Date: 20000628
Docket: 2000-1415-IT-I
BETWEEN:
KENNETH R. SHEWCHUK,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Teskey, J.T.C.C.
[1] The Appellant in his Notice of Appeal wherein he appealed his reassessment of income tax for the 1998 taxation year, elected the informal procedure.
Issue
[2] The sole issue is whether the Appellant is entitled to claim what is referred to as the "equivalent-to-spouse" tax credit in the amount of $5,380.
Facts
[3] The facts are not in dispute and are as follows:
(1) The Taxpayer claimed the equivalent-to-spouse tax credit in 1998 for one of this three children (ages 7, 10 and 13) with whom he shares joint physical custody with his ex-spouse.
(2) The Taxpayer under a Divorce Judgment and Corollary Relief Order dated August 01, 1997, Court of Queen's Bench of Alberta was granted joint physical custody of the 3 children on an alternating weekly basis, resulting in each party having the children 50% of the time.
(3) In accordance with Section 9 of the Federal Child Support Guidelines (February 21, 1997) where there is shared custody, the Honourable Madam Justice M.T. Moreau utilized the amounts set out in the applicable tables for each spouse.
(4) Utilizing the recognized "off set" method the Honourable Madam Justice calculated the amount that each spouse would have to pay the other spouse if they had majority physical custody of the three children.
(5) As the taxpayer's income was greater than that of his ex-spouse, the resulting guidelines table differential was applied to the taxpayer. This resulted in the taxpayer providing a monthly amount to the ex-spouse in recognition of the increased costs of the shared custody arrangement.
(6) The taxpayer was also granted by the Court to utilize the 1998 equivalent to spouse deduction for the children. The taxpayer's ex-spouse was entitled to make this claim in 1997.
(7) Utilizing the "off set" method, results in a netting of the amounts payable to each party during the time they have physical custody of the children.
(8) The taxpayer maintained a separate residence where the children reside, provided for their needs and has made no duplicate claim of the children.
(9) The taxpayer's claim for the 1998 equivalent-to-spouse deduction was reassessed by Revenue Canada and denied on appeal on February 18, 2000.
(10) During the 1998 taxation year, the Appellant was required to pay a support amount for the support of the children of the marriage.
(11) The support amount was required to be paid to the Appellant's former spouse, Laura Lynn Shewchuk, (hereinafter the "former spouse").
(12) The support amount was required to be paid in respect of the children of the marriage, being Kristen Margaret Shewchuk born May 18, 1986, Robert Louis Shewchuk born May 22, 1989 and Michael David Shewchuk born May 10, 1992.
(13) The Appellant was living separate and apart from his former spouse throughout the 1998 taxation year because of a breakdown of their marriage.
[4] The Divorce Judgment of the Honourable Madam Justice M.T. Moreau of the Court of Queen's Bench of Alberta, dated the 1st day of August 1997 orders, in paragraph 7 thereof as follows:
7. IT IS ORDERED:
THAT the Petitioner shall be entitled to utilize the 1997 equivalent to married income tax deduction for the children. The Respondent shall be entitled to utilize the 1998 equivalent to married income tax deduction for the children. Thereafter the parties shall review the claim for married equivalent deduction.
Jurisdiction
[5] The only court of original jurisdiction to determine how a taxpayer is to be assessed for income tax is this Court, therefore the terms set forth in paragraph 7 of the above order shall be ignored as they are of no force or effect.
Appellant's Position
[6] The Appellant based his argument on the fact that there was no duplicate claim between him and his spouse, as in his tax return, he only claimed support for his daughter Kristen Shewchuk and no claim was made by his spouse for Kristen.
[7] The Appellant also submits that the utilization of the "off-set" method by the provincial courts having jurisdiction over custody and maintenance of children should not result in the Appellant being unfairly treated in respect of his spouse.
[8] The Appellant also suggests that Revenue Canada's procedures do not fairly recognize joint physical custody situations, the application of the Federal Guidelines in these cases, equitable treatment of the taxpayers involved and the best interests of the children.
Respondent's Position
[9] The term "support payment" is defined in the Income Tax Act (the "Act") in subsection 56.1(4). It reads:
“support amount” means an amount payable or receivable as an allowance on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and children of the recipient, if the recipient has discretion as to the use of the amount, and
(a) the recipient is the spouse or former spouse of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage and the amount is receivable under an order of a competent tribunal or under a written agreement; or
(b) the payer is a natural parent of a child of the recipient and the amount is receivable under an order made by a competent tribunal in accordance with the laws of a province.
[10] Section 118 of the Act, under the heading "Personal Credit" is the section that gives taxpayers tax credits under certain circumstances. Herein, in spite of the fact that the Appellant falls within the provision of subsection 118(1)(b), subsection 118(5) takes the tax credit away. This subsection reads as follows:
No amount may be deducted under subsection (1) in computing an individual's tax payable under this Part for a taxation year in respect of a person where the individual is required to pay a support amount (as defined in subsection 56.1(4)) to the individual's spouse or former spouse in respect of the person and the individual
(a) lives separate and apart from the spouse or former spouse throughout the year because of the breakdown of their marriage; or
(b) claims a deduction for the year because of section 60 in respect of a support amount paid to the spouse or former spouse.
Analysis
[11] As the late Justice John Sopinka of the Supreme Court of Canada said: "Fairness and Equity have nothing to do with tax law". I believe the Respondent's position is correct in law and that a combination of subsections 56.1(4) and 118(5) of the Act take away from the Appellant the "equivalent-to-spouse" tax credit, as provided for in subsection 118(1) of the Act.
[12] For these reasons, the appeal is dismissed.
Signed at Edmonton, Alberta, this 28th day of June, 2000.
"Gordon Teskey"
J.T.C.C.