled private corporation and has exercised those options during the year, add the difference between the value of the shares at the time the options are exercised and the amount paid by the parent for the shares and any amount paid to acquire the options to purchase the shares, to the income for the year in which the options are exercised.

(2) If the parent has disposed of the shares during the year referred to in subsection (1), deduct from the income for that year the difference determined under that subsection.