Citation: 2007TCC396
Date: 20070719
Docket: 2006-1430(IT)I
BETWEEN:
MARJOLAINE VERPAELST,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Tardif J.
[1] This is an appeal
from a Notice of Canada Child Tax Benefit Redetermination for the 2002 base
year and from a Notice of Redetermination concerning the Goods and Services Tax
credit ("the GST credit") for the 2001 and 2002 taxation years.
[2] The issues to be
determined are
·
whether
the Appellant was Alain Audet's common-law partner on
December 31, 2002;
·
if applicable, whether
the Minister of National Revenue ("the Minister") correctly
calculated the Appellant's tax benefit in respect of the 2002 base year;
·
if applicable, whether
the Minister correctly calculated the Appellant's GST credit in respect of the
2001 and 2002 taxation years; and
·
if applicable, whether
the Appellant was entitled to claim, in computing her non‑refundable tax
credits for the 2002 taxation year, the sum of $1,037 as a credit for a wholly
dependent person.
[3] The Appellant's
Notice of Appeal states as follows:
[TRANSLATION]
The allegation that Marjolaine Verpaelst had
a cohabiting spouse during the years 2001 and 2002 is wrong.
Ms. Verpaelst has always lived with
her children on her own.
The person who appears to have been
designated as the Appellant's spouse never lived with her. The two people have
separate residential addresses. The only ties between them are that the alleged
"cohabiting spouse" is the father of a child whose mother is the
Appellant, and that he rents a house to the Appellant in which she lives with
her family. Each of the two people is financially independent, and each looks
after his or her own expenses.
Thus, the officer erred in fact and in
law when he stated that the spouse in question was a qualified relation within
the meaning of sections 122.5(1) and 122.6 of the Act and when he stated that
the Appellant did not qualify for the credit for an eligible dependant within
the meaning of section 118.
The Court must therefore reverse the
decision made on March 10, 2006.
May 12, 2006 Michèle
Beaupré
[4] In order to make
and confirm the Canada Child Tax Benefit redetermination dated
April 20, 2005, in respect of the 2002 base year, and the
redetermination of April 5, 2005, in respect of the GST credit for
the 2001 and 2002 taxation years, the Minister relied on the following assumptions
of fact:
(a) The Appellant and Alain Audet are the
parents of a child named Tommy.
(b) On January 26, 2005, the Minister sent the
Appellant and Alain Audet a questionnaire to fill out and a request for
documents in order to determine their civil status for the 2002 and 2003
taxation years, because, in their respective tax returns for the 2002 taxation
year, they stated that they lived at the same residential address, but did not
consider themselves married or common-law partners.
(c) On March 10, 2005, the Minister notified
the Appellant in writing that he considered her a common-law partner for the
2002 taxation year, and that, among other things, Notices of Canada Child Tax
Benefit Redetermination, Notices of GST Credit (GSTC) Redetermination and
notices of reassessment would be issued forthwith in order to reflect the
change to her civil status.
(d) In his letter of March 10, 2005, the
Minister told the Appellant that she had not provided enough documents to
support her contention that she was not a common-law partner in 2002.
(e) At the objection stage, the Appellant
submitted photocopies of life insurance, home insurance and auto insurance
policies that did not pertain to the 2002 year.
(f) The Appellant was unable to satisfy the
Minister that Alain Audet lived separate from her in the year 2002.
(g) The Minister was of the opinion that the
Appellant was Alain Audet's common-law partner on December 31, 2002, and this
caused the following changes to be made:
(i) Alain Audet's net income was now taken into
account in computing the Appellant's net family income for the purposes of
calculating the child tax benefit for the 2002 base year and the GST credit for
the 2001 and 2002 taxation years; and
(ii) with respect to the 2002 income tax return, in
calculating the non‑refundable tax credits, the amount claimed each year
as a credit for a wholly dependent person was disallowed.
[5] The Appellant
essentially stated that she was not Alain Audet's common-law partner during the
periods in issue. She acknowledges having had regular meetings with Mr. Audet,
the father of the son of whom she had custody.
[6] She said that Alain
Audet paid no support and that he saw his son regularly. She explained
that she lived in a building that belonged to Alain Audet, and that she paid
him roughly $500 monthly, in cash, as rent.
[7] At the Respondent's
request, Alain Audet also testified. He, too, said that he was not the
Appellant's partner during the periods in issue. However, he admitted that he
made regular visits to the Appellant's place of residence for various reasons, which
included seeing and visiting his child, but also picking up and dropping off
various personal effects, since he used the basement and garage of his
building, the building in which the Appellant resided, as storage spaces for the
used appliances that he sold as his business.
[8] However, a detailed
analysis of Alain Audet's income tax return disclosed certain facts that are
very important to the instant appeal.
[9] For one thing, although
the Appellant said that she paid rent of $500 per month for the building in
which she lived and which was owned by Alain Audet, Mr. Audet did not
report any of this income, despite the fact that he owns several rental
buildings from which he reported income on his return.
[10] With respect to a
question that was not answered accurately, Alain Audet essentially attributed
it to a mistake by the accountant. He also testified that the accountant who
looked after his business had been doing so for a long time — more
than twenty, years, in fact — and that he knew the
accountant very well.
[11] Thus, it is possible
that the accountant answered certain questions based on his personal knowledge
of the relationship between Alain Audet and the Appellant.
[12] Alain Audet's
income tax return for the 2002 taxation year gives the same residential address
as the Appellant's, namely 405 9th Avenue South, Sherbrooke.
[13] The building in
which the Appellant lives, and which Alain Audet owns, is not on the list
of rental buildings attached to his income tax return. Moreover, the
rental income, which, according to the Appellant's testimony, was $500 per
month, is not stated on the return either.
[14] All of these
elements are contained in Alain Audet's duly signed income tax return.
[15] In addition, Alain
Audet said that the accountant with whom he did business knew him very well;
thus, one can reasonably assume that certain information was provided with
Mr. Audet's assent, while other information came from the accountant's
personal knowledge of Alain Audet's lifestyle.
[16] The question whether
two people form a couple is a difficult one to decide because it concerns
intimate bonds between individuals. However, since being part of a couple
entitles people to tax advantages, it is up to those involved, and, in this
instance, the Appellant, to provide convincing evidence in support of their
allegations.
[17] One thing that must
be done is to elicit the testimony of at least one neighbour. In the case at
bar, had the Respondent not called Alain Audet to the stand, the Appellant
would have adduced only her own testimony to the effect that she was not in a
common-law relationship, despite the fact that she lived in one of his
buildings, for which she paid rent in cash. She saw him regularly. She received
no support payments, even though he was by no means impecunious.
[18] In the absence of
adequate evidence, the Court will have to rely on elements that offer some
degree of reliability, notably where the appeal essentially turns on the
testimony of a single person.
[19] In the case at bar,
the admission that dealings between the Appellant and Alain Audet were
harmonious; the fact that he paid no child support for his son even though he
was clearly able to pay such support and the son was in the Appellant's
custody; the fact that the rent was always paid in cash; the unambiguous
contents of Alain Audet's tax return, where the building in which the Appellant
lived was not listed as one of his rental buildings; and the fact that he
clearly did not report the amounts that the Appellant allegedly paid him as
rent, are all factors that discredit the Appellant's poor evidence. In other
words, the Appellant has in no way met her burden of proof.
[20] The Appellant essentially
stated that she was not Alain Audet's common-law partner, and Mr. Audet
confirmed her testimony, but the Court has serious doubts about the credibility
of both persons.
[21] Alain Audet
acknowledged, among other things, that he received an assessment for a
significant amount of unreported income; moreover, he blamed his accountant,
who knew him very well, for three major errors in the preparation of the income
tax return that he signed.
[22] For all these
reasons, the Court will rely on the elements contained in Alain Audet's
income tax return. Moreover, I will accord him no credibility because of his
past experience with the Canada Revenue Agency, and, above all, because he
blamed the accountant for three egregious errors even though he signed returns
that reported facts which totally contradicted the essentially oral allegations
made by the Appellant.
[23] Accordingly, the
appeal is dismissed.
Signed at Ottawa, Canada, this
19th day of July 2007.
"Alain Tardif"
Translation certified
true
on this 15th day
of August 2007.
Brian McCordick,
Translator
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