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Citation: 2007TCC330
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Date: 20070613
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Docket: 2005-3605(IT)I
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BETWEEN:
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KEITH WHEATLEY,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Little J.
A. FACTS
[1] The Appellant was
married to Lore Marie Wheatley on February 16, 1973 (the "Former
Spouse").
[2] The Appellant and
the Former Spouse had two children:
1. Daughter –
born March 12, 1978;
2. Son – born
December 20, 1988.
[3] The Appellant and
the Former Spouse separated. By Order dated August 8, 1995 Madam Justice M.Y. Carter
of the Court of Queen’s Bench for Saskatchewan ordered that the Appellant shall
pay to the Former Spouse the amount of $400.00 per month per child commencing
July 1, 1995 and continuing on the first day of each month so long as the child
remains a child within the meaning of the Divorce Act.
[4] The Appellant and
the Former Spouse entered into Minutes of Settlement dated February 10, 1999
(the "Minutes of Settlement"). Paragraph 6 of the
Minutes of Settlement provides as follows:
The existing Order for payment of child
maintenance made by Madam Justice M.Y. Carter on August 8, 1995 shall continue
in effect in respect of the said Son, and the said sum payable thereunder shall
be $500.00 per month for the Son to continue as long as he remains a child
within the meaning of the Divorce Act. As the Daughter has ceased her
full time attendance at an educational institution there shall be no sums
payable in respect of her maintenance unless there is a material change in her
circumstances or upon further order of the court. (Note: The names of the Son
and the Daughter were removed by the Court for privacy reasons)
[5] It will be noted
that the Minutes of Settlement and the Divorce Judgment increased the amount of
child support payable, in respect of the Son, by the first Order from $400.00
per month to $500.00 per month.
[6] The Appellant paid
the amount of $500.00 per month to his Former Spouse in respect of the Son in
the 2003 taxation year.
[7] When the Appellant
filed his income tax return for the 2003 taxation year he deducted the child
support payments.
[8] The Minister of
National Revenue (the “Minister”) disallowed the deduction.
B. ISSUE TO BE DECIDED
[9] The issue is
whether the amount of $500.00 in child support paid by the Appellant in respect
of his Son is deductible in computing the Appellant’s income in the 2003 taxation
year.
C. ANALYSIS AND DECISION
[10] 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 common-law
partner or former spouse or common-law partner 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 common-law partner or former spouse or common-law partner of the
payer, the recipient and payer are living separate and apart because of the
breakdown of their marriage or common-law partnership 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.
[11] "Support" in 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
received after 1996 and before the end of the year by the taxpayer from a
particular person where the taxpayer and the particular person were living
separate and apart at the time the amount was received,
B is the total of all amounts each of which is a child support
amount that became receivable by the taxpayer from 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 received after 1996 by the taxpayer from the particular person and
included in the taxpayer's income for a preceding taxation year;
[12] Under the former rules in the Act (pre-May 1997)
a spouse making support payments to the ex-spouse or for the support of
children could deduct those payments and the recipient was required to include
the payments as income. Following the decision of the Supreme Court of Canada
in Thibaudeau v. Canada,
[1995] 2 S.C.R. 627, the legislation was amended. So long as a pre‑May
1997 agreement remained unchanged the deduction/inclusion system under the
former legislation applied.
[13] If a new agreement were entered into or an old
agreement was changed in a particular way, the deduction/inclusion regime
ceased and only payments made up to the "commencement day" as defined, were deductible by the
payer and included in the income of the payee.
[14] The Appellant contends that the definition of "commencement day" in subsection 56.1(4) of the Act
does not apply in this situation and that the limitation contained in paragraph
60(b) of the Act does not apply.
[15] It will be noted that the definition of "commencement day" quoted above is very broad and it
would apply to "new agreements" or variations of existing agreements where the child support
amount payable to the recipient is changed. In this situation the Minutes of
Settlement dated February 10, 1999 clearly changed the child support amount
payable to the Son by increasing the monthly payment from $400.00 per month to
$500.00 per month.
[16] I have concluded that the definition of "commencement day" is broad enough to apply to this
situation.
[17] In my opinion the Appellant is caught by the amended
legislation contained in section 56.1 of the Act and he is not allowed
to deduct the child support payments made to his Son in determining his income
for the 2003 taxation year.
[18] In support of my conclusion, I have read and I adopt
the Reasons for Judgment of Associate Chief Justice Bowman (now Chief Justice
Bowman) in Kovarik v. The Queen, 2001 DTC 3716.
[19] I regret that I cannot provide any tax relief to the
Appellant because he is obviously a responsible and supportive parent. However,
my position is to interpret the provisions of the Act. I do not have the
authority to amend the Act.
[20] The appeal is dismissed without costs.
Signed at Calgary, Alberta, this 13th day of June 2007.
"L.M. Little"
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