Citation: 2007TCC410
Date: 20070712
Docket: 2006-2143(IT)I
BETWEEN:
CHERYL THORPE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Beaubier, J.
[1] This appeal
pursuant to the Informal Procedure was heard at Vancouver, British Columbia, on July 9,
2007. The Appellant’s husband, Michael Thorpe, testified. The Respondent called
Diana Townley, the Canada Revenue Agency Appeals officer on the file.
[2] The particulars in
appeal are set out in paragraphs 12-19 and 22-25 of the Reply to the Notice of
Appeal. They read:
12.
The Minister notified
the Appellant on August 19, 2005, that she was entitled to [Canada Child Tax
Benefit] CCTB for the 2002 base taxation year in the amounts totalling
$6,421.88 as indicated in Schedule "A".
13.
The Minister notified
the Appellant on August 19, 2005, that she was entitled to CCTB for the 2003
base taxation year in the amounts totalling $6,715.65 as indicated in Schedule
"B".
14.
The Minister
subsequently determined that the CCTB benefits calculation had not taken into
account the income of the Spouse.
15.
The Minister notified
the Appellant on October 20, 2005, that her entitlement to CCTB had been recalculated
for the 2002 base taxation year. Therefore, the Minister requested that the
Appellant repay CCTB in the amount of $6,421.88 for the 2002 base taxation year
as indicated in Schedule "A".
16.
The Minister notified
the Appellant on October 20, 2005, that her entitlement to CCTB had been
recalculated for the 2003 base taxation year. Therefore, the Minister requested
that the Appellant repay CCTB in the amount of $6,715.65 for the 2003 base
taxation year as indicated in Schedule "B".
17.
The Appellant
objected to the redeterminations for the 2002 and 2003 base taxation years
dated October 20, 2005, by serving a Notice of Objection received by the
Minister on November 30, 2005.
18.
The Minister confirmed
the (Re)Determination of the Appellant's CCTB for the 2002 base taxation year
by Notification of Confirmation dated April 11,2006 on the basis that the
Appellant had not provided confirmation of the Spouse's income for that year.
19.
The Minister notified
the Appellant on April 20, 2006, that she was entitled to CCTB for the 2003
base taxation year in the amounts totalling $185.40 as indicated in Schedule
"B". This entitlement was calculated taking into account the income
of the Spouse for that year.
. . .
Assumptions
22. In so determining the Appellant's
entitlement to the CCTB and confirming the(Re)Determination dated April 11,2006
for the 2002 base taxation year and by Notice dated April 20, 2006 for the 2003
base taxation year for the CCTB, the Minister assumed the following facts:
a) the Appellant was married to Michael
Thorpe (the "Spouse") throughout the period relevant to this appeal;
b) the Appellant was not separated from
the Spouse due to a breakdown of their marriage at any point during the period
relevant to this appeal;
c) the Spouse was a non-resident
throughout the period relevant to this appeal;
d) the Appellant and the Spouse are the
parents of the children, Christopher, born on August 20,1990 and Hilary, born
on January 18, 1993;
e) for the purpose of the calculation of
the CCTB for the 2002 base taxation year, the Appellant's net income was
$22,556.00 and the Spouse's net income was $73,769.00. The net family income
was $96,325.00 as indicated in Schedule "A"; and
f) for the purpose of the calculation of
the CCTB for the 2003 base taxation year, the Appellant's net income was
$23,317.00 and the Spouse's net income was $67,448.00. The net family income
was $90,765.00 as indicated in Schedule "B".
23.
The assumptions of
fact outlined in paragraphs e and f above were first made by the Minister in confirming
the redetermination for the 2002 base taxation year and in redetermining the
2003 base taxation year.
B. ISSUES TO BE DECIDED
24.
The issues in this
appeal are:
a) whether the Minister properly
calculated the Appellant's entitlement, if any, to the CCTB for the 2002 and
2003 base taxation years; and
(b) whether the Appellant is
entitled to [Goods and Services Tax Credit] GSTC for the 2002 base
taxation year.
C. STATUTORY PROVISIONS RELIED ON
25.
He relies on sections
3, 114, 115 and 122, 122.5, 122.6 and subsections 122.5(6.2), 122.61(3) and
248(1) of the [Income Tax] Act.
[3] None of the
assumptions were refuted by the evidence. The Goods and Services Tax Credit
question was not in dispute at the Hearing.
[4] The
Appellant argues that because her husband was a non-resident of Canada throughout the year and
at all material times, his net income should not be included in the calculation
of the Canada Child Tax Benefit (“CCTB”) for the base taxation year for either
year in appeal.
[5] Appellant’s Counsel
referred to subsection 122.61(3) of the Income Tax Act (the “Act”) which
reads:
(3) Non-residents and part-year residents - For
the purposes of this section, unless a person was resident in Canada throughout a taxation year,
(a) for greater certainty, the person’s
income for the year shall be deemed to be equal to the amount that would have
been the person’s income for the year had the person been resident in Canada
throughout the year; and
(b) the person’s earned income for the
year shall not exceed that portion of the amount that would, but for this
paragraph, be the person’s earned income that is included because of section
114 or subsection 115(1) in computing the person’s taxable income or taxable
income earned in Canada, as the case may be, for the year.
Subsection 122.61(1) reads in part:
122.61 (1) Deemed overpayment [Child Tax
Benefit] - Where a
person and, where the Minister so demands, the person’s cohabiting spouse or
common-law partner at the end of a taxation year have filed a return of income
for the year, an overpayment on account of the person’s liability under this
Part for the year is deemed to have arisen during a month in relation to which
the year is the base taxation year, equal to the amount determined by the
formula
[6] The Shorter Oxford English Dictionary (1993) defines “cohabit” as
“Live together” or “Live together as husband and wife.” “Cohabiting spouse” is
defined in section 122.6 as follows:
"cohabiting spouse or common-law
partner" of an
individual at any time means the person who at that time is the individual’s
spouse or common-law partner and who is not at that time living separate and
apart from the individual and, for the purpose of this definition, a person
shall not be considered to be living separate and apart from an individual at
any time unless they were living separate and apart at that time, because of a
breakdown of their marriage or common-law partnership, for a period of at least
90 days that includes that time
Thus, the Thorpes were cohabiting
spouses.
[7] During the period
in question, Michael Thorpe was treated as a resident of the United States by both the Canadian
and United
States tax
authorities pursuant to the Canada-U.S. Income Tax Convention (the
“Convention”). Under Article IV of the Convention, he is therefore “an
individual” who “has a substantial presence, permanent home or habitual abode
in the United
States. .
.”
[8] Mr. Thorpe returned
to the Appellant’s home in Victoria, B.C. every second weekend and Cheryl and
their two children went to his rented apartment in Seattle, Washington every long weekend and
for the month of August. Mr. Thorpe’s income was not used to support the family
but a vehicle was purchased in Cheryl’s name in 2001 which she operated and Mr.
Thorpe made the substantial monthly payments on it. Cheryl rented a house in Victoria where she lived with
their two children.
[9] Respondent’s
Counsel argued that to allow the appeal would in essence allow the Appellant
and Michael relief that is not available to other couples with two residences
in Canada. But this couple had
the expense of two residences, not one, and one of the residences was in
another country because Michael, an architect, could not get a job in Canada.
[10] Appellant’s Counsel
argued that subsection 122.61(3) can only apply if Michael resided in Canada
for part of a year; and that it does not apply where Michael resided in the United States for the whole year.
[11] It should be noted
that, in this Court’s view, the provisions in question should be read
generously in favour of enabling the children to receive the benefit of the CCTB.
[12] The word
“throughout” is defined by the Shorter Oxford English Dictionary
(1993)
as:
2a: Through the whole of; in or to every
part of; everywhere in.”
The meaning of the French version
of subsection 122.61(3) is similar. The evidence before the Court is that the
only income that Michael had in any year in question was earned or obtained in
the U.S.A. The Technical Note
respecting subsection 122.61(3) reads as follows:
May 1992 TN (Child Tax Benefit): Subsection 122.61(3) stipulates that,
where a person was not resident in Canada at any time in a year, that person’s
income for the year is equal to the amount that would have been the person’s
income for the year had the person been a Canadian resident. This subsection
also provides that, for the purpose of the earned income supplement, the
person’s earned income for the year in such a case includes only such income
that was taxable in Canada.
This confirms the argument of the
Appellant’s counsel. Section 114 deals with a part-time resident in Canada during the year and
subsection 115(1) applies to a non-resident’s taxable income in Canada. Neither has any
application to Michael Thorpe.
[13] On the basis of the
wording of subsection 122.61(3) and the reference to it in the Technical Note
quoted, the appeal is allowed.
[14] The Appellant is
awarded her costs throughout.
Signed
at Vancouver, British Columbia this 12th day of July, 2007.
Beaubier,
D.J.
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