The Queen v. Dorion, 81 DTC 5111, [1981] CTC 136 (FCTD)

Décary, J [TRANSLATION]:—The question is whether the amount of $8,000 paid by defendant to his ex-wife during the 1976 taxation year, an amount which is part of a sum of $20,000 which defendant is required to pay as the result of a divorce decree, constitutes a payment as alimony or other allowance payable on a periodic basis for the maintenance of his ex-wife, for the purposes of paragraph 60(b) of the Income Tax Act.

The Tax Review Board considered this amount to be deductible for the purposes of paragraph 60(b).

In consequence of this decision, plaintiff brought an action against defendant in accordance with the Rules of Court, as required by the provisions of subsections 175(1) and (3) of the Income Tax Act.

As the payment of $8,000 was admitted by plaintiff, the only decisive proof is the judgment of the Court of Appeal of May 20,1976, consisting of Tremblay, CJ, Lajoie and Owen, JJ, the last named having written the reasons, and the judgment of Chouinard, J of the Superior Court dated February 3, 1975.

The nature of the $20,000 payable to the ex-wife of defendant was first submitted for decision to Chouinard, J of the Superior Court, but in view of the appeal to the Court of Appeal of Quebec, it was this Court which would finally establish the nature of this payment.

In his judgment, from which defendant appealed to the Court of Appeal, the learned Superior Court judge first determined the alimony:

ORDERS respondent to pay petitioner at her domicile a weekly alimony of $225 on Friday of each week, from the date of this judgment;

and then the amount of $20,000:

ORDERS respondent to pay petitioner at her domicile the sum of $20,000 divided into 5 payments of $4,000 the first payable within 6 months of the date of this judgment, with others in the amount of $4,000 each to be made on July 1 of each year thereafter, without interest, until the full amount is paid;

The Court of Appeal made no change in the amount of the alimony, which also is not in dispute for tax purposes.

The Court of Appeal held, however, that the amount of $20,000 was payable for a specific and clearly identified consideration. At p 4 of his reasons, Owen, J stated:

The judgment provides, in effect, that the sum of $20,000 represents payment in full of all amounts which the former wife might be able to claim in virtue of the marriage contract.

and at pp 5 and 6 of the judgment:

With respect to the award of $20,000 I am of the opinion, after reading the judgment as a whole, that it was granted in full and final settlement of all claims by the former wife against the former husband under the marriage contract. Viewed in this light and taking into consideration that this sum of $20,000 is to be paid in five annual instalments of $4,000, I am of the opinion that this item was properly awarded.

It is my considered opinion that the decision of the Court of Appeal as to the nature of the $20,000 for purposes of civil relations between the parties cannot be ignored in establishing the tax nature of this amount.

The Court of Appeal of Quebec, which had to determine the nature of the $20,000, held that this amount was payable because of the waiver by the ex- wife of all rights under the marriage contract. It is not for this Court, which is only concerned in the case at bar to decide the nature of the payment of $8,000 for tax purposes as part of the $20,000 payable, to arrogate to itself the right to change the civil nature of the payment which the Court of Appeal awarded.

A payment as alimony or an allowance for maintenance is linked to the duration of the life of the creditor or debtor or to the period of time during which the alimony or allowance is necessary for the recipient and can be paid by the debtor. In such a case the alimony or allowance cannot be a total fixed amount payable by instalments up to the amount of $20,000 over a period of five years as in the case at bar, as the consideration for alimony or an allowance is the need of the creditor, whereas here the consideration is the waiver of benefits resulting from the marriage contract.

The consideration for the payment of $8,000 in 1976, which is a part of the amount of $20,000 payable for the waiver by the ex-wife of defendant of all rights under the marriage contract [s/c], it follows that this cannot be either "alimony” or any "other allowance payable on a periodic basis for the maintenance of the recipient thereof”, as required by paragraph 60(b) of the Act, in order for this amount to be deductible in computing defendant’s income.

This action is allowed with costs.