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Citation: 2006TCC596
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Date: 20061031
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Docket: 2006-187(IT)I
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BETWEEN:
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STANLEY STRUG,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
Respondent.
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REASONS FOR JUDGMENT
Bowman, C.J.
[1] These appeals are from income tax assessments for the appellant's 2002 and 2003 taxation years.
[2] In each of those years the appellant claimed as a deduction for support payments $29,000 paid annually to his former wife. This figure represents $575 per week.
[3] When the appellant and his wife Wendy Donison ("Wendy") separated in 1995 the appellant was ordered to make payments for the benefit of Wendy. Justice Croteau of the Quebec Superior Court made the following order:
The Court grants the motion;
Grants to Petitioner the custody of four (4) minor children;
Orders and condemns Respondent to pay the mortgage, the insurance, electricity, heating and taxes of the family residence until the sale of the house; and the sale of the house has soon as possible.
Orders and condemns Respondent to pay to Petitioner an alimony of 200.00$ per week to be pay on Friday of each week at Petitioner's residence;
Orders that the alimony will be indexed on the first of January of each year according article 590 CCQ;
Grants to Petitioner the right to residence;
Grants to Petitioner the right to reside in the family residence without the Respondent until the sale of the house;
Grants to Petitioner the exclusive use of the Astro Chevy Van;
The house has to be listed with an agent for sale in the next ten (10) days;
Orders the provisional execution of judgment to intervene notwithstanding appeal;
Without costs;
...
[4] The appellant paid the amount set out in the order, i.e. $200 per week to Wendy and the various amounts for mortgage, insurance, heating and taxes. He deducted $200 per month paid to Wendy but not the other amounts paid to third parties.
[5] In late 1998 the house was sold and a new arrangement was entered into. On September 15, 1999 the spouses, both of whom were represented by lawyers, signed a "Consent to Judgment on Accessory Measures". This consent to judgment was not presented to the court and did not form the basis of my judgment. It was however treated by the parties as an agreement and they acted on it. Clauses 4, 5 and 6 of the consent to judgment read:
ALIMENTARY SUPPORT AND FINANCIAL RESPONSIBILITIES
4− The Defendant shall pay to the Applicant as an alimentary pension for the children an amount of 575.00 $ per week, payable to the Applicant the Friday of each week, starting Friday October 1st, 1999. Until October 1st, 1999, the Defendant shall continue to pay the amount of the rent, Hydro and Bell for September 1999 plus the alimentary pension of 200.00 $ per week indexed, as the Judgment of July 17, 1995 ordered;
The parties ask by this judgement the exemption of article 3 of the "Loi facilitant le paiement des pensions alimentaires" the whole in the purpose of not to be subjected to the automatic perception of Ministère du Revenu. The Defendant engages himself to pay to the Ministère du Revenu the security of one month of alimentary pension;
5− The amount of the alimony pension will be indexed January first of each year, according to article 590 of the Civil code of Quebec;
6− The Defendant shall pay to the Applicant an amount of 10,000.00 $ as lump sum, payable September 17, 1999, and in consideration of this payment, the Applicant renounce to claim to the Defendant all form of alimony pension in the future. They give to each other full and complete release of all alimony recourses between spouses for the past, the present and the future;
[6] The appellant deducted in 2002 and 2003 $575 per month or $26,900 annually and the Minister of National Revenue disallowed the deduction on the basis that the order of Justice Croteau had a "commencement date" of September 15, 1999, i.e. after April 1997. It is not necessary to reproduce the formula in section 60 of the Income Tax Act (A-(B+C)). It has been reproduced in scores of cases. Essentially the old rules (the deduction inclusion regime) with respect to child support comes to an end when an agreement or order has a commencement date after May 1997 in which case child support payments made after that date are not deductible by the payer or includible by the payee.
[7] "Commencement day" is defined in subsection 56.1(4):
"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.
[8] The respondent's position is that the Consent to Judgment on Accessory Measures is an agreement and it was either made after April 1997 within the meaning of paragraph (a) or that it falls within either subparagraph (b)(ii) or (iii) because it changes the child support amounts. I agree. With respect I am unable to accept the appellant's contention that the agreement of September 15, 1999 did not change anything but merely set out explicitly what had always been the obligations from the beginning. This is obvious from a comparison of the situation before and after the agreement of September 15, 1999.
[9] Before, the appellant was paying his wife $200 per week plus varying amounts for electricity, mortgage taxes and so forth, and was also voluntarily paying $400 per month for the two children.
[10] Commencing on October 1, 1999 the obligation to pay rent, hydro, telephone and so forth came to an end, the obligation to pay $200 per week to his wife ceased in consideration of a lump sum payment of $10,000 and the obligation to pay such things as rent, hydro etc. was replaced by an alimentary pension for the children of $575 per week. This is quite a different arrangement and it does not matter that the payments made under the new arrangement happened to be very similar in amount to those that he was previously making under the old one.
[11] Despite Mr. Strug's thorough and able presentation of his case I think the commencement date was September 15, 1999 or at the latest October 1, 1999.
[12] The appeals are dismissed.
Signed at Ottawa, Canada this 31st day of October 2006.
Bowman, C.J.
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