D'Anjou v. MNR, 92 DTC 1022, [1991] 2 CTC 2563 (TCC)

Couture, C.J.T.C. [Translation]: —The taxpayer is appealing from an assessment for the 1981 and 1982 taxation years.

In his tax returns he claimed in computing his income deductions of $21,400 for the 1981 taxation year and $23,145 for the 1982 taxation year as alimony or other allowance paid to his wife and in part to his daughter, and paid to his son, pursuant to an agreement signed by the parties on October 20, 1981, titled "Consent to Interim Order".

On September 11,1981 the parties signed an initial agreement for the same purposes, the relevant provisions of which read as follows:

4. On the matter of physical custody, the petitioner will keep Sonia at her residence at 231 Calixda Lavallée, Saint-Jérôme, district of Terrebonne, and the respondent will keep Jacques at his residence at 1795 Domaine Bastien, Ste-Adèle, district of Terrebonne.

5. The respondent will pay alimony of $700 a month for the petitioner and $300 a month for the minor child Sonia, the said amounts being payable on the 15th of each month at the petitioner's residence.

6. The respondent will pay Daniel, the child of full age studying at university, alimony for a period of ten months a year, in the amount of $400 a month.

7. The petitioner acknowledges receipt of the sum of $15,000 from the respondent, and the latter also undertakes to pay a further amount of $5,000 a year payable on March 15 of each year at the petitioner's residence.

8. The amounts of money mentioned in this consent are taxable in the hands of the petitioning wife, except for the payment made to the child of full age, Daniel, and deductible by the respondent husband, including those paid to the child of full age, Daniel. . .

The agreement of October 20 contained inter alia the following provisions:

4. On the matter of physical custody, the petitioner will keep Sonia at her residence at 231 Calixa Lavallée, Saint-Jérôme, district of Terrebonne, and the respondent will keep Jacques at his residence at 1795 Domaine Bastien, Ste-Adèle, district of Terrebonne.

5. The respondent will pay to the petitioner as present and future alimony the sum of $40,000, broken down as follows:

(a) petitioner acknowledges already having received the sum of $15,000; the balance of $25,000 will be paid in instalments of $5,000, the first to be payable when judgment shall be rendered on the interim orders following the said consent; the second when the decree nisi is rendered, and the balance in three consecutive instalments every four months, until the full amount is paid, from the time the decree absolute is rendered;

(b) N.A.;

(c) N.A.;

(d) N.A.;

(e) the respondent shall pay Daniel, the child of full age studying at university,

alimony for a period of ten months a year, in the amount of $400 a month;

(f) the amounts of money mentioned in this consent are taxable in the hands of the petitioning wife, except for the payment made to the child of full age, Daniel, and deductible by the respondent husband, including those paid to the child of full age, Daniel.

6. The respondent shall pay the petitioner alimony of $300 a month for the minor child Sonia, payable on first day of each month at the petitioner’s residence. . .

Though the original documentation in support of the payments which the appellant claims to have made for the 1981 and 1982 taxation years could not be located and produced by him, he filed bank documents showing that his bank account was debited by $25,000 in $5,000 instalments between November 9, 1981 and February 21, 1983, namely $5,000 in 1981, $15,000 in 1982 and $5,000 in 1983.

Under a decree nisi dated February 12, 1982 Renaud, J. of the Quebec Superior Court approved the consent signed by the parties on October 20, 1981, as alleged in the reply to the notice of appeal filed by counsel for the respondent, a fact not denied by the appellant.

According to the evidence, the sum of $21,400 claimed by the appellant for the 1981 taxation year includes the sum of $15,000 which his ex-wife acknowledged receiving prior to the agreement, one payment of $5,000 and two of $300 to his ex-wife to maintain their daughter and two payments of $400 to their son.

For the 1982 taxation year the sum of $23,145 includes, according to a statement filed with his tax return, the sum of $15,000 paid to his ex-wife, $3,800 paid in part to his ex-wife and in part to his daughter to maintain them, and $4,000 paid to his son. To this should be added the sum of $345 as legal fees. The evidence disclosed that in June 1982 his daughter attained the age of majority and the subsequent payments were made to her personally.

The respondent for his part, by his assessments, disallowed the deductions claimed by the appellant on the ground that the latter had provided no proof of their payment. He further added that the sums of $20,000 and $15,000 in 1981 and 1982 were lump sums and so not deductible as alimony under paragraph 60(b).

Paragraph 60(b) reads as follows:

60.(b) An amount paid by the taxpayer in the year, pursuant to a decree, order or judgment of a competent tribunal or 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 he was living apart from, and was separated pursuant to a divorce, judicial separation or written separation agreement from, his spouse or former spouse to whom he was required to make a payment at the time the payment was made and throughout the remainder of the year. . .

Although the evidence was not as complete as it might have been regarding the payment of the amounts in question, I accept that they were actually paid by the appellant.

As regards the amounts of $300 a month for the maintenance of his daughter, the appellant is entitled to deduct $600 claimed for the 1981 taxation year and $1,800 only for the 1982 taxation year, since he paid the balance to her personally. Paragraph 60(b) requires that any amount paid as alimony or other allowance be paid to the former spouse. For the same reason, this deduction cannot be allowed for the payments of $800 and $4,000 to his son. The legal fees of $345 are not deductible since they are not in the nature of alimony or an allowance paid to this former spouse, as required by the Act.

The sum of $15,000 which his ex-wife acknowledged receiving prior to signature of the agreement on October 20, 1981 clearly cannot be deductible due to the fact that it was made and preceded [sic] the agreement.

For the 1981 taxation year, there remains $5,000 of the sum of $21,400 paid pursuant to the agreement, and for 1981 there remains $15,000 of the sum of $23,145 also paid pursuant to the agreement.

For these two amounts I refer to the judgment of the Federal Court of Canada, Appeal Division, in Michel Lariviére v. The Queen (not reported), in which Pratte, J. held that the sum of $20,000 in instalments of $10,000, $5,000 and $5,000 met the requirements of paragraph 60(b), since it was paid for the maintenance of the appellant's former spouse and was an allowance payable on a periodic basis within the meaning of the paragraph.

I am satisfied that the payments of $5,000 in 1981 and $15,000 were paid to the appellant's former spouse for her maintenance during the period in question. The fact that the first two payments had to be made on the occurrence of two events specified in the agreement of October 20, 1981 does not in my opinion make them any less periodic payments.

The appeal is allowed and the assessments are referred back to the Minister for reconsideration and reassessment, allowing the appellant a deduction of $5,600 for the 1981 taxation year and $16,800 for 1981 as an allowance paid to his former spouse for her maintenance and that of her daughter.

The appellant will be entitled to party-and-party costs.

Appeal allowed in part.