Citation: 2012 TCC 279
Date: 20120726
Docket: 2011-3986(IT)I
BETWEEN:
ROSS J. CUNNINGHAM,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Boyle J.
[1]
Mr. Cunningham has
appealed the denial of his claim for a dependent child tax credit under
paragraph 118(1)(b.1) of the Income Tax Act (the “Act”) in 2009
in respect of his son, Alex. Mr. Cunningham has instituted an informal
appeal. He has put in his case in a very clear manner and he is familiar with
the Act and the tax system. The facts are not in dispute whatsoever.
Facts
[2]
The Appellant and his
wife separated in 2007 and divorced in 2010. In 2009, they entered into a
Separation Agreement. With respect to their only child Alex, the Separation Agreement
provides that they will have shared custody of him. Alex has in fact resided with
each of them approximately fifty percent of the time.
[3]
The Separation Agreement
deals with child support in respect of Alex in the following manner:
(a)
The Appellant was
required to pay to his wife support on a shared‑custody basis in the
amount of $261 monthly in 2009. It is clear that this is based precisely upon
the Tables of the Federal Child Support Guidelines having regard to each of
their respective incomes. That is, the amount the Appellant agreed to pay his
wife was the precise difference between (i) the amount of support the
applicable Table indicated he should pay her based upon his income for one
child in her custody and (ii) the amount of support the applicable Table
indicated she should pay him based upon her income for one child in his custody.
The agreement specified the amount that was the net amount once child support that
would be payable by his wife under the Guideline Tables was set-off or netted
against the child support that would be payable to him under the Guideline
Tables, each determined as if the other had sole custody.
(b)
Additional support of
$250 monthly was payable for 24 months beginning in 2009.
(c)
Reasonable “special or
extraordinary expenses” were to be shared 60% by the Appellant and 40% by his
wife. It can be noted that this is not precisely proportional to their
respective incomes at the time of the Separation Agreement. It is out by somewhat
over 1 % in each direction.
(d)
Private school tuition
and music lessons were also to be borne 60% by the husband and 40% by the wife.
(e)
The Appellant and his
wife agreed that they would alternate years for claiming Alex for Canada Child
Tax Benefit and eligible dependent purposes. Under the agreement, the wife
agreed that the Appellant would be entitled to these claims in 2009.
[4]
The Separation Agreement
specified that the parties recognized and acknowledged that they were agreeing
to child support based upon section 9 of the Federal Child Support Guidelines dealing
with shared custody and that they had considered the increased costs of the
shared-custody arrangement, including appropriate housing, transportation and
the duplication of necessities.
Law
[5]
Paragraph 118(1)(b.1)
provides a tax credit in respect of a taxpayer’s child under 18.
[6]
Subsection 118(5)
provides that this credit is not available for a child in respect of whom the
taxpayer has paid child support to his spouse or former spouse.
[7]
Subsection 118(5.1)
provides that the restriction in subsection 118(5) will not apply if it would
deny the credit to both parents. In such a case, one would have to go on to
consider paragraph 118(4)(b.1) which provides that, if both parents are
entitled to the child credit, they must agree on who will claim it on an annual
basis, failing which the credit will again be denied to both of them.
Position of the Taxpayer
[8]
The Appellant does not
dispute that he was required to pay his wife child support in 2009 in respect
of Alex and for this reason is caught by the words of subsection 118(5).
[9]
However, he argues that
subsection 118(5.1) also applies to restore his entitlement to the child credit
because both he and his wife paid each other child support under the Separation
Agreement in respect of their shared custody of Alex. He argues that, but for
subsection 118(5.1), neither he nor his wife would therefore be entitled to the
child credit in respect of Alex and so, as set out in subsection 118(5.1), the
restriction in subsection 118(5) does not apply to either of them.
[10]
Finally, he says that
the end result of the application of paragraph 118(4)(b.1) is that he is
entitled to the credit in 2009 because he and his wife agreed to that in their
Separation Agreement.
Analysis
[11]
This issue has been
considered several times by this Court and it has consistently dismissed
taxpayers’ appeals in cases of shared custody. See the reasons for judgment of
Woods J. in Perrin v. Her Majesty the Queen, 2010 TCC 331,
those of Webb J. in Melnyk v. Her Majesty the Queen,
2007 TCC 733, and those of Lamarre J. in Ladell v. Her
Majesty the Queen, 2011 TCC 314. In each of these cases, it was
decided that in shared custody arrangements governed by the Guidelines, there
are not two offsetting support payments payable by the parents and that there
is only one parent required to make support payments.
[12]
In Melnyk and Ladell,
the Court expressly relied upon the decision of the Supreme Court of Canada in Contino
v. Leonelli‑Contino [2005] 3 SCR 217 to the effect that in
cases of shared custody under section 9 of the Guidelines, child support was
not payable on a set-off basis with the parent having the higher income
required to make the net payment equal to the difference between the two
support amounts. Rather, section 9 starts off from a simple set-off but
requires further considerations to be considered and appropriate adjustments
made in setting child support. The Supreme Court in Contino contrasted
these section 9 requirements in cases of shared custody with those applicable to
section 8 in cases of split custody (each parent having custody of different
children) which do simply provide for a set-off.
[13]
It is clear from the child
support provisions of the Separation Agreement that the Appellant and his wife
entered into, that the child support be paid following the approach mandated by
section 9 of the Guidelines and described by the Supreme Court of Canada in Contino.
That is, the Table amounts for each parent were the starting point and then
consideration was given to, and adjustments made for, further special and
extraordinary expenses relating to Alex’s care and custody.
[14]
I see no reason to
consider departing from this Court’s analysis and approach in these three
cases. The Appellant’s wife was not required to make child-support payments to
the Appellant. For this reason, the appeal must be dismissed.
[15]
The Appellant sought to
rely on the decision of Lamarre J. in Rabb v. Her Majesty the Queen,
2006 TCC 140. However, it is entirely clear that Rabb was considering a
split-custody agreement covered by section 8 of the Guidelines and not a
shared-custody agreement covered by section 9 of the Guidelines. As noted
above, the two circumstances – split custody and shared custody ‑ require
different approaches to the computation of support under the Guidelines. For
that reason, Rabb does not assist the Appellant.
[16]
I am not unsympathetic
to the fact that the Appellant is not receiving the benefit of the child credit
in 2009 even though he and his ex-wife agreed he would be the one entitled to
claim it during that year of shared custody. Instead, I am told that she
claimed the deduction in 2009. However, the agreement of the parties cannot
change the requirements of the Act. I am also not unsympathetic to the fact
that the Appellant, a tax professional, cannot discern a policy basis or other
reason for such differing tax results in the cases of shared custody and split
custody. Nonetheless, it is clear that the provisions of the Guidelines and of
the child tax credit, as they are worded and as they have been interpreted by
the Courts, do not allow Mr. Cunningham’s appeal to succeed.
Conclusion
[17]
The appeal is
dismissed.
Signed at Ottawa, Canada, this 26th day of July 2012.
“Patrick
Boyle”
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