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Date: 20030130 |
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Docket: 2001-3929(IT)I |
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BETWEEN: |
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CHARLES G. TRUMAN, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
_______________________________________________________________
Appeal heard on November 18, 2002 at Regina, Saskatchewan
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Before: The Honourable Judge L.M. Little |
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Appearances: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Anne Jinnouchi, Dana Brûlé |
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JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1999 taxation year is allowed, without costs, and the assessment is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
Signed at Vancouver, British Columbia, this 30th day of January 2003.
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"L.M. Little" |
J.T.C.C.
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Date: 20030130 |
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Docket: 2001-3929(IT)I |
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BETWEEN: |
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CHARLES G. TRUMAN, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
REASONS FOR JUDGMENT
Little, J.
A. FACTS
[1] The Appellant and his ex-spouse Fadiah Truman ("Fadiah") were married in Toronto in 1977.
[2] Three children were born of the marriage, namely:
- Charles David Truman - December 28, 1983
- Kevin Daniel Truman - July 05, 1986
- Brian Michael Truman - April 20, 1989
[3] In 1993 Fadiah commenced a divorce action against the Appellant.
[4] In June 1996 the Appellant and Fadiah signed Minutes of Settlement to settle the divorce action.
[5] By Judgment dated the 15th day of July 1996 the Court of Queen's Bench of the Province of Saskatchewan ordered the Appellant to pay the sum of $180.00 per month per child for the support of the three children commencing on the 1st day of July 1996. (The Order of the Court is hereinafter referred to as the "Court Order").
[6] The Appellant testified that when he entered into the Minutes of Settlement with his ex-spouse he was advised by his lawyer (Gavin Gordon) that if his income increases in the future, he might increase the amount of the child support payments to his three children. The Appellant testified that he accepted the advice of his lawyer and agreed with Fadiah to increase the child support payments if his income increased in the future. The Appellant filed a chart with the Court which contains numbers showing how child support payments might be increased as the Appellant's income increased. The Appellant also said that his lawyer had died and was therefore unable to testify on the agreement that the Appellant had made.
[7] The Appellant stated that in the 1998 taxation year he was obliged by the Court Order to pay Fadiah child support payments of $6,480.00 ($180.00 x 3 = $540.00 x 12 = $6,480.00). However, the Appellant said that because he felt obliged pursuant to the agreement with Fadiah, he actually paid Fadiah $8,056.00 rather than $6,300.00 in the 1998 taxation year. The Appellant stated that when he filed his income tax return for the 1998 taxation year he deducted the amount of $8,056.00 as child support payments and the Minister of National Revenue (the "Minister") accepted the Appellant's tax return as filed.
[8] The Appellant said that in the 1999 taxation year he paid Fadiah the sum of $8,568.00 as child support payments rather than the sum of $6,480.00 as outlined in the Court Order. The Appellant stated that he made this additional payment to Fadiah for the benefit of his three children because of the agreement that he had made with Fadiah.
[9] When the Appellant filed his income tax return for the 1999 taxation year he deducted the amount of $8,568.00 as child support payments.
[10] By Notice of Reassessment dated the 4th day of January 2001 the Minister reassessed the Appellant's 1999 taxation year. In the said Reassessment the Minister allowed the Appellant to deduct child support payments of $6,480.00 and disallowed the amount of $2,088.00. (Note: The Appellant paid Fadiah $8,568.00 - $8,568.00 minus $6,480.00 = $2,088.00.)
[11] During the hearing of the appeal the Appellant stated that Fadiah included in her income for the 1999 taxation year the amount of $8,568.00 that the Appellant paid her as child support payments. The Appellant also filed with the Court a signed copy of a letter from Fadiah to the Canada Customs and Revenue Agency dated October 15, 2000. In the letter Fadiah said as follows:
I, Fadiah Truman received the amount of $8,568.00 (eight thousand, five hundred, sixty-eight dollars) from Charles Truman 617-260-310 in the taxation year 1999.
B. ISSUE
[12] Is the Appellant entitled to deduct the amount of $8,568.00 as child support payments in determining his income for the 1999 taxation year?
C. ANALYSIS
[13] It will be noted from the above comments that in the 1998 taxation year the Appellant paid Fadiah the sum of $8,056.00 rather than the sum of $6,480.00 as outlined in the Court Order. It will also be noted that in the 1999 taxation year the Appellant paid Fadiah the sum of $8,568.00 rather than the sum of $6,480.00 as stipulated in the Court Order. Furthermore, Fadiah acknowledged by letter having received the sum of $8,560.00 in the 1999 taxation year and the Appellant stated that Fadiah included the amount of $8,568.00 in her income for the 1999 taxation year.
[14] I am satisfied by the testimony of the Appellant and the evidence before the Court that the Appellant did agree with Fadiah and his lawyer that he would increase the child support payments to his children if his income increased. I am also satisfied that the schedule filed by the Appellant with the Court provides for increased child support payments.
[15] Under what has been sometimes described as the old tax régime (pre-May 1997) spouses making payments to separated or ex-spouses for the support of the children were allowed to deduct those payments and the recipient was required to include the amount of the payments in their income. Following the decision of the Supreme Court of Canada in Thibaudeau v. Canada, [1995] 2 S.C.R. 627, the Income Tax Act (the "Act") was amended and new provisions were introduced to deal with child support payments.
[16] The amended Act provided that if a pre-May 1997 agreement remained unchanged the deduction/inclusion system as provided by the old tax régime prevailed. However, if a new agreement were entered into by the parties or if a new court order was issued, or if an old agreement was changed in a particular way the deduction/inclusion régime did not apply and only payments made up to the commencement day, as defined, were deductible from income by the payor and included in income by the payee.
[17] Since I have found that the Appellant had agreed with Fadiah in 1996 to increase his child support payments if his income increased it follows that there is no commencement date after April 1997 in this situation and therefore the old tax régime applies.
[18] The Appellant is entitled to deduct the sum of $8,568.00 as child support payments in determining his income for the 1999 taxation year.
[19] The appeal is allowed, without costs.
Signed at Vancouver, British Columbia, this 30th day of January 2003.
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"L.M. Little" |
J.T.C.C.
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COURT FILE NO.: |
2001-3929(IT)I |
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STYLE OF CAUSE: |
Charles G. Truman and Her Majesty the Queen |
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PLACE OF HEARING |
Regina, Saskatchewan |
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DATE OF HEARING |
November 18, 2002 |
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REASONS FOR JUDGMENT BY: |
The Honourable Judge L.M. Little |
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DATE OF JUDGMENT |
January 30, 2003 |
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APPEARANCES: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Anne Jinnouchi, Dana Brûlé |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |