Date: 20010615
Docket: 2000-2500-IT-I
BETWEEN:
GARY A. NORTHCOTT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
O'Connor, J.T.C.C.
[1] This appeal was heard at Windsor, Ontario on May 31, 2001.
[2] The issue in this appeal is whether, in the 1998 taxation year, the Appellant was entitled to deduct as support payments an amount of $2700.00 which he paid directly in that year to his son, Ryan Edward Northcott.
[3] The relevant facts are as follows:
1. The Appellant and his ex-spouse, Stephanie Ellen Northcott (Ellen Bajc), ("ex-spouse"), had three children of the marriage, namely, Stephanie Lynn Northcott, born July 28, 1976, Ryan Edward Northcott ("Ryan"), born December 8, 1978, and Shevon Marie Northcott, born January 2, 1980.
2. The Supreme Court of Ontario Order dated October 27, 1987, which divorced the Appellant and his ex-spouse, provided for support payments of $675.00 (i.e. $225.00 for each of the three children) per month by the Appellant to his ex-spouse.
3. By 1998 Ryan had attained the age of majority and was attending college and he acknowledged receipt of the said $2,700.00. The Appellant and the ex-spouse determined that the better arrangement would be for the Appellant to pay the $2,700.00 directly to Ryan rather than the ex-spouse receiving the amount and remitting it to Ryan.
4. On September 1, 1999 the Appellant and his former wife entered into an Agreement which provided as follows:
1) Gary Alan Northcott [sic] pay all support payments due pursuant to the said Divorce Judgment directly to Ryan Edward Northcott in full satisfaction of his support obligation for Ryan Edward Northcott.
2) This Agreement confirms the verbal agreement that existed throughout the 1998 Year and the parties acknowledge that monthly payments of $225.00 were paid by Gary Alan Northcott throughout the 1998 year.
It is noted that although the Agreement was dated the 1st day of September, 1999 it was actually signed by the ex-spouse on October 10, 1999 and by the Appellant on October 8, 1999.
[4] The only issue in the appeal is whether, under the applicable provisions of the Income Tax Act ("Act") namely, sections 56, 56.1, 60, and 60.1, the said payment of $2,700.00 was deductible by the Appellant in 1998.
[5] Counsel for the Respondent summarizes the applicable provisions of the Act as follows:
7. The general scheme for the deduction of support amounts is set out in sections 60 and 60.1, and section 56, ...
8. Section 60 of the ... Act provides for deductions in computing a taxpayer's income for a taxation year, including support payments pursuant to paragraph 60(b).
9. Subsection 56.1(4) defines the meaning of support amounts for the purposes of sections 60 and 60.1, and requires that such payments be, inter alia:
a) payable or receivable on a periodic basis
b) for the maintenance of the payor's former spouse ... , the children of the spouse or both the children and the spouse
c) that the spouse have discretion as to the use of the amount;
d) the amount is receivable pursuant to a written agreement or under an order of a competent tribunal.
10. Section 60.1 deems deductible support payments made to a third [party] for the benefit of the person, children in the person's custody, or the person and the children. These payments must still provide the spouse with discretion over the use of the payment, as well as be made pursuant to a written agreement. ...
11. Furthermore, in order to be deductible, support payments must be clearly determined in advance in a written agreement or judgment, as an agreement cannot be applied retroactively.
Robichaud v. Her Majesty the Queen, 99 DTC 41 (T.C.C.) ...
Payments Made Directly to a Child for Educational Expenses
12. Discretion of the supported spouse in the use of the payments is required by section 60.1(1). ...
13. Payments made directly to a child to assist ... with educational expenses are not support payments within the meaning of section 56.1(4) as the spouse is not the recipient and does not have discretion to the use of the payments. ...
Payments Made Directly to a Child Not in the Custody of the Supported person
14. Where a child of the marriage is not a child within a supported spouse's custody, section 60.1 does not deem payments received by the child to have been received by the supported spouse; such payments are not deductible under paragraphs 60(b) of the Act. ...
15. A child of the marriage ceases to be a child within a person's custody where a custody order could no longer be enforced as against a child of the marriage. Where a child of the marriage has reached the age of majority, ... and has withdrawn from parental control by leaving the family home, that person is no longer within a parent's custody. Payments made to such a child are not payments within the meaning of section 60.1. ...
[7] I accept the analysis of counsel for the Respondent. In particular I refer to Robichaud. The headnote in that decision reads in part as follows:
During divorce proceedings in 1978, the taxpayer and his spouse, W, agreed, in a written agreement included in the divorce judgment, that he would pay W an alimentary pension of $50 per month for their minor daughter. ... In December 1995, the taxpayer and W agreed, in a written agreement that the divorce judgment ought to have been interpreted retroactively so as to require the payments to be indexed, and to be made to W for the daughter (with no reference to her minority). In assessing the taxpayer for 1993, 1994 and 1995, the Minister disallowed the deduction of increased payments made by the taxpayer to his daughter while she was engaged in her studies. The taxpayer appealed to the Tax Court of Canada.
Held: The taxpayer's appeal was dismissed. ... In addition, the payments made by the taxpayer had not been made pursuant to any judgment or written agreement between the parties. Indeed, in order to qualify for beneficial tax treatment, the payments in issue ought to have been clearly determined in advance in a written agreement, or in a judgment. The payments, therefore, were not deductible. The Minister's assessments were affirmed accordingly.
[8] In my opinion this appeal cannot succeed for the simple reason that the payments by the Appellant to Ryan were not made pursuant to a written agreement or court order. Further, I accept the Respondent's submissions as to lack of custody and the lack of discretion in the ex-spouse.
[8] Consequently for all the above reasons the appeal is dismissed.
Signed at Ottawa, Canada this 15th day of June 2001.
"T. O'Connor"
J.T.C.C.
COURT FILE NO.: 2000-2500(IT)I
STYLE OF CAUSE: Gary A. Northcott and The Queen
PLACE OF HEARING: Windsor, Ontario
DATE OF HEARING: May 31, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge Terrence O'Connor
DATE OF JUDGMENT: June 15, 2001
APPEARANCES:
For the Appellant: The Appellant himself
Counsel for the Respondent: Rosemary Fincham
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-2500(IT)I
BETWEEN:
GARY A. NORTHCOTT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 31, 2001 at Windsor, Ontario, by
the Honourable Judge Terrence O'Connor
Appearances
For the Appellant: The Appellant himself
Counsel for the Respondent: Rosemary Fincham
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1998 taxation year is dismissed in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada this 15th day of June 2001.
|
"T. O'Connor" |
J.T.C.C.