Date:
20020730
Docket:
2002-729-IT-I
BETWEEN:
JOHN
BRACE,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent.
Reasonsfor Judgment
Little,
J.
A.
FACTS
[1]
The Appellant was separated from his ex-spouse, Mary Colleen
Brace.
[2]
Pursuant to an Order of the Honourable Mr. Justice Whalen of the
Ontario Court (General Division) dated the 11th day of October
1996 the Appellant was ordered to pay his ex-spouse the sum of
$300.00 per month, for each of three children for a total of
$900.00 per month.
[3]
The Appellant was unemployed and was therefore unable to pay the
child support payments as ordered by the Court by Order dated the
11th day of October 1996.
[4]
On the 4th day of July 1997 the Honourable Mr. Justice Dunn of
the Ontario Court (General Division) ordered that the Appellant
pay to his former wife, child support of $506.00 per month
commencing July 1, 1997. (Note: This represented a reduction in
the child support payments as ordered by the Court on October 11,
1996.)
[5]
In the 1997 taxation year the Appellant paid his ex-spouse child
support payments in the total amount of $8,042.00.
[6]
In computing his income for the 1997 taxation year the Appellant
deducted the amount of $8,042.00 as child support
payments.
[7]
In a Notice of Reassessment dated the 1st day of June 2001 the
Minister of National Revenue (the "Minister")
disallowed the deduction for child support payments in the amount
of $8,042.00.
[8]
The Appellant filed a Notice of Appeal to the Court. At the
commencement of the hearing of the Appellant's appeal on July
22, 2002, counsel for the Respondent conceded that the Appellant
was allowed to deduct the child support payments of $5,400.00
that were made for the period January 1, 1997 to June 1, 1997.
However, counsel for the Respondent stated that the Minister
maintains that the child support payments that were made from
July 1, 1997 to December 1, 1997 are not
deductible.
B.
ISSUE
[9]
The issue to be determined is whether the Appellant is entitled
to a deduction from income, for the child support payments of
$3,036.00 (6 x $506.00) that he made for the period
commencing July 1, 1997 and ending December 31, 1997.
C.
ANALYSIS
[10] Under what
has been sometimes described as the old régime
(pre-May 1997), spouses making payments to separated
or ex-spouses for the support of children were allowed to deduct
those payments and the recipient was required to include the
amount of the payments in their income. Following the decision of
the Supreme Court of Canada in Thibaudeau v. Canada,
[1995] 2 S.C.R. 627, the Income Tax Act (the
"Act") was amended and new provisions were
introduced to deal with child support payments.
[11] The amended
Act provided that if a pre-May 1997 agreement remained
unchanged the deduction/inclusion system as provided by the old
régime prevailed. However, if a new agreement were entered
into by the parties or if a new Court Order was issued, or if an
old agreement was changed in a particular way the
deduction/inclusion régime did not apply and only payments
made up to the commencement day, as defined, were deductible from
income by the payor and included in income by the
payee.
[12] Subsection
56.1(4) of the Income Tax Act (the "Act")
defines "child support amount", "commencement
day" and "support amount". Subsection 56.1(4)
reads as follows:
"child
support amount" means any support amount that is not
identified in the agreement or order under which it is receivable
as being solely for the support of a recipient who is a spouse or
former spouse of the payer or who is a parent of a child of whom
the payer is a natural parent.
"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.
"support amount" means an amount payable or
receivable as an allowance on a periodic basis for the
maintenance of the recipient, children of the recipient or both
the recipient and children of the recipient, if the recipient has
discretion as to the use of the amount, and
(a)
the recipient is the spouse or former spouse of the payer, the
recipient and payer are living separate and apart because of the
breakdown of their marriage and the amount is receivable under an
order of a competent tribunal or under a written agreement;
or
(b)
the payer is a natural parent of a child of the recipient and the
amount is receivable under an order made by a competent tribunal
in accordance with the laws of a province.
[13] Paragraph
60(b) of the Act reads as follows:
(b)
Support -- 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 paid after
1996 and before the end of the year by the taxpayer to a
particular person, where the taxpayer and the particular person
were living separate and apart at the time the amount was
paid,
B is the
total of all amounts each of which is a child support amount that
became payable by the taxpayer to 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 paid by
the taxpayer to the particular person after 1996 and deductible
in computing the taxpayer's income for a preceding taxation
year;
[14] In my
opinion the Order of the Ontario Court (General Division) dated
the 4th day of July 1997 effective the 1st day of July 1997
trigged a commencement date of July 1, 1997. It therefore follows
that the Appellant is caught by the amended legislation in
section 56.1 and section 60 of the Act and he is not
allowed to deduct the child support payments of $506.00 per month
that he made for the period commencing July 1, 1997 and ending
December 31, 1997.
[15] The appeal
will be dismissed.
Signed at
Vancouver, British Columbia, this 30th day of July
2002.
"L.M. Little"
J.T.C.C.
COURT FILE
NO.:
2002-729(IT)I
STYLE OF
CAUSE:
John Brace and
Her Majesty the Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
July 23, 2002
REASONS FOR
JUDGMENT BY: The Honourable Judge L.M.
Little
DATE OF
JUDGMENT:
July 30, 2002
APPEARANCES:
For the
Appellant:
The Appellant himself
Agent for
the
Respondent:
Brian Puddington (Student-at-law)
COUNSEL OF
RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-729(IT)I
BETWEEN:
JOHN BRACE,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Appeal heard on July
23, 2002 at Toronto, Ontario, by
the Honourable Judge
L.M. Little
Appearances
For the
Appellant:
The Appellant himself
Agent for the
Respondent:
Brian Puddington (Student-at-law)
JUDGMENT
The appeal from the
assessment made under the Income Tax Act for the
1997 taxation year is dismissed in accordance with the
attached Reasons for Judgment.
Signed at Vancouver,
British Columbia, this 30th day of July 2002.
J.T.C.C.
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