BETWEEN:
and
____________________________________________________________________
Appeals heard on August 18, 2006, at Edmonton, Alberta
By: The Honourable Justice M.A. Mogan
Appearances:
____________________________________________________________________
JUDGMENT
The appeals from reassessments made under the Income Tax Act for the 2003 and 2004 taxation years are dismissed.
Signed at Ottawa, Canada, this 7th day of February, 2007.
BETWEEN:
CHRISTOPHER F. STALS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
[1] The Appellant is the father of Austin Christopher Stals ("Austin") who was born to Donnalee Krupnik ("Donnalee") on February 9, 1994. At the time of Austin's birth, the Appellant and Donnalee lived together in a common-law relationship. On November 9, 1996, the Appellant and Donnalee separated and they have lived separate and apart since that date. As the result of certain proceedings in the Court of Queen's Bench of Alberta, the Appellant paid $485 per month to Donnalee throughout 2003 and 2004. In each of those years, the Appellant deducted in computing income the sum of $5,280 as child support.
[2] By Notices of Reassessment dated May 19, 2005, the Minister of National Revenue (the "Minister") disallowed the deduction of the amount $5,280 which the Appellant had claimed in each of the years 2003 and 3004. The Appellant has appealed from those two assessments. The only issue before the Court is whether the Appellant may, under the Income Tax Act (the "Act"), deduct the amount $5,280 as child support in each of the years 2003 and 2004. Those are the only two years under appeal.
[3] After the Appellant and Donnalee separated in November 1996, the Appellant paid to Donnalee $400 per month for the support of Austin in each of the months December 1996 to April 1997. According to Exhibit A-1, Tab 1, Justice M.A. Binder of the Alberta Court of Queen's Bench made an Order on February 19, 1997 requiring that the Appellant pay to Donnalee "for the interim maintenance" of Austin the sum of $400 per month commencing February 1, 1997; and requiring that the trial of issues concerning maintenance payable and other relief be held at Edmonton on April 22, 1997.
[4] Those issues came on for hearing before Madam Justice Eileen Nash on April 22, 1997. At that time, Donnalee was seeking $600 per month "net of tax" for the support of Austin. When the hearing concluded on April 22, 1997, Justice Nash adjourned the matter to issuea written decision at a later date. On May 16, 1997, she issued her written decision. Her Memorandum of Decision is Exhibit A-1, Tab 2 and her Order is Exhibit A-1, Tab 3. The only relevant part of the Order states:
IT IS HEREBY ORDERED that CHRISTOPHER F. STALS shall pay to DONNALEE L. KRUPNIK the sum of $485.00 per month for the support of AUSTIN CHRISTOPHER STALS born on February 9, 1994, commencing on the 1st day of December, 1996, and continuing on the 1st day of each and every month thereafter.
[5] There is no evidence of any other order concerning the support of Austinfrom May 16, 1997 to December 31, 2004. Therefore, the payments of $485 per month which the Appellant made to Donnalee throughout 2003 and 2004 were made pursuant to the Order of Madam Justice Nash made on May 16, 1997. See Exhibit A-1, Tab 3.
[6] The provisions of the Act with respect to the payment of child support were amended in a significant manner following the decision of the Supreme Court of Canada in Thibaudeau v. The Queen, [1995] S.C.R. 627. The amendment is clearly described by Bowie J. in Hollbrook v. The Queen, (October 25, 2005), 2005 TCC 671, at paragraphs 8, 9 and 10. In a nutshell, prior to May 1, 1997, payments of child support were deducted by the payer and included in income by the recipient. But after April 30, 1997, depending upon a "commencement day", payments of child support could not be deducted by the payer and were not included in income by the recipient. Although "support amount" and "child support amount" are defined terms in the Act, there is no doubt in this appeal that each payment of $485 per month was a child support amount. Therefore, the only two significant provisions of the Act are paragraph 56(1)(b) and the definition of "commencement day" in subsection 56.1(4):
56(1) Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,
(a) ...
(b) 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 received after 1996 and before the end of the year by the taxpayer from a particular person where the taxpayer and the particular person were living separate and apart at the time the amount was received,
B is the total of all amounts each of which is a child support amount that became receivable by the taxpayer from 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 received after 1996 by the taxpayer from the particular person and included in the taxpayer's income for a preceding taxation year;
56.1(4) The definitions in this subsection apply in this section and section 56.
"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.
[7] The Appellant argues that, although the payments of $485 per month which he made to Donnalee throughout 2003 and 2004 were dictated by the Order of Justice Nash dated May 16, 1997 (Exhibit A-1, Tab 3), those payments were based upon and determined by the hearing before Justice Nash on April 22, 1997. Therefore, the Order should be regarded as having been made on April 22, 1997; and the child support payments would be under the old regime: deductible to the payer (Appellant) and included in the income of the recipient (Donnalee).
[8] The Appellant also makes a factual argument. He has been making these child support payments to Donnalee since 1997; and he has been deducting them in computing his income for each year. Revenue Canada has consistently allowed the deduction in each year. The reassessments issued in May 2005 disallowed the deduction of the child support amounts for 2003 and 2004 (the years under appeal); and those are the first years in which the deduction of the Appellant's child support payments has been challenged by Revenue Canada.
[9] Considering first the factual argument, the Minister is not estopped from assessing a particular year to apply a particular provision of the Act if the Minister has neglected to apply that provision to identical circumstances in prior years. A taxpayer may have had a financial benefit in prior years arising from the Minister's failure to apply a particular provision of the Actbut, once that provision comes to the Minister's attention, he or she is obliged to apply the law without regard to prior years.
[10] Considering the legal argument, the definition of "commencement day" does not help the Appellant. I will repeat the first words of the definition:
"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) ...
The Order of Madam Justice Nash (Exhibit A-1, Tab 3) was signed by the Clerk of the Court of Queen's Bench of Albertaon May 16, 1997. Within the plain language of paragraph (a) of the definition, this was an order "made after April 1997". In the case of Vidéotron Ltée v. Quebecor Média Inc., 2003 FCA 56, Nadon J.A. stated in paragraph 6:
[6] The authorities are clear that where an order or decision is not pronounced or delivered in public, the order or decision is not made until such time as the order or decision is entered by the Registry or when the parties are notified of the decision.
I have no difficulty in concluding that the Order of Madam Justice Nash was made after April 1997, and was in fact made on May 16, 1997.
[11] The Appellant relies on the decision of the Federal Court of Appeal in Dangerfield v. The Queen, 2003 FCA 480. In Dangerfield, a mother's application for child support was heard by a Manitoba Judge on April 21, 1997. The Judge granted certain relief orally at the conclusion of the hearing but the formal judgment was not signed by the Deputy Registrar until May 5, 1997. The Judge specified that the child support payments were to commence on May 1, 1997. The Federal Court of Appeal concluded that there was a "commencement day" within the terms of subparagraph (b)(iv) of the definition.
[12] Because Madam Justice Nash's Order required the monthly payments of $485 to commence on December 1, 1996, the Appellant asks me to apply the Dangerfield principle and hold that there was no "commencement day" after April 1997. In my opinion, the decision in Dangerfield has no application to this appeal because the Federal Court of Appeal was dealing with an Order "made before May 1997" within the meaning of paragraph (b) of the definition of "commencement day". Paragraphs 9 and 13 of the Reasons in Dangerfield are conclusive.
[9] It is not contested that the judgment or order, as a whole, was effective on the day it was pronounced, according to Queen's Bench Rule 1.04.1, that is, on April 21, 1997. Nor is it contended that the May 5, 1997 date on which the judgment or order was signed had any significance for this appeal. What is at issue here is whether the part of the judgment or order dealing with child support could have a commencement day different than the April 21 effective date of the entire judgment or order, that is, May 1, 1997, the date specified in the clause dealing with the child support payments.
[13] In my view a commencement day for the support payments was specified in this case. This was the clear intention of the Judge who made the order in question. The transcript demonstrates conclusively that the Judge, inter alia, made a separate oral order, as part of the overall judgment rendered on April 21, 1997, that the support payments of $250 per month were to commence on May 1, 1997. There was some doubt expressed about the commencement date issue in the transcript, but it was resolved to the satisfaction of the Judge, who clearly wished to comply with the new legislation by specifying a commencement day that would allow the tax free treatment of the payments to the applicant. This view is reflected in the Family Disposition Sheet signed by the Judge on April 21, 1997, which has a separate entry under "support", which indicates that $250 per month is to be paid "commencing May 1, 1997". The other orders made in this document have no commencement day specified, for it was not necessary to do so for tax or any other purposes.
[13] The fact that Madam Justice Nash's Order was made after April 1997 distinguishes this appeal from the decision in Dangerfield. Having regard to the definition of "commencement day" in the Act, this appeal is governed by paragraph (a) whereas the Dangerfield case was governed by paragraph (b).
[14] It appears from paragraph 17 of Madam Justice Nash's Memorandum of Decision (Exhibit A-1, Tab 2) that she thought that the monthly payments of $485 would be taxable in the hands of Donnalee. When her Order was made after April 1997, the learned Family Court Judge simply erred with respect to the taxability of the monthly payments in the hands of the recipient. Indeed, there is nothing in the Memorandum of Decision to indicate that Justice Nash was even aware that a new regime was in place.
[15] In any event, a family court judge does not have jurisdiction to decide the income tax consequences of a support payment flowing from one former spouse to another. See Bates v. The Queen, 98 DTC 1919. The appeals for 2003 and 2004 are dismissed.
Signed at Ottawa, Canada, this 7th day of February, 2007.
"M.A. Mogan"
Mogan J.
STYLE OF CAUSE: CHRISTOPHER F. STALS AND
HER MAJESTY THE QUEEN
PLACE OF HEARING: Edmonton, Alberta
DATE OF HEARING: August 18, 2006
REASONS FOR JUDGMENT BY: The Honourable Justice M.A. Mogan
DATE OF JUDGMENT: February 7, 2007
APPEARANCES:
|
Agent for the Appellant: |
Jennifer Panych |
|
Counsel for the Respondent: |
John O'Callaghan |
COUNSEL OF RECORD:
Firm: N/A
For the Respondent: John H. Sims, Q.C.
Deputy Attorney General of Canada
Ottawa, Canada