Citation: 2010 TCC 102
Date: 20100223
Docket: 2009-1026(IT)I
BETWEEN:
GERALD V. GUEST,
Appellant,
and
HER MAJESTY THE QUEEN
Respondent.
____________________________________________________________________
|
Counsel for the Appellant:
|
Mr. Sean M. Sinclair
|
|
Counsel
for the Respondent:
|
Mr.
Ken Hawkins
|
____________________________________________________________________
ORAL REASONS FOR JUDGMENT
(Delivered orally
by conference call on
February 11, 2010, at Ottawa, Ontario,
modified for clarity and accuracy)
[1]
The Appellant, Gerald Guest, has appealed an
income tax assessment in respect of his 2007 taxation year. The sole issue
before the Court is whether the Appellant was entitled to deduct $1,000 as a
support payment pursuant to paragraph 60(b) of the Income Tax Act.
[2]
The relevant facts are not in dispute. During
the summer of 1986, the Appellant had a relationship with a woman whom I will
call F. After the relationship ended, F gave birth to a child. The child was
born on March 9, 1987.
[3]
The Appellant and F have never lived together
and have never married. A default judgement was issued by the District
Court of the State of Maine on June 9, 1989 in which the Appellant was declared
the legal and biological father of the child and ordered to pay for certain
expenses including child support payments of $25 per week.
[4]
This will be referred to as the Maine Order.
[5]
The Appellant first became aware of the Maine Order
in June 2006. At the time he became aware of the Maine Order, the Appellant
owed approximately $29,000.
[6]
On June 24, 2007, a letter was issued by the
Justice Department of the Saskatchewan Government notifying the Appellant that
the Maine Order had been registered for enforcement in the Saskatchewan Court
of Queen’s Bench.
[7]
This will be referred to as the Saskatchewan registration.
[8]
The Appellant, since August 2007, has paid $200
per month in satisfaction of the amounts owing under the Maine Order. One
thousand dollars was paid in 2007. The Appellant claimed a deduction of $1,000
under paragraph 60(b) of the Income Tax Act when computing his income
for the 2007 taxation year.
[9]
When assessing the Appellant for the 2007
taxation year, the Minister disallowed the $1,000 deduction.
[10]
I will first review the relevant law. Paragraph
60(b) of the Income Tax Act sets out the deductions for support amounts.
This subsection was amended by Parliament after the Supreme Court of Canada’s
decision in Thibaudeau v. Canada, [1995] S.C.R. 627. The amendment
eliminated the inclusion/deduction regime for all child support payments made
after April 30, 1997.
[11]
This was accomplished by using the formula
A–(B+C) to determine the amount of the deduction under paragraph 60(b) where A
is defined in paragraph 60(b) to mean certain support payments paid after 1996;
B is defined as certain child support payments; and C is defined as certain support
amounts previously deducted by the taxpayer.
[12]
Both parties accepted that the amounts paid by
the Appellant in 2007 were included in the A portion of the formula. In
particular, the parties agreed that the Appellant was the legal parent of the
child and that payments were received in 2007 under an order made by a
competent tribunal in accordance with the laws of a province.
[13]
The parties, however, disagree with respect to
the inclusion of the $1,000 in the B portion of the formula.
[14]
B is defined in paragraph 60(b) as 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 date, and before the end of the year in respect of a period that
began on or after its commencement date.
[15]
The Appellant argues that there was no
commencement date as that term is defined, and as a result no amount is
included in B.
[16]
The Respondent argues that the commencement date
was June 24, 2007, the day the Maine Order was registered by the Saskatchewan
Court of Queen’s Bench, and thus the $1,000 should have been included in B.
[17]
Commencement date is defined in subsection
56.1(4) to mean, in part – where the agreement or order is made before May 1997
– the day, if any, that is after April 1997 and is the earliest of a number of
days, including the day specified in the agreement or order or any variation
thereof as the commencement date of the agreement or order for the purposes of
the Act, and – where the agreement or order is made after April 1997 – the day
it is made.
[18]
The issue before the court is whether the order
referred to in the definition of commencement date is the Maine Order or the Saskatchewan registration.
[19]
Counsel for the Appellant argued that the
relevant order is the Maine Order. He argued that the registration by the Saskatchewan court did not constitute an
order. In his view, the only order issued was the judgment of the Maine court. He provided the Court with
numerous cases to support his position.
[20]
Counsel for the Respondent argued that the
registration by the Saskatchewan court did constitute an order. He relied on the wording of
subsection 18(1) of the Saskatchewan Inter-jurisdictional Support Order Act, which reads as
follows:
From the date of registration, the extra-provincial
order or foreign order has the same effect as if it were a support order made
by a court in Saskatchewan.
[21]
He argued that as a result of the wording in subsection
18(1), the Maine Order did not become an order of a competent tribunal in
accordance with the laws of a province until it was accepted for registration
in Saskatchewan. He did not
provide the Court with any jurisprudence to support his position.
[22]
When discussing the Saskatchewan Inter-jurisdictional Support Order Act, which I will refer
to as the Registration Act, both parties only referred to subsection
18(1) of the Registration Act.
[23]
This section cannot, however, be considered in
isolation. One must consider the whole Act.
[24]
Under the Registration Act a person can
register and enforce in the province of Saskatchewan a
support order or agreement from another jurisdiction.
[25]
Section 18 sets out the effect of the
registration. Subsection 18(1) states the following:
From the date of registration, the extra-provincial
order or foreign order has the same effect as if it were a support order made
by a court in Saskatchewan.
[26]
Subsection 18(2) states that:
(2) The registered order may:
(a) both with respect to arrears accrued
before registration and with respect to obligations accruing after
registration, be enforced in the same manner as a support order made by a court
in Saskatchewan; or
(b) be varied as provided in this Act.
[27]
Section 16 of the Registration Act
defines foreign order to mean:
a support order, an interim support order or an order
that varies a support order made in a reciprocating jurisdiction outside of Canada before, on or after the date on which this Act comes
into force, but does not include a provincial order or a provisional order of
variation.
[28]
Section 2 of the Registration Act defines
reciprocating jurisdiction to mean a jurisdiction declared in the
regulations to be a reciprocating jurisdiction. The United States is declared in Section 3 of
the Regulations to the Registration Act to be a reciprocating
jurisdiction.
[29]
Paragraph 42(1)(a) of the Registration
Act is also relevant. It states:
In a proceeding pursuant to this Act:
(a) the court shall take judicial notice of the laws
of a reciprocating jurisdiction and, when required, apply it;
[30]
As a result of Section 2 and paragraph 42(1)(a)
of the Registration Act and the relevant regulations, the Maine court is a competent tribunal in
accordance with the laws of a province.
[31]
The issue before the Court is whether the
support payments were made pursuant to an order made on or after April 1997.
[32]
As Justice Sexton noted in Kennedy v. The
Queen, 2004
FCA 437
at paragraph 13:
It seems to me that, although
the statutory definition of "commencement day" in subsection 56.1(4)
might be more clearly drafted, the intention of the legislation is that orders
or agreements made after April 1997 which actually create new obligations will
be subject to the new regime. Obligations created under the old regime will
remain subject to the old provisions. This intention is borne out by
subparagraph (b)(ii) which specifies that agreements or orders which are varied
after April 1997 so as to change child support amounts payable, will qualify as
creating a commencement day. In such a case, a new obligation will have been
created by the variance after April 1997. The same can be said of subparagraph
(b)(iii) which provides that a subsequent agreement or order made after April
1997 which changes the total amount of child support payments creates a
commencement day.
[33]
After reviewing the provisions of the Registration
Act, it appears to me that the purpose of the Act is twofold: first, to
allow for the enforcement of an order issued in another jurisdiction; and
second, to allow for the variation of that order.
[34]
With respect to the Maine Order, the Saskatchewan court only availed itself of
the provisions relating to the enforcement of an existing order. It merely
allowed for the enforcement of the order issued by the Maine court. It did not issue a new order and did not vary the
previous order.
[35]
The Saskatchewan court registered the Maine Order under paragraph 18(2)(a) of
the Registration Act. It ordered that the arrears that had accrued
before registration be enforced in the same manner as a support order made by a court
in Saskatchewan.
[36]
In other words, it allowed for the enforcement
of amounts owing under the Maine judgment, amounts owing pursuant to an order issued prior to May
1997. If the Saskatchewan court had wished to vary the order, then it could
have done so under the provisions of paragraph 18(2)(b) of the Registration
Act, in which case amounts payable by the Appellant would have been payable
pursuant an order issued after April 1997.
[37]
In summary, the support payments made by the Appellant
in 2007 were made pursuant to an order that commenced on June 9, 1989 and was
issued prior to May 1997. As a result, there was no commencement date as that
term is defined in subsection 56.1(4) of the Income Tax Act.
[38]
The support payments were therefore subject to
the old regime and were fully deductible by the Appellant.
[39]
For the foregoing reasons, the appeal is allowed
with costs to the Appellant and the matter is referred back to the Minister of
National Revenue for reconsideration and reassessment on the basis that when
determining the Appellant’s income for the 2007 taxation years, $1,000 is to be
deducted pursuant to paragraph 60(b) of the Income Tax Act.
“S. D’Arcy”
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