Date: 20001220
Docket: 2000-3281-IT-I
BETWEEN:
MICHAEL BROMLEY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bell, J.T.C.C.
ISSUE:
[1] The issue is whether certain amounts paid by the Appellant pursuant to a written separation agreement, in the 1995, 1996 and 1998 taxation years, are deductible by him. Although a notice of appeal respecting his 1992 taxation year was filed, the Appellant abandoned same at the hearing.
FACTS:
[2] The Appellant had a common law conjugal relationship with one Catherine Suzanne Custeau ("Custeau"), which terminated on September 18, 1988 when they commenced living separate and apart. Under a written separation agreement made in 1992 the Appellant agreed to pay Custeau the sum of $1,000 per month for the support of their two children.
[3] The Appellant made the following payments pursuant to the agreement:
1995 $ 2,000
1996 $17,000
1998 $ 6,000
SUBMISSIONS:
[4] Appellant's counsel submitted that the Appellant was entitled by virtue of section 60(b) to deduct the 1995 and 1996 payments.[1] That section provides that there may be deducted in computing a taxpayer's income for a taxation year such of the following amounts are applicable.
First version of 60(b):
(b) an amount paid by the taxpayer in the year, pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written agreement, as alimony or other allowance payable on a periodic basis for the maintenance of the recipient thereof, children of the marriage, or both the recipient and children of the marriage, if he was living apart from, and was separated pursuant to a divorce, judicial separation or written separation agreement from, his spouse or former spouse to whom he was required to make the payment at the time the payment was made and throughout the remainder of the year;
Second version of 60(b):
The second version was included in section 20.(1) of the Income Tax Amendments Revision - Schedule VIII ("Amendments Revision") which reads as follows:
20.(1) Paragraphs 60(b) and (c) of the Act are replaced by the following:
(b) an amount paid by the taxpayer in the year as alimony or other allowance payable on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and the children, if the taxpayer, because of the breakdown of the taxpayer's marriage, was living separate and apart from the spouse or former spouse to whom the taxpayer was required to make the payment at the time the payment was made and throughout the remainder of the year and the amount was paid under a decree, order or judgment of a competent tribunal or under a written agreement;
Subsection (20).11 of the Amendments Revision provides that:
20.(11) Subsection (1) applies to amounts received[2]under a decree, order or judgment of a competent tribunal or under a written agreement, with respect to a breakdown of a marriage occurring after 1992.
Common Law Spouse Amendment:
Subsection 140(3) of the Amendments Revision provides that:
(3) Section 252 of the Act is amended by adding the following after subsection (3):
(4) 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) is a parent of a child of whom the taxpayer is a parent
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 to not apply to a person who is, because of paragraph (a), a spouse of a taxpayer.
Subsection 140(4) of the Amendments Revisions provides that:
Subsections (1) and (3) apply after 1992.
Third version of 60(b)
The third version of section 60(b) reads as follows:
(b) support - the total of all amounts 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 were living separate and apart at the time the amount was paid,
B is the total of all amounts each of which is a child support amount that became payable by the taxpayer to the particular person under an agreement or order on or after its commencement day and before the end of the year in respect of a period that began after its commencement day, and
C is the total of all amounts each of which is a support amount paid by the taxpayer to the particular person after 1996 and deductible in computing the taxpayer's income for a preceding taxation year;
This new provision was expressed to be
... effective for amounts received after 1996, ...[3]
ANALYSIS AND CONCLUSION:
[5] Respecting the 1995 and 1996 taxation years, Appellant's counsel acknowledged that the Appellant was not entitled to a deduction under the second version of section 60(b) because it applies only to marriage breakdowns occurring after 1992. However, he submitted that the Appellant was entitled to a deduction for those years under the former section 60(b), presumably on the basis that it was replaced only so far as marriage breakdown after 1992 was concerned. He argued that the new subsection 252(4) used the words "at any time" and "at that time" and that they, therefore, referred to a time when an unmarried couple was cohabiting, even if before 1993, thus entitling the Appellant to a deduction.
[6] Counsel then submitted that the Appellant was entitled to a deduction for his 1998 taxation year on the basis that, as above, new subsection 252(4) would apply to make Custeau a "former spouse"[4]. He pointed out that the formula in the third version of paragraph 60(b) would entitle his client to a deduction of $6,000 in 1998 because the amount of A in that formula was the $6,000 payment and the amount of each of B and C was nil.
[7] I do not accept those submissions. Subsection 252(4) applies only to taxation years after 1992. The amendment introducing that subsection cannot, therefore, be said to characterize a relationship as a common law relationship in which each of the Appellant and Custeau could be regarded as a spouse or former spouse, that relationship having existed prior to, and having ended in, 1988.
[8] Had the couple been married and then divorced in 1988, Custeau would clearly be a "former spouse" and I would be obliged to decide whether the second version of paragraph 60(b) applied only to persons whose marriage breakdown occurred after 1992, leaving the first version of paragraph 60(b) remaining in force, thus entitling the Appellant to a deduction. Support for this interpretation is found in the fact that the amended paragraph 60(b) was implemented by subsection 1 of section 20 of the Amendments Revisions and the application thereof was accomplished by subsection 11 of the same section. Obviously, the recipient of such amount would support the opposite interpretation. The implementing provisions that apply to each of paragraph 56(1)(b) (including in the recipient's income the amount deducted by the payor, under paragraph 60(b)) and paragraph 60(b) are identical. The recipient would submit that, respecting the 1995 and 1996 taxation years, the second version of section 60(b) replaced the first version of that section, such version having no validity after replacement. The word "replace" is defined, in part, in The New Shorter Oxford English Dictionary as follows:
Take the place of, become a substitute for ...
[9] My finding respecting subsection 252(4) obviates the necessity of my interpreting the extent and application of the second version of paragraph 60(b).
[10] Appellant's counsel referred to John Carey v. Canada, 1999 DTC 3502. The facts in Carey were very similar to the facts in the present case. The Court decided that Carey should succeed. It appears that the learned judge concluded that the first version of paragraph 60(b) should be given the interpretation urged by Appellant's counsel in this case. My study of the Reasons for Judgment does not inform me as to what submissions were made. As set out above, it was not necessary for me to make a decision in that regard. While respecting his judgment, my view of the application of subsection 252(4) differs from the view expressed by that learned judge. I have concluded that it does not apply retroactively to any year preceding 1993. 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.
[11] According, the Appellant is not entitled to the deductions sought for his 1995, 1996 and 1998 taxation years. Having abandoned his appeal for the 1992 taxation year, his appeal for those four years will be dismissed.
Signed at Ottawa, Canada this 20th day of December, 2000.
"R.D. Bell"
J.T.C.C.
[1] Section 60(b) was altered three times in the period under appeal. Each of the first three versions together with the dates when they became applicable will be set out. The fourth version, not relevant to this appeal, is referred to in footnote 3.
[2] It should have used the word "paid" instead of "received". Exactly the same wording was used in the legislation implementing the corresponding replaced paragraph 56(1)(b). The word "received", instead of "paid", was, apparently, mistakenly employed in subsection 20.(11) above.
[3] See footnote 2. Recognition of this error was contained in subsection 99(8) of the Income Tax Amendments Act, 1997, Chapter 19, 1998 Statutes of Canada. In referring to subsection 99(1) which provided that the description of B in paragraph 60(b) be replaced with a new B adding the words "on or" before the words "after its commencement day", subsection 99(8) read:
(8) Subsection (1) applied to amounts PAID after 1996.
(emphasis added)
[4] The term "support amount" used in the third version of section 60(b) is defined to include reference to a "former spouse of the payor".