Income Splitting?

[darby]

My wife worked for my business for part of 2009, and then took outside employent for which she will receive a T4 slip. Throughout the year "payments" to her were made in the form of cheques payable both to her and to myself. (A former accountant suggested this as a means to be able to adjust the allocation of income between us). Is this a satisfactory method, and can I retroactively decide to make her income zero and claim all amounts paid on my return alone? I ask because it turns out that my income is sufficiently low that ordinary business writeoffs will eliminate much of my tax burden, and I do not want to allocate income to her which may increase her tax burden due to her employment status outside my business. I have been in communication with CRA on unrelated matters, and have advised them that income allocated to her in past years was based on a reasonably constant figure - will reducing it to zero this year raise red flags, or am I within my rights to do this?

[nelsona]

This is not a cross-border issue.