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Citation: 2003TCC106 |
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Date: 20030313 |
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Docket: 2002-1115(IT)I |
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BETWEEN: |
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HONORA ZAKRISON, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent, and
ROBERT L. ZAKRISON, Third Party. |
____________________________________________________________________
For the Appellant: The Appellant herself
Counsel for the Respondent: Nimanthika Kaneira
Counsel for the Third Party: Mark Greenstein
____________________________________________________________________
REASONS FOR JUDGMENT
(Delivered orally from the Bench on
February 14, 2003, at Toronto, Ontario)
Sarchuk J.
[1] This an appeal by Honora Zakrison from an assessment of tax with respect to her 1999 taxation year. In computing income for that year, the Appellant did not include any child support amounts. In reassessing her for that year by Notice of Reassessment dated July 6, 2001, the Minister of National Revenue on behalf of Canada Customs and Revenue Agency (CCRA), included child support amounts totalling $12,000 in the Appellant's income.
[2] Subsequently, on October 29, 2001, the Minister made an application under section 174 of the Income Tax Act (the "Act") for an Order joining Robert L. Zakrison to the appeal of Honora Zakrison and for the determination of questions in relation to a Notice of Assessment dated April 7, 2000 in respect of the 1999 taxation year of Ms. Zakrison and a proposed reassessment in respect of the 1999 taxation year of Mr. Zakrison, should the answers to the questions be answered in the negative.
[3] More specifically, the questions in respect of which a determination is sought are :
(a) whether the amounts paid by Mr. Zakrison to Ms. Zakrison in the 1999 taxation year were paid pursuant to a written agreement;
(b) whether amounts paid by Mr. Zakrison to Ms. Zakrison in the 1999 taxation year are deductible in computing Mr. Zakrison's income pursuant to paragraph 60(b) of the Act; and
(c) whether amounts paid by Mr. Zakrison to Ms. Zakrison in the 1999 taxation year are includable in computing her income pursuant to paragraph 56(1)(b) of the Act.
[4] At the commencement of the trial, the parties filed an Agreed Statement of Facts as follows:
1. The taxation year under appeal is 1999;
2. Both the Appellant and the Added Party were residents of Canada for the purposes of the Income Tax Act (herein "the Act");
3. The Appellant and the Added Party were married on August 6, 1983 and separated in October, 1993;
4. At all material times, since October 1993, the Appellant has lived separate and apart from the Added party;
5. There are two children of the marriage and their names and dates of birth are as follows: Michelle Zakrison, September 30, 1982, Danielle Zakrison, September 3, 1985;
6. The Appellant and the Added Party executed a document entitled 'Separation Agreement'. The Appellant and the Added Party are not in agreement with respect to the significance of this document and the date the document was executed;
7. The Added Party in computing his income for the 1999 taxation year deducted the amount of $12,000 as support amounts paid;
8. The Appellant in computing her income for the 1999 taxation year did not include any amounts as support payments received;
9. The Minister of National Revenue (herein "the Minister") assessed the Appellant for the 1999 taxation year by a Notice of Assessment dated April 7, 2000;
10. The Minister reassessed the Appellant for the 1999 taxation year by a Notice of Reassessment dated July 6, 2002;
11. The Minister assessed the Added Party for the 1999 taxation year by a Notice of Assessment dated April 3, 2000.
12. The Minister reassessed the Added Party for the 1999 taxation year by a Notice of Reassessment dated January 15, 2001 to allow a deduction for contribution to a RRSP and to allow a tuition credit, transferred from his daughter, Tanya Zakrison;
13. The Minister reassessed the Added Party for the 1999 taxation year by a Notice of Reassessment dated March 8, 2001, disallowing the support payment;
14. The Minister reassessed the Added Party for the 1999 taxation year by a Notice of Reassessment dated June 28, 2001, to allow a deduction for support payments;
15. On March 22, 2002, the Appellant filed an appeal with the Tax Court of Canada.
16. Pursuant to section 174 of the Income Tax Act, the Respondent made an application, dated September 28, 2002, to have Robert Zakrison joined as a party to the appeal of Honora Zakrison;
17. On November 28, 2002, Associate Chief Judge G. H. Bowman of the Tax Court of Canada ordered that Robert Zakrison be joined as a party in the current appeal;
18. The Appellant received payment in the amount of $12,000 from the Added Party in the 1999 taxation year.
In addition to the facts admitted, evidence was adduced on behalf of both the Appellant and the joined party.
[5] The Appellant testified that, as a result of marital problems, she and Robert Zakrison agreed to separate in or about 1993. According to her, legal advice was sought from a lawyer and they were provided with a sample separation agreement for their consideration. That document was filed as Exhibit A-1. She says the sample is different from the one she signed, referring to the agreement in issue which is Exhibit R-1, Tab 4. Furthermore, she maintains that this agreement, although bearing the date "September 3, 1994", was not signed on that date, but was in fact signed by her in 2001 while under duress and with no independent legal advice.
[6] Mr. Zakrison, for his part, testified that at the time of the breakup they discussed separation and put together a preliminary list of matters to be sorted out. He said that the Appellant alone spoke to her lawyer, a Mr. McKee, who practices in the field of matrimonial disputes, matrimonial law. Mr. Zakrison further testified that he and the Appellant subsequently worked out an arrangement which formed the basis of the separation agreement which they both signed on September 3, 1994. According to him, the form was provided to him by the Appellant, was filled out or completed by him and then was signed by both. He then took it to his house, photocopied it for his records, and returned the original to her.
[7] The primary argument advanced by the Appellant is that the document relied upon by CCRA contained errors and, more importantly, had not been executed until sometime in 2001, and even then, as noted earlier, under duress. Thus, she maintains the document is not valid. This submission is contradicted by Mr. Zakrison. Furthermore, evidence was adduced that at the request of CCRA, he had forwarded a copy of the document to it on November 20, 2000. There can be no doubt that the document, that is the agreement in issue, existed well before the time the Appellant alleges it was signed by her.
[8] To put it charitably, I have grave misgivings regarding the Appellant's testimony with respect to the signing of the separation agreement. There is, in my view, no credible evidence before the Court from which it could be concluded that the agreement was not executed on September 3, 1994. There is, as well, no cogent evidence capable of establishing her claim that it was signed under duress.
[9] The Appellant further contends that the agreement is null and void because it was not signed in the presence of a witness as required under an Ontario Statute relating to, I believe, marital issues. There is no substance to this argument. An agreement means nothing more than that two or more persons together express a common intention to alter their duties and rights. Thus, an oral agreement may well be, in some instances, sufficient. If in any particular case the legislators decide that for a specific purpose a written agreement is necessary, and the statute reflects that, then it is required, and that is all that is required. If they, on the other hand, felt it was necessary to have it witnessed, that requirement would have been in the legislation.
[10] The Appellant also submitted that the payments required to be made pursuant to the agreement, that is, $500 per month per child, were not made to her during the tax year in question. Rather, the payments were made by way of monthly deposits to a bank account which was referred to by both parties as "the mortgage account". The evidence before me is that at the time of the marriage break-up they were substantially indebted. These debts included both personal and business outlays, the latter arising, for the most part, I gather, from Mr. Zakrison's business problems. Indeed, the evidence given by both parties indicates that their financial situation at the time was quite bleak and that Mr. Zakrison, in order to protect the family residence, transferred his interest in the family residence to the Appellant. As well, the Appellant agreed that the child support payments would not be made until the debt situation was stabilized. I further note that notwithstanding that agreement, during this period Mr. Zakrison continued to make some payments with respect to family bills and debts.
[12] By 1997, the situation appears to have improved and as of that year, Mr. Zakrison commenced making specific payments of child support as required. Furthermore, by mutual agreement, these payments were deposited by him into "the mortgage account". The Appellant now argues that these amounts were not paid to her and thus, were not discretionary amounts of child support. Accordingly, she says there is no entitlement to a deduction by Mr. Zakrison and equally ought not to be included in her income.
[13] A "support amount" is defined in section 56.2 of the Act and requires, inter alia, that the recipient has discretion as to the use of the amount. That discretion can be exercised in a number of ways. In these particular circumstances, it is clear that the arrangement to deposit the payments, i.e. $500 bi-monthly into "the mortgage account" was the result of a mutual agreement. Although the bank account had remained in both names because of the mortgage the evidence is that Mr. Zakrison never used it for personal purposes at any relevant period of time. In my view, the deposits made by him into this account cannot in any sense be considered as payments to a third party. Furthermore on the facts before me, I am satisfied that once deposited by Mr. Zakrison, the amounts in issue were at the complete disposition of the Appellant. She was able to use the amount for whatever purpose she chose at the time it was received and thus it constitutes an allowance within the meaning of subsection 56(12) of the Act.
[14] Accordingly, the Court's determination of the questions in issue is as follows:
(a) The amounts paid by Mr. Zakrison to Ms. Zakrison in the 1999 taxation year were paid pursuant to a written agreement;
(b) The amounts paid by Mr. Zakrison to Ms. Zakrison in the 1999 taxation year are deductible in computing his income pursuant to paragraph 60(b) of the Act; and
(c) The amounts paid by Mr. Zakrison to Ms. Zakrison in the 1999 taxation year are includable in computing Ms. Zakrison's income pursuant to paragraph 56(1)(b) of the Act.
Signed at Ottawa, Canada, this 13th day of March, 2003.
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"A.A. Sarchuk" |
J.T.C.C.
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CITATION: |
2003TCC106 |
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COURT FILE NO.: |
2002-1115(IT)I |
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STYLE OF CAUSE: |
Honora Zakrison and Her Majesty the Queen and Robert L. Zakrison |
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PLACE OF HEARING: |
Toronto, Ontario |
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DATE OF HEARING: |
February 13, 2003 |
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REASONS FOR JUDGMENT BY: |
The Honourable Judge A.A. Sarchuk |
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DATE OF JUDGMENT: |
February 19, 2003 |
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APPEARANCES: |
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For the Appellant: |
The Appellant herself |
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Counsel for the Respondent:
Counsel for the Third Party: |
Nimanthika Kaneira
Mark Greenstein |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
N/A |
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Firm: |
N/A |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |