[OFFICIAL ENGLISH TRANSLATION]
2001-564(IT)I
BETWEEN:
BERMOND LAVOIE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on November 28, 2001, at Montréal, Quebec, by
the Honourable Judge Lucie Lamarre
Appearances
Agent for the Appellant: Jean-Guy Mathieu
Counsel for the Respondent: Philippe Dupuis (Student-At-Law)
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1999 taxation year is dismissed.
Signed at Ottawa, Canada, this 4th day of December 2001.
|
"Lucie Lamarre" |
J.T.C.C.
Translation certified true
on this 10th day of March 2003.
Sophie Debbané, Revisor
[OFFICIAL ENGLISH TRANSLATION]
Date: 20011204
Docket: 2001-564(IT)I
BETWEEN:
BERMOND LAVOIE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre, J.T.C.C.
[1] This is an appeal under the informal procedure from an assessment made by the Minister of National Revenue ("Minister") under the Income Tax Act ("Act") for the appellant's 1999 taxation year.
[2] By that assessment, the Minister disallowed an equivalent-to-spouse tax credit of $972.06 that the appellant had claimed under paragraph 118(1)(b) of the Act.
[3] The respondent is relying on subsections 56.1(4) and 118(5) of the Act to deny the appellant that credit. Those legislative provisions read as follows:
456.1(4)3
(4) Definitions. The definitions in this subsection apply in this section and section 56.
"support amount"-"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 common-law partner or former spouse or common-law partner of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage or common-law partnership 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.
4118(1)(b)3
(b) Wholly dependent person - in the case of an individual who does not claim a deduction for the year because of paragraph (a) and who, at any time in the year,
(i) is
(A) a person who is unmarried and who does not live in a common-law partnership, or
(B) a person who is married or in a common-law partnership, who neither supported nor lived with their spouse or common-law partner and who is not supported by that spouse or common-law partner, and
(ii) whether alone or jointly with one or more other persons, maintains a self-contained domestic establishment (in which the individual lives) and actually supports in that establishment a person who, at that time, is
(A) except in the case of a child of the individual, resident in Canada,
(B) wholly dependent for support on the individual, or the individual and the other person or persons, as the case may be,
(C) related to the individual, and
(D) except in the case of a parent or grandparent of the individual, either under 18 years of age or so dependent by reason of mental or physical infirmity,
an amount equal to the total of
(iii) $7,131, and
(iv) the amount determined by the formula
$6,055 - (D - $606)
where
D is the greater of $606 and the dependent person's income for the year,
4118(5)3
(5) Support. 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 (within the meaning assigned by subsection 56.1(4)) to the individual's spouse or common-law partner or former spouse or common-law partner in respect of the person and the individual
(a) lives separate and apart from the spouse or common-law partner or former spouse or common-law partner throughout the year because of the breakdown of their marriage or common-law partnership; or
(b) claims a deduction for the year because of section 60 in respect of a support amount paid to the spouse or common-law partner or former spouse or common-law partner.
[4] The facts are not in dispute. A judgment divorcing the appellant and his former spouse, Diane Boyer, was rendered by the Superior Court of Quebec (Family Division) on November 21, 1996.
[5] By that divorce judgment, legal custody of the two children, Maïa (born on October 1, 1982) and Jonathan (born on July 1, 1987), was awarded to Diane Boyer. At the same time, Ms. Boyer waived any support for herself, and the appellant was also exempt from paying child support because he was an income security recipient at the time of the divorce.
[6] On April 29, 1998, the Superior Court of Quebec ratified a written consent entered into by Diane Boyer and the appellant by which the appellant undertook to pay his former spouse a support amount of $5,660 a year in respect of his two minor children, who were still in their mother's legal custody.
[7] In June 1998, Maïa went to live with her father. The appellant then met with his lawyer in August 1998 to instruct him to take the necessary steps to put an end to the support payments he was making in respect of his daughter Maïa. As a result, a consent to judgment by the appellant and Diane Boyer was ratified by the Superior Court of Quebec (Family Division) on March 4, 1999, pursuant to the motion to vary corollary relief made on the appellant's behalf. Thus, as of that date, the support amount of $5,660 a year payable by the appellant to Diane Boyer in respect of the two children was cancelled and the appellant undertook to pay his former spouse $2,829.84 a year in support solely in respect of the minor child Jonathan.
[8] The respondent is denying the appellant an equivalent-to-spouse tax credit for his daughter Maïa for 1999 on the basis that he was required to pay a support amount (within the meaning assigned by subsection 56.1(4)) to his former spouse (Diane Boyer) in respect of his daughter Maïa during that taxation year (that is, from January 1 to March 4, 1999, the date of the judgment varying the corollary relief) and that he lived separate and apart from his former spouse throughout 1999 because of the breakdown of their marriage, as set out in subsection 118(5) of the Act.
[9] Through his agent, the appellant argued that, as of March 4, 1999, he was no longer required to pay a support amount to his former spouse for his daughter Maïa. In this case, he does not see why he would be barred from claiming the equivalent-to-spouse tax credit under subsection 118(5), since, in his opinion, that provision does not prevent an individual who is required to pay a support amount for only part of the year from claiming such a credit.
[10] This question has already been addressed by Judge Lamarre Proulx of this Court in Sherrer v. The Queen, [1998] T.C.J. No. 62. In reliance on a principle established by the Federal Court of Appeal in The Queen v. Marshall et al., 96 DTC 6292, it was held in that case that subsection 118(5) of the Act did not provide for the possibility of taking the credit for a year according to a proportion based on the months when a support amount was payable to the former spouse for the dependent child. Subsection 118(5) states that no amount may be deducted under subsection 118(1) in computing an individual's tax payable "for a taxation year" in respect of a person where the individual is required to pay a support amount to his or her former spouse in respect of that person. Where that is the case, the individual does not meet the first condition for being entitled to the credit. Thus, where a taxpayer must pay his or her former spouse a support amount for the children during a taxation year, the taxpayer loses the right to the equivalent-to-spouse tax credit for the children even if the support amount was payable for only part of the year.
[11] That is the case here. Since the appellant was required to pay a support amount in respect of his daughter Maïa during the first two months of 1999, he cannot be entitled to the credit for the rest of 1999 because of the first condition set out in subsection 118(5).
[12] Subsection 118(5) also sets out a second condition for denying entitlement to the credit. Where the individual lived separate and apart from his or her former spouse throughout the year because of the breakdown of their marriage or claimed a deduction for the year because of section 60 of the Act in respect of a support amount paid to his or her former spouse, the individual loses the right to the credits provided for in subsection 118(1) of the Act (including the equivalent-to-spouse tax credit provided for in paragraph 118(1)(b)).
[13] As a result of the amendments made to the Act after April 1997, it is clear here that the appellant was not entitled to any deduction because of section 60 in respect of the support amount he paid for his children.
[14] It is also clear, however, that the appellant lived separate and apart from his former spouse throughout 1999 because of the breakdown of their marriage.
[15] The wording of the Act, the explanatory notes accompanying the introduction of subsection 118(5), quoted above, and certain court decisions (see Spirig v. The Queen, [2001] T.C.J. No. 270) indicate that, for 1997 and all subsequent years, an individual who is required under a written agreement or an order of a competent tribunal to pay a support amount to his or her former spouse during a year for the maintenance of the children can no longer claim a credit for the children under subsection 118(1) for that year. The logic behind this is that the parent who has legal custody of the child and who receives the support is allowed to claim the credit him or herself. Thus, even though the parent who pays the support amount for his or her children is no longer able to deduct that amount from his or her income under section 60 (as of May 1997), that parent is also unable to claim a credit under subsection 118(1) for the children if he or she lives separate and apart from his or her former spouse throughout the year because of the breakdown of their marriage.[1]
[16] This is clear from resolution 5 of the Notice of Ways and Means Motion to Amend the Income Tax Act accompanying the federal budget of March 6, 1996, which concerns the equivalent-to-married tax credit, and from CCH's editorial comment on this matter. They are set out as follows in the Special Report published by CCH Canadian Limited at page 76, paragraph 25:
[ ¶ 25] Resolution 5: Equivalent-to-married credit
(5) That, for the 1997 and subsequent taxation years, where an individual is required under the terms of a written agreement or court order to make payments in the year in respect of the support of a child, the individual not be entitled to claim any tax credit under section 118 of the Act in respect of the child.
CCH Editorial Comment: Section 118 of the Act provides for certain tax credits in respect of persons supported by the taxpayer, including his or her children. Resolution 5 proposes that for 1997 and subsequent taxation years, any person required to pay in the year an amount for support of a child is not entitled to any tax credit available under section 118. This proposal is related to the revisions to the taxation of child support payment in Resolution 3, in that by prohibiting a person paying child support from taking the section 118 credit, the credit then becomes available to the custodial parent. Under subsection 118(5), the child of any person who paid child support (and who was entitled to a deduction under paragraphs 60(1)(b), (c) or (c.1)) was deemed not to be the child of the person for purposes of section 118. Thus the person could not claim both the deduction for child support and the child tax credit. Under the new rules for the taxation of child support, the payer will not be entitled to a deduction. However, Resolution 5 proposes that the credit will nonetheless be denied to the payer of child support and the present treatment, permitting the recipient of child support to claim the credit, will continue.
[17] Accordingly, I must conclude that subsection 118(5) is applicable here and that the appellant cannot be entitled to the equivalent-to-spouse tax credit for 1999.
[18] The appeal is therefore dismissed.
Signed at Ottawa, Canada, this 4th day of December 2001.
|
"Lucie Lamarre" |
J.T.C.C.
Translation certified true
on this 10 thday of March 2003.
Sophie Debbané, Revisor
[1] The appellant's agent told the Court that the appellant's former spouse died in 2001. To answer a question by the appellant's agent, I would think that the second condition under subsection 118(5) would no longer be met in 2001 (that is, the appellant was no longer living separate and apart from his former spouse throughout 2001 because of the breakdown of their marriage) and that the appellant could claim the equivalent-to-spouse tax credit for 2001 for his son Jonathan (who is under 18 years of age) if he meets the other conditions set out in paragraph 118(1)(b) of the Act.