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Citation: 2007TCC439
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Date: 20070807
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Docket: 2006-3607(IT)I
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BETWEEN:
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DALE TROYER,
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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 and Heather A. Troyer ("Heather") were married at Kelowna, British Columbia on December 15, 1984.
[2] The Appellant and Heather are the parents of a Daughter born on
February 3, 1988 and a Son born on June 30, 1989 (collectively referred to
as the "Children").
[3] The Appellant and Heather separated on or about May 18, 1994.
[4] On June 24, 1994 the Appellant and Heather entered into an Interim
Maintenance Agreement (the “Agreement”). Pursuant to the Agreement the Appellant agreed to
pay Heather maintenance payments totalling $2,000.00 per month for herself and
the Children effective May 15, 1994.
[5] By Order of the Supreme Court of British Columbia dated February 8, 1996
the Honourable Mr. Justice Curtis ordered (the "First Order"):
i) the Appellant
and Heather were divorced from each other, effective the thirty-first day after
the date of the First Order;
…
v) the Appellant was
required to pay support payments in the amount of $600.00 per month per child
in respect to the Children commencing on the first day of February, 1996 and
continuing on the first day of each and every month thereafter so long as the
child was eligible for maintenance under the Divorce Act or otherwise by law;
and
vi) the
Appellant was required to pay Heather spousal support payments of $900.00 per
month on the first day of each month, commencing February 1, 1996 until
February 1, 1998. However, in any month during this period that Heather earned
in excess of $500.00 per month gross, her spousal support would be reduced for
the subsequent month by an equivalent amount.
[6] By Order of the Supreme Court of British Columbia dated April 28, 2003,
the Honourable Mr. Justice Grist ordered (the "Second Order"):
i) the provision of
the First Order requiring the Appellant to pay support totalling $1,200.00 per
month in respect of the Children was held in abeyance for the period from
January 1, 2003 through September 30, 2003, but resumed on October 1,
2003;
ii) for the months of January,
2003 through September, 2003, inclusive, the Appellant was required to pay
Heather $320.00 per month for the support of the Children; and
iii) both the
Appellant and Heather were at liberty to apply to that Court to vary the
provisions of the Second Order upon a change of circumstances; and
g) The "commencement day" resulting
from the Second Order is January 1, 2003.
[7] When the Appellant filed his income tax return for the 2004 and 2005
taxation years he deducted the amount of $14,400.00 for each year.
[8] On June 30, 2006 the
Minister of National Revenue (the "Minister") reassessed the Appellant’s 2004 and 2005 taxation
years and disallowed the deduction of $14,400.00 claimed by the Appellant for
each taxation year.
B. ISSUE
[9] The issue to be decided is whether the Minister was correct in denying the
deduction of $14,400.00 claimed by the Appellant for the 2004 and 2005 taxation
years.
A. CHILD SUPPORT PAYMENTS
[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
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.
[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 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;
[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 was 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] It will be noted that the definition of "commencement day"
quoted above is very broad and it would apply to "new agreements" or
new Court Orders or variations of existing agreements where the child support
amount payable to the recipient is changed. In this situation the Second Order
clearly changed the child support amount payable to the ex-spouse for the two
children.
[15] After carefully considering the evidence and the relevant case law, I have
concluded that child support payments payable to Heather under the First Order
were varied by the Second Order. This variation resulted in a "commencement day" of January 1, 2003. It therefore follows
that the child support payments paid by the Appellant after the commencement
day are not deductible by the Appellant.
[16] The Appellant acted as a fair and supportive father in this situation and
I commend him for his support of the Children. However the wording contained in
the Act regarding “commencement day” is very clear. It is my
responsibility to interpret the Act. I do not have the authority to
amend the Act.
[17] The appeals are dismissed without costs.
Signed at Vancouver, British Columbia,
this 7th day of August 2007.
Little
J.
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