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Citation: 2005TCC363
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Date: 20050603
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Docket: 2004-1469(IT)I
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BETWEEN:
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KEVIN LECLAIR,
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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
BowieJ.
[1] This appeal is brought under the Court's informal procedure from a reassessment for income tax for the taxation year 2001. The only issue is whether in the circumstances of this case subsection 118(5) of the Income Tax Act (the Act) operates to deprive the Appellant of a tax credit under paragraph 118(1)(b) to which he would otherwise be entitled in respect of his son.
[2] The facts are not in dispute. The Appellant and his former spouse have lived separate and apart since 1986. Until December 1995, their child lived with his mother. The Appellant was obliged by a court order to pay child support to her, and the amount of that support was increased by a second order in 1987. The Appellant fell behind in making those payments. In December 1995 he and his former spouse entered into a separation agreement under which he obtained custody of their son, and the requirement that he pay child support was terminated. At that time he owed $7,725.25 to his former spouse as arrears of child support. He made payments against this debt thereafter, including $2,075.35 that he paid in 2001, for which he claimed a deduction from income under paragraph 60(b) of the Act in filing his return for that year. He also claimed the so-called equivalent to spouse credit under paragraph 118(1)(b) in respect of his son. Initially, he was assessed on the basis that he was entitled to both the deduction under paragraph 60(b) and the credit under paragraph 118(1)(b). The Minister of National Revenue later reassessed him to deny the credit claimed under paragraph 118(1)(b) on the basis that subsection 118(5) precluded him from having the benefit of it.
[3] Paragraph 118(1)(b) and subsection (5) of the Act read as follows:
118(1) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted an amount ...
(a) ...
(b) in the case of an individual who does not claim a deduction for the year because of paragraph (a) and who, at any time in the year,
(i) is
(A) a person who is unmarried and who does not live in a common-law partnership, or
(B) a person who is married or in a common-law partnership, who neither supported nor lived with their spouse or common law-partner and who is not supported by that spouse or common-law partner, and
(ii) whether alone or jointly with one or more other persons, maintains a self-contained domestic establishment (in which the individual lives) and actually supports in that establishment a person who, at that time, is
(A) except in the case of a child of the individual, resident in Canada,
(B) wholly dependent for support on the individual, or the individual and the other person or persons, as the case may be,
(C) related to the individual, and
(D) except in the case of a parent or grandparent of the individual, either under 18 years of age or so dependent by reason of mental or physical infirmity,
an amount equal to the total of
(iii) $7,131, and
(iv) the amount determined by the formula
$6,055 - (D - $606)
...
118(5) No amount may be deducted under subsection (1) in computing an individual's tax payable under this Part for a taxation year in respect of a person where the individual is required to pay a support amount (within the meaning assigned by subsection 56.1(4)) to the individual's spouse or common-law partner or former spouse or common-law partner in respect of the person and the individual
(a) lives separate and apart from the spouse or common-law partner or former spouse or common-law partner throughout the year because of the breakdown of their marriage or common-law partnership; or
(b) claims a deduction for the year because of section 60 in respect of a support amount paid to the spouse or common-law partner or former spouse or common-law partner.
The definition of "support amount" found in subsection 56.1(4) reads:
"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.
[4] The Appellant's position is that subsection 118(5) does not operate to disentitle him to the credit under paragraph 118(1)(b) because he was not required to pay child support in respect of the year in question. The support that he paid was arrears relating to an earlier year, and therefore not within the purview of that provision.
[5] Unfortunately for the Appellant, there is no room for doubt that his situation is caught by the plain words of subsection 118(5) of the Act. That provision operates where the taxpayer is required to pay a support amount in respect of the dependant for whom he claims the personal credit if either of two other conditions is met. Those are that the Appellant and the former spouse are living apart, or that the Appellant claims a deduction for the child support payments in the year. It is clear from the Appellant's own notice of appeal and from his evidence that all three conditions are met in this case. There is no doubt that the payment of arrears of child support ordered or agreed to be paid in respect of an earlier year, but remaining unpaid until the year in question, falls within the definition of a "support amount". The amendment made in 1998[1] to the Income Tax Budget Amendments Act, 1996[2] had the effect of removing certain amounts from the definition of "support amount" in subsection 45.1(4) that would otherwise fall within it. If that provision were to apply, the arrears would not be caught by subsection 118(5) and the Appellant would succeed. For it to apply, however, it would have to be one
(i) that was received under a decree, order or judgment of a competent tribunal, or under a written agreement, that does not have a commencement day (within the meaning assigned by that subsection 56.1(4)), and
(ii) that if paid and received would, but for this Act, not be included in computing the income of the recipient of the amount;
Only the first of those two conditions is met by the payments in question here, and so this exception does not assist the Appellant.
[6] The appeal must therefore be dismissed.
Signed at Ottawa, Canada, this 3rd day of June, 2005.
Bowie J.
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