Date: 20010726
Docket: 2001-749-IT-I
BETWEEN:
RICHARD EDMOND GIRARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Miller, J.T.C.C.
[1] Laws change to reflect shifting attitudes in our society, for example, commencing in 1993 the Income Tax Act ("Act") was amended to extend the meaning of spouse to include common law relationships. It is not easy to pin point exactly when society recognized these relationships as equivalent-to-spouse relationships, but I would suggest it was certainly long before the government passed this amending legislation. The Appellant, Mr. Girard, was in such a relationship until 1991. The Minister is denying Mr. Girard's claim for a deduction for support amounts paid by Mr. Girard in 1998 pursuant to a 1995 Separation Agreement, on the basis that his former partner was not a spouse within the meaning of the Act at the time of separation and neither were the amounts paid pursuant to a Court Order, an Order obtained subsequent to the year in question.
[2] There is no dispute as to the facts in this matter so I will go over them briefly. From 1980 to September, 1991 the Appellant and Elaine Johnstone were in a common law relationship. They never married with a certificate or license. Together they had two children, Richard Girard and Danielle Girard born in 1983 and 1987 respectively. By written Separation Agreement dated April 21, 1995, a copy of which was produced in evidence, Ms. Johnstone was provided sole custody of the children with access privileges to the Appellant. The Agreement also provided that the Appellant is required to pay Ms. Johnstone $660.00 per month for support of the children. Mr. Girard testified that the support amount was originally $600.00 but was amended upwards to take into account the tax effect. The Appellant was clear that the understanding at the time of signing the Agreement in 1995 was that he would deduct payments from his income and Ms. Johnstone would include the payments in her income. The Appellant has made all payments since, including throughout 1998 and the Appellant and Ms. Johnstone have treated such payments in accordance with this understanding.
[3] In 2001 it became apparent to the Appellant that Canada Customs and Revenue Agency ("CCRA") would only accept the deductibility of payments if they were made pursuant to a Court Order. On March 8, 2001 the Appellant and Ms. Johnstone obtained an Order from the Ontario Superior Court of Justice. It read, in part, as follows:
1. THIS COURT ORDERS that all child support payments made by the Applicant to the Respondent were made pursuant to the Separation Agreement dated April 21, 1995.
2. THIS COURT ORDERS that paragraph 9 of the Separation Agreement dated April 21, 1995 ... was in full force and effect as of April 21, 1995.
[4] Counsel for the Appellant argued that the Court Order resolves the issue as it could now be said payments in 1998 were pursuant to a Court Order and therefore deductible in accordance with the definition of "support amount". In the alternative, counsel for the Appellant argued that the definition of "spouse" or "former spouse" applies to the Appellant and Ms. Johnstone and therefore the support payments fall within the definition in the Act.
[5] The right to deduct support amounts stems from section 60(b), as it read in 1998:
Other deductions.
There may be deducted in computing a taxpayer's income for a taxation year such of the following amounts as are applicable:
...
(b) Support - the total of all amounts of each of which is an amount determined by the formula
A - (B + C)
where
A is the total of all amounts each of which is a support amount paid after 1996 and before the end of the year by the taxpayer to a particular person, where the taxpayer and the particular person where living separate and apart at the time the amount was paid, ...
I need not cite the balance of the section, as it is only relevant to note that this provision refers to the deductibility of "support amount". Support amount in 1998 was defined as follows:
"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 a 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 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.
[6] If the Appellant can fall under either (a) or (b) of that definition, then the Appellant is entitled to a deduction pursuant to section 60(b) of the payments of $8,224.00 in 1998. I will turn to paragraph (b) first. Were the payments in 1998 receivable under the March, 2001 Order? No they were not. The Order itself is not worded in a way that suggests the payments were made pursuant to the Order. It simply affirms that payments were made pursuant to the Separation Agreement and that the provisions requiring payment were in full force and effect. There was never any issue that there was a binding agreement that required these payments. That is all the Order appears to indicate. It does not purport to deem payments three years earlier to have been made pursuant to the Order itself. Even if it had gone so far, which I would doubt any Court would do, I fail to see how I can give effect to such retroactivity. In 1998 these payments were receivable pursuant to an agreement. There simply was no Order. The Income Tax Appeal Board in Bentley v. Minister of National Revenue, 54 DTC 510 and again in Hobbs v. Minister of National Revenue, 70 DTC 1744 lead to a similar conclusion.
[7] The only legislative provision in connection with support payments that offer some retroactive relief is found in section 60.1(3). This provision however has no application to the case before me. I find the 1998 payments were not receivable pursuant to the 2001 Order.
[8] The alternative argument presented by the Appellant is whether the Appellant is entitled to deduct the $8,224.00 in 1998 as support payments as defined by subparagraph (a) of the definition of support payment. If the Appellant and Ms. Johnstone are considered to have been spouses, then payments pursuant to the written Agreement would be deductible. The definition of spouse is found in section 252(4) of the Act:
(4) Idem. In this Act,
(a) words referring to a spouse at any time of a taxpayer include the person of the opposite sex who cohabits at that time with the taxpayer in a conjugal relationship and
(i) has so cohabited with the taxpayer throughout a 12-month period ending before that time, or
(ii) would be a parent of a child of whom the taxpayer would be a parent, if this Act were read without reference to paragraph (l)(e) and subparagraph (2)(a)(iii)
and, for the purposes of this paragraph, where at any time the taxpayer and the person cohabit in a conjugal relationship, they shall, at any particular time after that time, be deemed to be cohabiting in a conjugal relationship unless they were not cohabiting at the particular time for a period of at least 90 days that includes the particular time because of a breakdown of their conjugal relationship;
(b) references to marriage shall be read as if a conjugal relationship between 2 individuals who are, because of paragraph (a), spouses of each other were a marriage;
(c) provisions that apply to a person who is married apply to a person who is, because of paragraph (a), a spouse of a taxpayer; and
(d) provisions that apply to a person who is unmarried do not apply to a person who is, because of paragraph (a), a spouse of a taxpayer.
[9] Pursuant to this section I have no hesitation in finding the Appellant and Ms. Johnstone were spouses and qualify as such for purposes of determining "support amounts". There is nothing in section 252(4) of the Act that indicates the section is not to apply to relationships before a certain period of time. This was the law in 1998, the year in which the deduction is sought. The Respondent contends I must look at the law at the time the couple separated. I do not accept that argument. She cited the decision of this Court in Bromley v. Regina 2000 CarswellNat 3033, [2001] 1 C.T.C. 2468. In that case Judge Bell found section 252(4) "applies only to taxation years after 1992". I find that the taxation year in question in this case is the Appellant's 1998 taxation year. In 1998 section 252(4) was part of our legislation and it defined "spouse" for all purposes of the Act to include someone who fits Ms. Johnstone's description. Section 140(4) of the Act Amendment Revisions introducing this amendment did not state that the conjugal relationship referred to in section 252(4) must have existed after 1992; it simply stated that the subsection applies after 1992. I contrast this to subsection 20(11) of the Amendment Revisions, which differs significantly: it states most exactly that the section refers to a breakdown of marriage after 1992. If the legislators had used such exact language in introducing section 252(4), my conclusion would differ.
[10] The interpretation put on the timing of the applicability of section 252(4) is either:
1. For taxation years after 1992 I am to interpret "spouse" in accordance with section 252(4); or
2. I am to interpret "spouse" in accordance with section 252(4) for only those conjugal relationships existing after 1992.
[11] I favour the former approach. For the taxation year 1998 I rely on section 252(4) and find the Appellant's relationship with Ms. Johnstone falls within that definition notwithstanding that relationship concluded prior to 1993.
[12] In Bromley v. R. Judge Bell recognized that Judge Bowie also came to a different conclusion in Carey v. R., 1999 CarswellNat 562, [1999] 2 C.T.C. 2677, DTC 3502 allowing the deductibility of amounts paid in 1994 and 1995 by a common law husband in connection with a relationship which had ended in 1988. It is cause for some uncertainty in the tax community and public generally when the introduction of amending legislation is open to differing interpretations by a Court. Judge Bell put it as follows in paragraph 10 of his Judgment:
10 ... Lack of precision in the legislation in this regard is extremely unfortunate because faulty legislation, not clearly presenting the intent of Parliament, causes taxpayers concern, time and expense in pursuing objection and appeal procedures.
I agree with those comments.
[13] The appeal is allowed and the assessment is referred back to the Minister for reconsideration and reassessment on the basis the Appellant is entitled to a deduction in 1998 in the amount of $8,224.00 with costs of $200.00 for incidental expenses.
Signed at Ottawa, Canada, this 26th day of July, 2001.
"Campbell J. Miller"
J.T.C.C.
COURT FILE NO.: 2001-749(IT)I
STYLE OF CAUSE: Richard Edmond Girard v. The Queen
PLACE OF HEARING: Kitchener, Ontario
DATE OF HEARING: July 20, 2001
REASONS FOR JUDGMENT BY: The Honourable Judge Campbell J. Miller
DATE OF JUDGMENT: July 26, 2001
APPEARANCES:
Counsel for the Appellant: Phaedra Klodner
Counsel for the Respondent: Rosemary Fincham
COUNSEL OF RECORD:
For the Appellant:
Name: Phaedra Klodner
Firm: Sutherland, Mark, Bumstead, Flemming
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-749(IT)I
BETWEEN:
RICHARD EDMOND GIRARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on July 20, 2001 at Kitchener, Ontario, by
the Honourable Judge Campbell J. Miller
Appearances
Counsel for the Appellant: Phaedra Klodner
Counsel for the Respondent: Rosemary Fincham
JUDGMENT
The appeal from the reassessment made under the Income Tax Act for the 1998 taxation year is allowed, and the matter is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
The Appellant is awarded costs fixed in the amount of $200.00.
Signed at Ottawa, Canada, this 26th day of July 2001.
|
"Campbell J. Miller" |
J.T.C.C.