Mackay
J.:—This
is
an
appeal
by
Her
Majesty
The
Queen
from
a
decision
of
the
Tax
Court
of
Canada
dated
August
31,
1988
([1988]
2
C.T.C.
2219,
88
D.T.C.
1580),
whereby
an
appeal
by
the
defendant
against
an
assessment
of
tax
was
allowed
and
the
matter
referred
back
to
the
Minister
of
National
Revenue
for
reconsideration
and
reassessment.
The
issue
dealt
with
by
the
Tax
Court
decision
and
raised
by
this
appeal
is
whether
certain
payments
received
by
the
defendant,
Ms.
Jasper,
from
her
former
husband
were
income
subject
to
tax
pursuant
to
paragraph
56(1)(b)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
(am.
S.C.
1970-71-72,
c.
63)
(the
“Act’’)
as
an
allowance
for
maintenance
of
the
defendant,
of
her
children,
or
both
her
and
her
children,
or
whether
they
were
payments
on
account
of
capital
and
not
subject
to
tax.
The
latter
was
the
determination
made
by
the
Tax
Court
decision
in
the
circumstances
of
this
case.
In
reassessing
the
defendant
for
her
1983
taxation
year
in
respect
of
this
matter,
the
Minister
of
National
Revenue
made
the
following
assumptions
of
fact,
relied
upon
by
Her
Majesty
in
this
Court.
(a)
the
defendant
was
married
to
Ernest
C.
Boychuk
for
the
period
May
10,
1958
to
June
(b)
on
July
1,
1980
the
defendant
and
Ernest
C.
Boychuk
entered
into
a
written
separation
agreement
which
provided,
inter
alia,
that
the
defendant
was
to
receive
in
support
and
maintenance
one-half
of
the
monthly
mortgage
payments
in
respect
of
the
matrimonial
residence
to
which,
under
the
said
agreement,
the
defendant
was
entitled
to
exclusive
possession
for
the
benefit
of
herself
and
the
children
of
the
marriage
until
all
of
the
said
children
had
completed
their
education;
(c)
for
the
purpose
of
the
said
agreement
the
mortgage
payments
were
stipulated
to
include
principal,
interest
and
taxes
commencing
on
July
1,
1982
and
were
to
continue
to
be
made
by
Ernest
C.
Boychuk
to
the
defendant
until
such
time
as
all
the
children
of
the
marriage
had
completed
their
education;
(d)
on
June
23,
1983
the
defendant
and
Ernest
C.
Boychuk
entered
into
an
amending
separation
agreement
and
interspousal
contract
which
provided,
inter
alia,
that
Ernest
C.
Boychuk
was
to
continue
paying
one-half
('/2)
of
the
monthly
mortgage
payments
in
respect
of
the
matrimonial
residence
until
the
last
child
of
the
marriage
had
completed
his
or
her
education
and
had
left
the
family
home;
(e)
the
amending
separation
agreement
and
interspousal
contract
further
provided
that
it
was
to
become
effective
upon
the
issuance
of
a
decree
absolute
of
divorce;
(f)
on
June
30,
1983
the
defendant
and
Ernest
C.
Boychuk
were
divorced
pursuant
to
a
decree
absolute
issued
by
the
Saskatchewan
Court
of
Queen's
Bench;
(g)
during
the
1983
taxation
year
the
defendant
received
from
Ernest
C.
Boychuk
the
sum
of
$10,968.54
which
was
paid
pursuant
to
the
written
agreements
referred
to
in
subparagraphs
2(a)
and
2(b),
herein;
(h)
the
said
payment
was
made
as
follows:
|
January
1,
1983
|
$932.00
|
|
January
19,1983
|
157.89.00
|
|
February
1,
1983
|
932.00
|
|
March
1,
1983
|
932.00
|
|
April
1,
1983
|
932.00
|
|
May
1,1983
|
923.00
|
|
June
1,
1983
|
923.00
|
|
July
1,
1983
|
923.00
|
|
July
13,
1983
|
263.05
|
|
August
1,
1983
|
1,137.00
|
|
September
1,
1983
|
737.00
|
|
September
30,
1983
|
737.00
|
|
November
1,
1983
|
720.00
|
|
December
1,
1983
|
720.00
|
(i)
$4,168.94
of
the
amount
referred
to
in
subparagraph
2(g),
herein,
represented
the
mortgage
payments
received
by
the
defendant
in
respect
of
the
matrimonial
residence;
(j)
the
said
amount
was
not
included
by
the
defendant
in
the
calculation
of
her
income
for
the
1983
taxation
year;
(k)
at
all
material
times
the
defendant
was
living
separate
and
apart
from
Ernest
C.
Boychuk.
The
amount
of
$4,168.94
referred
to
in
paragraph
(i)
of
the
Minister's
assumptions,
the
amount
here
at
issue,
was
included
in
the
laintiff’s
income
for
the
1983
tax
year
by
reassessment
dated
May
24,
1985,
on
the
ground
that
it
was
income
pursuant
to
paragraph
56(1
)(b)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.148,
as
amended
by
S.C.
1970-71-72,
c.63,
5.1.
That
section,
as
it
then
applied,
provided:
56(1)
Without
restricting
the
generality
of
section
3,
there
shall
be
included
in
computing
income
of
a
taxpayer
for
a
taxation
year,
(b)
any
amount
received
DY
the
taxpayer
in
the
year.
.
.pursuant
to
a
written
agreement
as
alimony
or
other
allowance
payable
on
a
periodic
basis
for
the
maintenance
of
the
recipient
thereof,
children
of
the
marriage,
or
both
the
recipient
and
children
of
the
marriage,
if
the
recipient
was
living
apart
from,
and
was
separated
pursuant
to
a.
.
.written
separation
agreement
from
the
spouse
or
former
spouse
required
to
make
the
payment
at
the
time
the
payment
was
received
and
throughout
the
remainder
of
the
year.
.
.
.
The
defendant,
Grace
Jasper,
was
married
to
Ernest
Boychuk
in
1958.
There
were
five
children
born
of
the
marriage:
Christopher
in
1959;
Daryl
in
1960;
Philip
in
1962,
Terry
in
1964
and
Marianne
in
1966.
In
1980
the
defendant
and
her
husband
separated,
her
husband
left
the
family
residence
and
she
continued
to
live
there
with
the
three
younger
children
who
were
still
dependants
under
the
Divorce
Act
and
were
attending
schools.
The
two
elder
children,
while
continuing
to
reside
from
time
to
time
at
the
matrimonial
home
with
their
mother
and
siblings,
were
no
longer
dependants
under
the
Divorce
Act,
R.S.C.
1985,
c.
3
(2nd
Supp.).
At
the
time
of
their
separation
the
defendant
and
her
former
husband
were
joint
owners
of
the
matrimonial
home
and
of
a
lake
cottage
property.
The
defendant
and
her
former
husband
concluded
a
written
separation
agreement
effective
July
1,
1980,
which
provided,
in
part:
NOW
THEREFORE
THIS
AGREEMENT
WITNESSETH
that
in
consideration
of
the
premises
and
mutual
covenants
herein
contained,
the
husband
and
the
wife
agree
as
follows:
5.
MAINTENANCE:
The
husband
shall
pay
to
the
wife,
for
the
support
and
maintenance
of
herself
and
the
said
children
the
following
sums:
(a)
The
sum
of
$2,660
for
the
month
of
July,
A.D.
1980;
(b)
The
sum
of
$1,500
per
month
commencing
on
the
first
day
of
August,
A.D.
1980,
and
to
continue
from
the
first
day
of
each
and
every
month
thereafter
up
to
and
including
the
first
day
of
June,
A.D.
1982,
after
which
time
the
wife
shall
make
provision
for
the
support
and
maintenance
of
herself.
(c)
The
sum
of
$600
per
month
plus
one-half
of
the
mortgage
payment
which
for
the
purpose
of
this
agreement
shall
include
principal,
interest
and
taxes
commencing
on
the
first
day
of
July,
A.D.
1982,
and
to
continue
until
such
time
as
all
of
the
children
have
completed
their
education.
The
wife
shall
be
responsible
for
any
income
tax
payable
on
any
moneys
paid
to
her
by
the
husband
pursuant
to
paragraphs
(a),
(b)
and
(c)
above.
6.
REAL
PROPERTY:
(a)
The
husband
and
wife
agree
that
the
wife
shall
be
entitled
to
the
exclusive
possession
of
the
matrimonial
residence
at.
.
.for
her
benefit
and
the
benefit
of
the
infant
children
until
all
of
the
children
have
completed
their
education;
The
wife
shall,
from
the
maintenance
amount
provided,
pay
for
the
maintenance,
mortgage,
taxes
and
all
utilities
for
the
matrimonial
home;
When
all
of
the
children
have
completed
their
education
the
said
matrimonial
residence
shall
be
sold
and
the
net
proceeds
from
the
sale
shall
be
divided
equally
between
the
parties;
(b)
The
husband
and
the
wife
are
also
the
joint
owners
of
a
cabin
at.
.
.
.
The
husband
and
the
wife
agree
that
the
said
cabin
shall
be
sold
at
the
best
price
obtainable
on
or
before
the
first
day
of
July,
A.D.
1981.
.
.
.
Until
the
said
cabin
has
been
sold,
as
aforesaid,
it
shall
be
maintained
by
the
wife
for
the
joint
use
of
the
husband
and
the
wife.
If
the
wife
desires
to
purchase
the
husband’s
interest
in
the
said
cabin
it
shall
be
purchased
by
her
at
and
for
the
fair
market
value
of
the
cabin
as
determined
in
the
months
of
April,
May
or
June
1981,
as
the
case
may
be;
the
wife
shall
have
the
first
option
to
buy
or
the
first
right
of
refusal.
At
trial
on
this
appeal
the
defendant
testified
about
the
background
of
the
agreement,
particularly
clause
5.
The
payment
provided
in
clause
5(a),
for
July
1980,
was
the
payment
to
her
of
the
proceeds
of
a
spousal
RRSP
which
it
was
agreed
should
be
paid
to
her
in
cash.
The
payment
of
$1500.
under
clause
5(b)
until
June
1,
1982
was
to
consist
of
monthly
payments
of
$200
for
each
of
the
younger
three
children
who
were
in
the
defendant's
care
and
custody
at
the
family
home,
$300
for
maintenance
of
the
defendant
and
$600.
for
the
monthly
mortgage
payment
on
the
matrimonial
home.
Those
arrangements
were
agreed
to
change
effective
July
1,
1982,
when
it
was
expected
that
the
defendant,
who
at
the
time
of
separation
in
1980
was
working
only
part-time
while
attending
university,
would
have
completed
her
studies,
would
expect
to
find
full-time
employment
and
would
be
responsible
for
her
own
maintenance
without
continuing
support
from
her
former
husband.
Thus
under
clause
5(c)
after
July
1,
1982,
the
sum
of
$600.
as
maintenance
support
for
the
three
youngest
children,
plus
one-half
of
the
mortgage
payment,
including
principal,
interest
and
taxes,
would
be
paid
to
the
defendant,
continuing
in
this
way
until
all
the
children
completed
their
education.
Until
that
occurred,
under
clause
6(a)
the
defendant
was
to
have
exclusive
possession
of
the
matrimonial
home.
When
all
the
children
completed
their
education,
which
Ms.
Jasper
explained
the
parties
intended
as
post-secondary
education,
then
the
matrimonial
property
was
to
be
sold
with
the
proceeds
divided
equally
between
the
defendant
and
her
former
husband,
and
the
agreement
so
provided
in
clause
6(a).
The
arrangements
provided
under
clauses
5(b)
and
(c)
are
in
fact
different
from
those
assumed
by
the
Minister
in
paragraph
(b)
of
his
assumptions
of
fact.
To
clarify,
from
July
1980
until
June
1982,
her
former
husband
was
to
pay
the
sum
of
$1500.
per
month
which
included
$600.
for
the
monthly
mortgage
payment.
After
June
1,
1982,
there
was
to
be
no
maintenance
paid
forsupport
of
the
defendant,
but
payments
to
her
were
to
include
an
amount
of
half
the
mortgage
payment.
The
payment
of
one-half
the
mortgage
payment
by
her
former
husband
was
not
to
be
considered
maintenance
for
the
defendant;
as
she
understood
the
arrangement
from
July
1,
1982
she
was
to
be
responsible
for
her
own
maintenance
including
payment
by
her
of
one-half
of
the
monthly
mortgage
payment.
Her
former
husband's
mortgage
payments
she
considered
were
made
in
relation
to
his
own
interest
in
the
property
as
a
continuing
joint
tenant,
pending
sale
of
the
property
when
the
last
of
the
children
was
educated.
In
accord
with
clause
6(b)
of
the
1980
agreement,
the
defendant,
with
assistance
of
her
father
and
the
children,
purchased
the
cottage
property
and
associated
chattels
for
$20,000.
the
appraised
market
value,
in
1981.
Her
former
husband
conveyed
his
undivided
one-half
interest
in
the
property
to
her
and
the
five
children
of
the
marriage,
who
presumably
thereafter
held
title
as
tenants
in
common
or
as
joint
tenants
in
the
interest
of
the
former
husband.
In
June
or
July
1982,
payments
under
the
1980
agreement
were
adjusted
in
accord
with
clause
5(c).
Thereafter
her
former
husband
continued
to
pay
to
the
defendant,
on
a
monthly
basis,
$600
as
maintenance
for
children
still
dependent
and
residing
at
the
matrimonial
home,
and
one-half
of
the
mortgage
payments.
The
latter
amount
was
deposited
monthly
by
the
appellant
in
a
special
bank
account
she
maintained
only
for
mortgage
payments
and
she
paid
the
full
payment
monthly
from
that
account
by
a
series
of
postdated
cheques
issued
annually.
By
the
fall
of
1982
the
defendant
was
having
difficulty
making
ends
meet
with
no
support
for
herself
from
her
former
husband.
She
sought
him
out
with
a
view
to
trying
to
have
him
reconsider
the
arrangements
for
herself
and
the
children.
Her
attempt
led
to
no
change;
she
testified
that
the
discussion
with
her
former
husband
was
very
difficult
and
at
one
point
he
indicated
she
would
be
responsible
for
income
tax
in
relation
to
his
payment
of
his
half
of
the
monthly
mortgage
amount.
This
led
her
to
discuss
the
matter
of
her
tax
liability
with
her
own
lawyer,
since
her
understanding
had
been
that
once
she
was
responsible
for
her
own
maintenance,
including
payment
of
half
the
mortgage
payments
and
all
costs
of
maintenance
of
the
property,
the
contribution
by
her
former
husband
of
half
the
mortgage
payment
was
simply
a
payment
toward
his
own
half
interest
in
the
property,
not
towards
her
or
the
children’s
maintenance.
Her
lawyer
wrote
on
September
23,
1982
to
Revenue
Canada,
Taxation,
in
the
following
terms:
Please
be
advised
the
writer
acts
on
behalf
of
Grace
Jasper
(Boychuk).
She
entered
into
a
Separation
agreement
with
her
husband
in
1980
with
certain
maintenance
provision
as
set
out
in
paragraph
5
on
page
3
of
the
agreement
a
photocopy
of
which
is
enclosed
herewith.
As
you
will
note
paragraph
5(c)
which
is
now
in
effect
provides
that
Mr.
Boychuk
pay
$600
per
month
plus
one-half
of
the
mortgage
payments
which
for
the
purpose
of
the
agreement
include
principal,
interest
and
taxes
such
payments
to
commence
on
the
first
day
of
July
of
1982.
There
is
addendum
that
the
wife
will
be
responsible
for
any
income
tax
payable
and
any
moneys
paid
to
her
by
the
husband
pursuant
to
5(a),
(b)
and
(c)
however
we
are
taking
the
position
that
under
the
Income
Tax
Act
this
clause
only
reaffirms
the
provisions
of
the
Act.
House
payments
and
in
more
particular
the
one-half
of
the
mortgage
payments
which
include
principal,
interest
and
taxes
under
The
Income
Tax
Act
are
not
classified
as
maintenance
and
hence
Ms.
Jasper
will
be
only
including
the
$600
per
month
in
her
personal
income
tax.
I
would
appreciate
your
confirmation
that
this
is
acceptable
at
your
very
earliest
convenience.
On
October
12,
1982,
a
written
response
was
received
by
her
lawyer,
signed
on
behalf
of
the
Director,
Winnipeg
Taxation
Centre,
of
Revenue
Canada,
Taxation,
which
stated:
Re:
1982
Income
Tax
Return
Grace
Jasper
(Boychuk)
The
information
you
requested
is
as
follows:
This
will
serve
to
confirm
that
Ms.
Jasper
will
be
required
to
report
only
the
specified
$600
per
month
in
maintenance
payments
inasmuch
as
the
"one
half
of
the
mortgage
payment.
.
.."
is
not
deemed
to
be
“maintenance”.
We
trust
this
information
is
satisfactory.
After
receipt
of
that
letter
the
defendant
did
not
include
the
monthly
payment
made
by
her
former
husband
in
relation
to
the
mortgage,
though
the
other
sums
paid
as
maintenance
for
one
or
more
of
the
children
were
included
in
income
of
Ms.
Jasper.
In
1983,
her
former
husband
sought
her
cooperation
in
facilitating
arrangements
for
a
divorce
with
a
decree
absolute
to
be
granted
at
conclusion
of
the
hearing
without
waiting
a
ninety
day
period
ordinarily
applicable.
The
defendant
asked
that
he
consider
transferring
his
equity
in
the
matrimonial
home
to
her,
but
he
declined
to
do
that.
Ultimately,
however
it
was
agreed
between
the
two
that
he
would
pay
$800.
per
month
maintenance
for
support
of
the
two
children
then
still
living
regularly
at
the
matrimonial
home,
and
further,
that
the
home
would
be
conveyed
by
the
defendant
and
her
former
husband
to
herself
and
the
five
children
of
the
marriage
as
joint
tenants,
but
that
so
long
as
children
of
the
marriage
lived
in
the
home
and
had
not
completed
their
education
he
would
continue
to
pay
one-half
of
the
monthly
mortgage
payment.
These
arrangements
were
set
out
in
an
Amending
Separation
agreement
and
Interspousal
Contract
which
was
concluded
on
June
23,
1983.
This
amending
agreement
provided,
inter
alia,
AND
WHEREAS
an
agreement
was
entered
into
effective
on
the
first
day
of
July,
A.D.
1980,
in
writing
between
the
parties
which
agreement
was
intended
by
the
parties
to
settle
amongst
other
things
maintenance
payments
and
other
related
matters
as
well
as
matrimonial
property;
AND
WHEREAS
the
husband
and
wife
wish
to
make
certain
amendments
to
the
agreement
effective
the
first
day
of
July,
A.D.
1980;
NOW
THEREFORE
THIS
agreement
WITNESSETH
that
in
consideration
of
the
premises,
mutual
covenants,
promises,
undertakings
and
agreements
hereinafter
contained,
the
husband
and
wife
do
mutually
covenant,
undertake
and
agree
with
each
other
as
follows:
(a)
Paragraphs
5(c),
6(a)
of
the
agreement
entered
into
between
the
parties
on
the
first
day
of
July,
A.D.
1980,
shall
be
deleted
and
the
following
provisions
shall
apply;
1
(a).
The
husband
shall
pay
to
the
wife,
for
the
support
and
maintenance
the
sum
of
$800
per
month
and
such
payments
to
continue
as
long
as
the
children
are
children
within
the
meaning
of
The
Divorce
Act
and
while
any
of
the
said
children
are
attending
at
a
full
time
educational
facility
however
return
to
reside
with
the
wife
during
the
summer
they
shall
continue
to
be
children
within
the
meaning
of
this
agreement.
Provided,
however,
that
upon
any
child
leaving
home
the
monthly
payment
shall
be
reduced
by
Two
Hundred
($200)
Dollars
per
month
for
each
child
and
upon
the
last
child
leaving
home,
all
liabilities
for
any
payment
whatsoever
shall
automatically
cease.
1(b).
The
husband
shall
continue
to
pay
one-half
of
the
mortgage
payment
which
for
the
purpose
of
this
agreement
shall
include
principal,
interest
and
taxes
such
payments
to
commence
on
the
first
day
of
July,
A.D.
1983,
and
the
first
of
each
and
every
month
thereafter
and
to
continue
on
the
first
of
each
and
every
month
thereafter
until
the
last
child
has
completed
his
or
her
education
and
has
left
the
family
home.
2.
The
husband
agrees
to
execute
and
transfer
the
property
described
in
clause
6(a)
of
the
agreement
in
favour
of
Grace
Irene
Jasper,
Christopher
Boychuk,
Daryl
Boychuk,
Philip
Boychuk,
Terry
Boychuk
and
Marianne
Boychuk,
as
joint
tenants
and
not
as
tenants
in
common
and
further
agrees
that
he
shall
have
no
further
claim
in
and
to
the
said
property.
It
is
further
agreed
that
the
transfer
shall
not
be
registered,
but
shall
be
held
in
trust
and
delivered
to
the
wife
upon
the
issuance
of
a
decree
absolute
for
divorce.
5.
The
amendments
provided
in
this
agreement
shall
become
effective
upon
the
issuance
of
the
decree
absolute
for
divorce.
6.
In
all
other
respects
the
contents
of
the
agreement
effective
the
first
day
of
July,
A.D.
1980,
are
hereby
ratified
and
confirmed.
When
the
amending
agreement
was
concluded
two
of
the
children
were
regularly
living
at
home
and
continuing
their
education.
For
July
and
August
the
monthly
maintenance
payment
of
$800
was
made
in
relation
to
these
two
children;
in
September
when
only
one
remained
at
home
that
payment
was
reduced
to
$400.
As
provided
in
the
amending
agreement
the
payments
in
respect
of
half
the
monthly
mortgage
payments
were
continued.
Thus,
for
the
year
in
question,
1983,
according
to
testimony
of
the
defendant,
from
January
to
April
inclusive
she
received
monthly
payments
of
$332.
for
mortgage
payments;
for
May
to
July
she
received
$323.
as
a
monthly
payment
for
the
mortgage;
from
August
to
October
she
received
$337.
for
mortgage
payments,
and
for
November
and
December,
she
received
payments
in
respect
of
the
mortgage
in
the
amount
of
$320.
Thus,
$3,948.
in
all
was
received
in
1983
by
Ms.
Jasper
as
payment
toward
the
mortgage.
Relying
on
the
advice
received
from
Revenue
Canada
in
the
fall
of
1982,
she
did
not
declare
any
of
this
amount
within
her
income
for
tax
purposes,
though
all
sums
paid
in
respect
to
maintenance
of
the
children
were
reported
as
income.
I
note
that
the
amount
received
as
mortgage
payments
was
established
by
evidence
in
the
Tax
Court
at
a
slightly
different
figure
and
may
there
have
included
an
amount
for
an
adjustment
in
relation
to
taxes
in
July.
The
total
here
established
by
evidence
also
varies
slightly
from
that
claimed
by
the
Minister's
reassessment,
in
paragraph
(i)
of
his
assumptions.
Counsel
for
the
Crown
confirmed
at
the
hearing
that
it
was
the
amount
established
by
evidence
at
trial,
i.e.
$3,948.,
that
was
in
issue
for
inclusion
or
exclusion
from
income
of
the
applicant
for
tax
purposes.
The
only
issue
in
this
case
is
whether
the
sum
received
by
the
defendant
in
1983
from
her
former
husband
as
payments
made
in
relation
to
the
monthly
mortgage
payment
was
taxable
income
pursuant
to
paragraph
56(1)(b)
of
the
Act.
The
basic
argument
on
behalf
of
the
taxpayer,
relying
principally
upon
Golden-
burg
v.
M.N.R.,
[1979]
C.T.C.
3082,
79
D.T.C.
851
(T.R.B.),
is
that
the
payments
by
the
former
husband
in
regard
to
the
mortgage
after
June
1982
were
payments
to
protect
his
own
capital
asset
i.e.,
one-half
interest
in
the
matrimonial
home,
which
was
to
be
sold
when
all
children
living
at
home
had
completed
their
education
and
half
the
proceeds
of
the
sale
were
to
be
his.
After
the
amending
agreement
of
1983
was
effected
by
transfer
of
title
in
the
whole
of
the
matrimonial
property,
by
the
defendant
and
her
former
husband,
to
the
defendant
and
the
five
children
of
the
marriage,
the
mortgage
payments
continued
to
be
on
account
of
capital
for
the
benefit
principally
of
the
five
children
of
the
marriage.
The
payments
were
not
intended
to,
and
did
not,
constitute
maintenance
payments
for
the
defendant
and
the
children.
Once
payment
on
account
of
maintenance
for
her
terminated
in
July
1982,
the
payment
on
account
of
the
mortgage
was
payment
on
a
capital
asset,
not
an
allowance
for
maintenance
of
the
defendant,
the
children
or
of
her
and
the
children.
For
the
Crown
it
was
argued
that
all
of
the
qualifications
for
application
of
paragraph
56(1)
of
the
Act
were
met.
Here
there
was
no
dispute
that
the
amount
was
received
by
the
taxpayer,
the
defendant,
in
1983;
it
was
received
pursuant
to
a
written
agreement;
it
was
paid
on
a
periodic
basis;
and
the
defendant
was
living
apart
from
and
separated
pursuant
to
a
written
separation
agreement
from
the
spouse
or
former
spouse
required
to
make
the
payment
at
the
time
the
payment
was
received
and
throughout
the
remainder
of
the
year.
The
elements
on
which
the
parties
differed,
but
which
the
Crown
urged
were
met
on
the
facts
so
that
paragraph
56(1
)(b)
applies,
were
whether
the
amount
was
received
as
alimony
or
other
allowance
for
the
maintenance
of
the
recipient,
that
is,
the
defendant,
or
children
of
the
marriage,
or
both
the
recipient
and
the
children
of
the
marriage.
The
Crown
relied
substantially
on
Gagnon
v.
The
Queen,
[1986]
1
S.C.R.
264,
[1986]
1
C.T.C.
410,
86
D.T.C.
6179.
No
argument
was
raised
concerning
possible
estoppel
against
the
Crown
arising
from
the
letter
of
October
1992
from
the
Winnipeg
Taxation
Centre
of
Revenue
Canada.
It
is
clear
that
no
estoppel
arises
in
relation
to
the
discharge
of
statutory
responsibilities,
and
even
where
an
officer
of
the
department
concerned
has
given
advice
in
writing,
that
may
not
be
relied
upon
as
the
basis
for
a
claim
of
estoppel.
Particularly
is
this
so
in
regard
to
income
tax
assessments,
for
the
Act
itself
provides
for
assessment
and
later
variations
by
the
Minister
by
reassessment.
(See
Gibbon
v.
The
Queen,
[1977]
C.T.C.
334,
77
D.T.C.
5193
(F.C.T.D.)).
It
is
useful
to
consider
the
principal
cases
relied
upon
by
each
of
the
parties.
In
Goldenburg,
supra,
relied
upon
by
the
taxpayer,
a
decision
of
the
former
Tax
Review
Board
in
1979,
at
issue
was
a
claim
by
the
taxpayer
for
a
deduction
from
his
income
of
payments
made
pursuant
to
a
divorce
decree
to
discharge
the
mortgage
on
the
matrimonial
home
which
by
the
decree
was
transferred
to
the
former
wife.
In
accordance
with
the
decree,
the
taxpayer
transferred
to
his
former
spouse
all
of
his
interest
in
the
matrimonial
home,
and
thereafter
he
paid
monthly
mortgage
payments,
as
was
required
by
the
decree
until
the
mortgage
was
retired,
and
subsequently
he
deposited
a
lump
sum
sufficient
for
retirement
of
the
mortgage
which
was
then
discharged.
The
Board
held
that
both
the
monthly
mortgage
payments
and
the
lump
sum
payment
were
not
for
the
support
and
maintenance
of
the
former
spouse,
even
though
she
might
have
some
benefit.
Rather,
the
payments,
even
the
periodic
payments
on
a
monthly
basis,
were
inthis
case
in
the
nature
of
capital
assets
transferred
to
the
former
spouse.
In
that
case
the
Chairman
of
the
Tax
Review
Board
said,
at
page
3085
(D.T.C.
853):
The
court
order
or
a
written
separation
agreement
might
well,
as
in
the
instant
appeal,
specify
that
payments,
even
periodic
payments,
be
made
by
the
taxpayer
to
his
spouse
which,
though
a
benefit
to
the
spouse,
are
not
maintenance
allowances
but
are
in
the
nature
of
capital
assets
and,
in
my
opinion,
not
meant
by
Parliament
to
fall
within
the
meaning
of
paragraphs
60(b)
and
(c),
and
section
60.1.
The
transfer
by
the
appellant
of
title
to
the
matrimonial
home
to
his
spouse,
the
mortgage
on
which
was
subsequently
totally
discharged,
is
over
and
above
what
is
generally
understood
by
alimony
and
maintenance
payments
made
for
the
support
of
the
spouse
and
children.
Such
payments
are,
in
my
view,
special
provisions
of
a
capital
nature
made
by
the
parties,
not
for
the
maintenance
of
the
spouse,
but
as
the
price
of
a
settlement,
or
of
damages
or
the
conditions
on
which
a
legal
separation
would
be
agreed
to.
While
in
that
case
the
Board
was
concerned
with
a
claim
to
a
deduction
under
then
paragraph
60(b)
of
the
Act,
that
provision
has
been
described
as
the
counterpart
to
paragraph
56(1
)(b),
here
in
issue,
so
that
the
amount
deductible
by
the
taxpayer
under
paragraph
60(b)
is
taxable
in
the
hands
of
the
recipient
under
paragraph
56(1
)(b).
(See
Gagnon,
supra,
per
Beetz
J.
at
page
269
(D.T.C.
6181).)
In
Gagnon
the
Supreme
Court
of
Canada
clarified
the
meaning
of
an
"allowance"
within
both
paragraphs
60(b)
and
56(1
)(b)
of
the
Act.
Earlier,
the
Court
of
Appeal
had
defined
an
allowance
in
paragraph
60(b),
per
Pratte
J.A.
in
R.
v.
Pascoe,
[1975]
C.T.C.
656,
75
D.T.C.
5427
at
page
658
(D.T.C.
5428),
as
follows:
An
allowance
is,
in
our
view,
a
limited
predetermined
sum
of
money
paid
to
enable
the
recipient
to
provide
for
certain
kinds
of
expense;
its
amount
is
determined
in
advance
and,
once
paid,
it
is
at
the
complete
disposition
of
the
recipient
who
is
not
required
to
account
for
it.
A
payment
in
satisfaction
of
an
obligation
to
indemnify
or
reimburse
someone
or
to
defray
his
or
her
actual
expenses
is
not
an
allowance;
it
is
not
a
sum
allowed
to
the
recipient
to
be
applied
in
his
or
her
discretion
to
certain
kinds
of
expense.
The
third
criterion
for
an
allowance,
as
determined
by
the
Court
of
Appeal,
that
is,
that
the
amount
paid
be
at
the
complete
disposition
of
the
recipient
who
is
not
required
to
account
for
it,
was
qualified
by
the
Supreme
Court
in
Gagnon
where
at
page
417
(D.T.C.
6184)
Beetz
J.
said:
.
.
.for
an
amount
to
be
an
allowance
within
the
meaning
of
subsection
60(b)
of
the
Income
Tax
Act,
the
recipient
must
be
able
to
dispose
of
it
completely
for
his
own
benefit,
regardlessof
the
restrictions
imposed
on
him
as
to
the
way
in
which
he
disposes
of
it
and
benefits
from
it.
In
Gagnon,
Beetz
J.
for
the
Supreme
Court
found
that
monthly
payments
under
a
divorce
decree
by
a
former
husband
to
his
former
wife,
of
principal,
interest
and
taxes
payable
under
mortgages
on
the
matrimonial
property,
which
as
a
result
of
the
decree
was
transferred
to
the
former
wife,
were
an
allowance
for
the
maintenance
of
the
former
wife
within
paragraph
60(b),
the
counterpart
of
paragraph
56(1
)(b).
The
payments
had
a
readily
realizable
economic
value,
a
benefit
for
the
former
spouse
which
resulted
in
the
payments
being
in
the
nature
of
income
for
her.
I
turn
to
The
Queen
v.
McKimmon,
[1990]
1
C.T.C.
109,
90
D.T.C.
6088
(F.C.A.).
The
decision
of
Collier
J.
at
trial
in
that
case
was
relied
upon
in
the
decision
of
the
Tax
Court.
The
decision
of
the
Court
of
Appeal
was
rendered
after
the
decision
of
the
Tax
Court
in
the
case
at
bar.
Hugessen
J.A.,
for
the
Court
of
Appeal,
said
at
page
112
(D.T.C.
6090):
The
problem
of
distinguishing
between
periodic
payments
made
as
an
allowance
for
maintenance,
which
are
deductible
for
income
tax
purposes,
and
periodic
payments
made
as
instalments
of
a
lump
or
capital
sum,
which
are
not
so
deductible,
is
one
which
has
given
rise
to
considerable
discussion
and
jurisprudence.
It
is
not
dissimilar,
and
is
indeed
related
to
the
problem,
common
in
income
tax
law,
of
determining
if
sums
of
money
expended
or
received
are
of
an
income
or
of
a
capital
nature.
As
with
that
problem
there
can
be
very
few
hard
and
fast
rules.
On
the
contrary,
the
Court
is
required
to
look
at
all
the
circumstances
surrounding
the
payment
and
to
determine
what,
in
the
light
of
those
circumstances,
is
its
proper
characterization.
Because
of
the
correlation
between
paragraphs
60(b)
and
56(1
)(b),
a
finding
that
a
payment
is
deductible
by
the
payer
will
normally
result
in
its
being
taxable
in
the
hands
of
the
recipient.
Conversely,
a
determination
that
a
payment
is
not
so
deductible
will
result
in
the
recipient
having
it
free
of
tax.
Mr.
Justice
Hugessen
then
listed
eight
factors,
a
list
not
intended
to
be
exhaustive,
that
may
be
considered
in
determining
whether
payment
in
a
given
case
is
to
be
classed
as
in
the
nature
of
capital
or
as
an
allowance
for
maintenance.
Most
of
the
factors
he
suggests
when
considered
in
the
circumstances
of
this
case
would
support
classifying
the
payments
for
the
mortgage
on
the
matrimonial
home
as
an
allowance
for
maintenance
of
Ms.
Jasper
and
one
or
more
of
her
children
of
the
marriage.
Thus,
the
payments
were
made
on
a
monthly
basis,
in
an
amount
that
is
not
substantial
in
relation
to
the
income
and
living
standard
of
the
defendant
and
presumably
of
her
former
spouse.
The
payments
are
not
specified
to
bear
interest
before
or
after
the
due
date
for
payment;
payments
are
not
subject
to
acceleration
at
the
option
of
the
defendant
in
the
event
of
default;
payments
do
not
allow
a
significant
degree
of
capital
accumulation
by
the
recipient
and
though
related
to
blended
payments
of
principal,
interest
andtaxes
under
a
mortgage,
they
are
payments
in
the
nature
of
a
normal
expense
of
living
usually
paid
from
income.
The
payments
do
not
continue
for
a
fixed
term
but
rather
for
an
indefinite
period,
terminating
when
children
of
the
marriage
complete
their
education
or
are
no
longer
resident
at
the
family
home.
The
payments
generally
made
to
the
recipient
personally
would
not
continue
beyond
her
death
and
would
not
generally
be
assignable
by
the
recipient.
The
payments
do
not
purport
to
release
the
former
husband
from
future
obligations
to
pay
maintenance,
indeed
no
future
obligation
for
maintenance
of
the
defendant
after
she
completed
her
university
studies,
or
for
maintenance
of
the
children
of
the
marriage
after
they
completed
their
education
or
left
home
was
contemplated
by
the
parties.
Those
factors
and
others
relied
upon
by
the
Minister,
point
to
classification
of
the
payments
in
question
in
this
case
as
an
allowance
for
maintenance
of
the
defendant
and/or
one
or
more
of
the
children.
Most
significant
of
the
other
factors
suggested
by
the
Minister,
in
my
view,
are
that
the
payments
towards
the
mortgage
were
to
continue
only
so
long
as
children
of
the
marriage
were
living
at
the
family
home
and
completing
their
education,
a
factor
which
supports
the
classification
of
the
payments
as
an
allowance
for
provision
of
a
home
for
the
defendant
and
children
of
the
marriage
until
their
education
was
completed.
Moreover,
the
former
husband's
payments
towards
the
mortgage
from
1980
were
unrelated
to
the
share
of
ownership
he
had
in
the
property,
rather
they
were
related
to
the
anticipated
need
for
support
of
the
defendant
and
the
children
of
the
marriage.
These
factors
tend
to
indicate
that
the
payments
were
intended
as
an
allowance
for
maintenance,
at
least
from
the
perspective
of
the
former
husband.
I
do
not
find
other
suggestions
on
behalf
of
the
Minister
as
helpful,
for
example,
that
under
the
separation
agreement
of
1980
and
its
amendment
in
1983,
the
provisions
in
clause
5
and
its
replacement
clause
1
are
introduced
by
the
following
words
“The
husband
shall
pay
to
the
wife,
for
the
support
and
maintenance
of
herself
and
the
said
children
the
following
sums".
The
Court
must
look
to
the
true
nature
of
the
transaction
in
construction
of
the
terms
in
the
context
of
the
agreement
as
a
whole.
Nor
do
I
find
helpful
the
argument
that
the
intention
of
the
parties
was
to
provide
for
maintenance
of
the
defendant
and
one
or
more
children
of
the
marriage.
That
may
be
a
conclusion
one
would
draw
from
assessment
of
all
the
factors
but
it
is
circular
reasoning
to
rely
on
that
as
a
factor
to
lead
to
that
conclusion.
For
the
defendant,
substantial
reliance
is
placed
upon
the
interests
of
the
parties
in
the
property
in
question
in
urging
that
after
July
1982
the
payments
in
relation
to
the
mortgage
were
on
account
of
capital
and
not
an
allowance
for
maintenance.
In
1982
the
defendant
and
her
former
spouse,
as
joint
tenants,
had
a
50
per
cent
interest
in
the
undivided
whole
of
the
property
(with
a
right
to
survivorship
not
here
in
play).
Each
made
an
equal
contribution
to
the
mortgage
payment,
that
is
each
paid
half
of
the
total
payment,
maintaining
their
respective
interests
in
a
property
that
was
expected
to
be
sold,
and
the
proceeds
of
sale
shared
equally
between
them,
once
the
last
of
the
children
was
educated.
In
the
terms
of
Gagnon,
supra,
it
is
urged
that
the
payments
of
half
the
monthly
mortgage
cost
by
the
former
husband
did
not
qualify
as
“an
allowance”
since
the
defendant
was
not
free
to
dispose
of
the
payments
except
in
relation
to
their
intended
purpose,
payment
of
the
mortgage.
I
am
not,
however,
persuaded
that,
whatever
her
liability
to
her
former
husband
or
to
her
children
might
be,
there
was
any
legal
impediment
to
her
disposing
of
those
payments
for
other
purposes.
With
the
change
by
the
1983
amendment
to
the
separation
agreement,
and
the
conveyance
of
the
property
by
both
parties
to
the
defendant
and
the
five
children
as
joint
tenants,
the
defendant
and
the
former
husband
continued
to
contribute
equally
to
the
mortgage
payments
even
though
he
no
longer
had
an
interest
in
the
property
and
her
interest
was
reduced
to
a
‘le
interest
in
the
undivided
whole.
The
children,
most
of
them
at
that
stage
considered
adults
and
no
longer
dependants
under
the
Divorce
Act,
became
the
significant
beneficiaries
of
the
mortgage
payments
by
Ms.
Jasper
and
her
former
spouse.
From
the
Crown's
perspective,
ownership
of
the
property
is
irrelevant
to
the
question
of
whether
the
payment
was
an
allowance
for
maintenance
within
paragraph
56(1
)(b).
I
can
appreciate
the
defendant's
sense
that
it
is
unfair
not
to
acknowledge
the
property
interests
and
to
conclude
that
by
paying
one-half
of
the
mortgage
payments
the
former
husband
conveyed
a
benefit
in
the
form
of
maintenance
for
the
defendant
and
the
children
to
continue
to
live
in
the
house.
It
is
true
that
continuation
in
the
house
under
the
arrangements
with
an
outstanding
mortgage
also
required
payment
by
the
defendant
of
one-half
the
mortgage
payments
after
July
1982,
when
maintenance
support
for
her
terminated
and
she
was
to
be
considered
responsible
for
her
own
maintenance.
If
there
were
beneficiaries
of
the
continuing
payment
of
half
the
mortgage
payments
by
the
former
husband,
the
principal
beneficiaries
were
the
children
and
not
the
defendant.
That
would,
nevertheless,
bring
the
payments
within
paragraph
56(1)(b)
for
the
payments
are
considered
properly
classified
within
that
paragraph
as
payments
of
“an
allowance
for
maintenance
of
the
recipient,
children
of
the
marriage,
or
both
the
recipient
and
children
of
the
marriage.
.
.
."
In
my
opinion,
assessing
the
circumstances
of
this
case
in
light
of
the
factors
identified
by
Hugessen
J.A.
in
McKimmon,
supra,
and
all
other
relevant
factors
the
payments
for
the
mortgage
made
to
the
defendant
by
her
former
spouse
are
an
allowance
within
paragraph
56(1
)(b)
of
the
Act.
The
defendant
urges
that
section
56.1
has
relevance
in
the
circumstances,
i.e.,
if
the
Court
concludes
that
the
payments
are
allowances
within
paragraph
56(1)(b),
then
under
section
56.1
the
allowance
for
maintenance
can
be
considered
only
in
relation
to
the
youngest
child
then
at
home
and
the
defendant
herself.
As
I
understand
the
argument,
it
is
that
the
other
four
children,
then
adults
and
no
longer
dependants,
who
benefited
by
transfer
of
interests
in
the
real
property
to
them,
benefit
as
well
from
the
continuing
payments
on
the
mortgage,
which
in
the
long
run
benefit
their
interests
as
joint
tenants
in
the
property.
That
benefit
ought
not
to
be
deemed
to
be
within
an
“allowance
for
maintenance.
.
."
since
after
1983
they
were
not
continuing
to
reside
at
home
and
the
payments,
insofar
as
their
interests
in
the
property
are
concerned,
could
not
be
considered
an
allowance
for
maintenance.
In
the
result,
it
is
urged
the
defendant
here
should
be
assessable
in
relation
to
the
share
of
payment
that
could
be
considered
for
maintenance,
i.e.,
‘/6
for
the
youngest
child,
remaining
at
home
and
Æ
for
the
defendant
herself,
a
total
of
'/3
of
the
payments
made,
after
transfer
of
the
property
in
September
1983.
As
I
see
it,
the
payment
toward
the
mortgage
can
only
be
an
allowance
for
maintenance
of
those
for
whom
maintenance
was
intended
under
the
agreements
—
that
is,
the
defendant
at
least
initially,
and
any
children
living
at
home
after
July
1982
pending
completion
of
their
education.
To
the
extent
the
payments
may
be
said
to
enure
to
the
benefit
of
others
that
is
an
effect
of
the
payments
made
as
an
allowance
for
maintenance
under
paragraph
56(1
)(b).
Conclusion
For
the
reasons
set
out
l
conclude
that
the
payments
here
in
question,
made
by
the
defendant's
former
spouse
to
the
defendant,
for
payment
of
one-half
of
the
monthly
mortgage
payment
were
an
allowance
for
maintenance
of
the
defendant
and
one
or
more
of
the
children
of
the
marriage.
Thus,
the
action
by
Her
Majesty
the
Queen
is
allowed,
except
that,
as
established
by
evidence
at
trial,
the
amount
of
the
payments
received
by
the
defendant
from
her
former
husband
in
the
year
1983
was
$3,948,
not
$4,168.94
as
set
out
in
paragraph
(i)
of
the
assumptions
of
fact
made
by
the
Minister
of
National
Revenue.
It
is
the
amount
of
those
payments
established
by
evidence
that
should
be
added
to
the
defendant's
income
in
the
Minister's
reassessment,
and
the
judgment
allowing
the
action
so
provides.
The
plaintiff,
Her
Majesty,
did
not
ask
for
costs
of
the
action
and
in
view
of
the
modest
claim
for
unpaid
tax
established
by
the
action,
and
the
reduction
in
the
amount
of
payment
toward
the
mortgage
from
that
originally
claimed
by
the
Minister,
no
costs
are
awarded.
Appeal
allowed.
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