[OFFICIAL ENGLISH TRANSLATION]
2001-2756(IT)I
BETWEEN:
MARIO LOAYZA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard and judgment delivered orally from the bench on May 29, 2002, at Montréal, Quebec, by
the Honourable Judge Louise Lamarre Proulx
For the Appellant: The Appellant himself
Counsel for the Respondent: Julie David
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 June 2002.
|
"Louise Lamarre Proulx" |
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Date: 20020822
Docket: 2001-2756(IT)I
BETWEEN:
MARIO LOAYZA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Delivered orally from the bench at Montréal, Quebec, on May 29, 2002,
and edited at Ottawa, Ontario, on August 22, 2002)
Lamarre Proulx, J.T.C.C.
[1] This is an appeal under the informal procedure for the 1999 taxation year.
[2] At issue is whether, in computing his income, the appellant is entitled to deduct the support amounts paid to his former spouse for their four minor children.
[3] In making the assessment, the Minister of National Revenue ("the Minister") relied on the following assumptions of fact set out in paragraph 7 of the Reply to the Notice of Appeal ("the Reply"):
[TRANSLATION]
(a) the appellant and Claudette Tanguay (hereinafter "the former spouse") have been divorced since August 4, 1999;
(b) four children were born of the union between the appellant and his former spouse;
(c) on October 19, 1999, the Quebec Superior Court (Family Division), district of Longueuil, confirmed a "consent to judgment on motion to vary corollary relief" (hereinafter "the consent"), which the appellant and his former spouse signed;
(d) according to clause 5 of the said consent, the appellant is to pay to his former spouse [TRANSLATION] "support amounts of $500 per month for their four minor children, beginning in September 1999";
(e) according to clause 6 of the consent, [TRANSLATION] "since the applicant receives support amounts of $400 per month from the Minister of Revenue, beginning in September 1999, the respondent shall pay directly to the applicant an additional amount of $100 per month, until the Minister of Revenue intervenes in this case";
(f) according to clause 8 of the consent, the appellant agrees to clothe his four minor children in accordance with their needs;
(g) the appellant's employer confirmed in writing that the appellant had paid support amounts of $6,151.16 for the period from January 1 to December 31, 1999;
(h) except for the consent and the letter from the appellant's employer referred to in subparagraph 6(g) [sic], the appellant provided the Minister with no other documents about the terms and conditions of his divorce or about the previous agreements concerning the support amounts that he was to pay to his former spouse for their four children.
[4] The Notice of Appeal reads in part as follows:
[TRANSLATION]
... I disagree with the dismissal of the objection on the grounds of paragraph 60(b) of section 60 of the Income Tax Act because, under the Canadian Charter of Rights, every Canadian has the right to equal treatment concerning income taxes. I therefore request that the deduction for support amounts paid be accepted on the same grounds as it is for other Canadians, not taking the date of such a judgment into account.
[5] The appellant testified. He admitted the truth of each statement set out in paragraph 7 of the Reply.
[6] The appellant stated that the separation took place in the summer of 1996. He adduced as Exhibit A-1 an April 1, 1997, motion for interim relief. Although this motion was served on the appellant, it is not a document issued by a court. The only court document the appellant adduced that was referred to in the Reply was the consent to judgment on motion to vary corollary relief. This consent, referred to in subparagraph 7(c) of the Reply, was confirmed by the Quebec Superior Court and adduced as Exhibit I-1.
[7] The appellant argued that he paid support amounts to his former spouse. Those support amounts would have been paid on the basis of oral agreements. Under cross-examination, the appellant confirmed that the August 4, 1999, divorce judgment and the judgment consented to in the motion to vary corollary relief were the first judgments to be made in their matrimonial affairs.
[8] I shall quote the third "Whereas" clause as well as clauses 5 and 6 of the consent (Exhibit I-1):
[TRANSLATION]
...
WHEREAS on August 4, 1999, the Honourable Judge Jocelyn Verrier pronounced a divorce judgment between the parties;
...
5. The respondent shall pay to the applicant support amounts of $500 per month for their four minor children, beginning in September 1999;
6. Since the applicant receives support amounts of $400 per month from the Minister of Revenue, beginning in September 1999, the respondent shall pay directly to the applicant an additional amount of $100 per month, until the Minister of Revenue intervenes in this case;
...
[9] Counsel for the respondent referred to the decision of Bowman J. of this Court in Kovarik v. Canada, [2001] T.C.J. No. 181 (Q.L.), at paragraphs 8 and 9:
8 Under what I may describe as the old régime (pre May 1997) spouses making payments to separated or ex spouses for the support of children could deduct those payments and the recipient had to include them in income. Following the decision of the Supreme Court of Canada in Thibaudeau v. Canada, [1995] 2 S.C.R. 627, the legislation changed. So long as a pre May 1997 agreement remained unchanged the deduction/inclusion system under the old régime prevailed.
9 If a new agreement were entered into, or an old agreement was changed in a particular way, the deduction/inclusion régime ceased and only payments made up to the "commencement day", as defined, were deductible by the payor and includible by the payee.
[10] Counsel for the respondent also referred to the decision of Rip J. of this Court in O'Neill v. Canada, [2001] T.C.J. No. 429 (Q.L.), at paragraph 11:
11 The definition of "commencement day" in subsection 56.1(4) applies to the facts at bar: when after April 1997, a written agreement made before May 1997 is varied to change the child support amounts payable to the recipient, the day on which the first payment of the varied amount is required to be made becomes the commencement day. The original written agreement was made on September 1, 1995, that is, before May 1997. However, it was finally varied on January 1, 1998 to change the child support amounts payable to the recipient, beginning on January 1, 1998. Whether the appellant and his former spouse intended to modify the tax treatment of the support amounts when they varied their agreement is not relevant. As stated by Bowman A.C.J. in Kovarik, supra, at paragraph 15, "[the] definition of commencement day in subsection 56.1(4) is not difficult to understand... . I do not see how the plain words of the definition can be avoided, however sophisticated the rules of statutory interpretation one may choose to use may be". The child support amounts paid in 1998 were therefore paid on or after the agreement's commencement day in respect of a period that began on or after its commencement day. It would follow that these amounts are not deductible from the appellant's income.
Conclusion
[11] Paragraph 60(b), subsection 60.1(4), and the definitions of "support amount", "child support amount" and "commencement day" in subsection 56.1(4) read as follows:
60. 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 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 the 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 on or 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;
60.1(4) Definitions - The definitions in subsection 56.1(4) apply in this section and section 60.
56.1(4) "commencement day" at any time of an agreement or order means
(a) where the agreement or order is made after April 1997, the day it is made; and
(b) where the agreement or order is made before May 1997, the day, if any, that is after April 1997 and is the earliest of
(i) the day specified as the commencement day of the agreement or order by the payer and recipient under the agreement or order in a joint election filed with the Minister in prescribed form and manner,
(ii) where the agreement or order is varied after April 1997 to change the child support amounts payable to the recipient, the day on which the first payment of the varied amount is required to be made,
(iii) where a subsequent agreement or order is made after April 1997, the effect of which is to change the total child support amounts payable to the recipient by the payer, the commencement day of the first such subsequent agreement or order, and
(iv) the day specified in the agreement or order, or any variation thereof, as the commencement day of the agreement or order for the purposes of this Act.
"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.
"child support amount" means any support amount that is not identified in the agreement or order under which it is receivable as being solely for the support of a recipient who is a spouse or common law partner or former spouse or common law partner of the payer or who is a parent of a child of whom the payer is a natural parent.
[12] According to those legislative provisions, child support amounts paid under a post-April 1997 judgment may not be deducted in computing the payer's income. Correspondingly, those support amounts need not be included in computing the recipient's income.
[13] In the present case, the only written documents under which support amounts were paid in 1999 are judgments dated 1999. The nature of the amounts collected by the Quebec Minister of Revenue was not explained at the hearing. Those amounts collected are referred to in clause 6 of the consent. However, according to that consent, those amounts were collected beginning in September 1999, that is, later than the August 4, 1999, divorce judgment between the parties. The appellant did not adduce that divorce judgment. The support amounts paid for the children to their mother are therefore not amounts that may be deducted in computing the appellant's income.
[14] In his Notice of Appeal, the appellant claimed that it is discriminatory that child support amounts paid under a post-April 1997 judgment may not be deducted. In Thibaudeau v. Canada, [1995] 2 S.C.R. 627, (referred to in the decision cited in paragraph 9 of these Reasons), the appellant challenged the constitutionality of the provision requiring that support amounts for children be included in income because non-separated women did not have to include in their income the support amounts paid by the fathers of their children. The Supreme Court of Canada ruled that this provision was not discriminatory because, in setting support amounts, the judges took into account the tax impact of the inclusion and deduction system. The reasoning must be the same in the reverse situation. The judges of the civil courts now take into account the absence of tax impact in the case of support amounts paid under post-April 1997 judgments. Prior to that date, the tax impact of including and deducting those amounts was taken into account; that has no longer been the case since that date.
[15] The appeal must be dismissed.
Signed at Ottawa, Canada, this 22nd day of August 2002.
|
"Louise Lamarre Proulx" |
J.T.C.C.