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Citation: 2004TCC777
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Date: 20041126
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Docket: 2004-830(IT)I
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BETWEEN:
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LES RIVARD,
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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
Sheridan, J.
[1] The Appellant Les Rivard is
appealing the reassessments of the Minister of National Revenue
for the taxation years 1998, 1999, 2000 and 2001. At the hearing,
it was conceded that there was no appeal for 1998. The issue in
the three remaining appeals is whether Mr. Rivard may deduct from
his income for those years the amounts he paid to his former
spouse for the support of their children.
[2] Mr. Rivard and his former spouse
Patricia Rivard have lived separate and apart since 1994. There
were three children of the marriage born in 1977, 1984 and 1989.
By Interim Interim Order dated August 19, 1994 Mr. Rivard was
required to pay "... Interim Interim Maintenance for the
[three] children of the marriage in the sum of $500 per month per
child, for a total of $1,500 per month with such maintenance to
commence the 1st day of September, A.D. 1994, and be payable on
the first of each and every month thereafter until such further
Order of this Honourable Court may be made." Pursuant to Clause 6
of the 1994 Interim Order, Mr. Rivard's obligation to pay support
for the eldest child, then 17, was conditional upon his remaining
in school on a full-time basis.
[3] Some time after the issuance of
the 1994 Interim Order Mr. Rivard fell into arrears. Upon the
application of the Director of Maintenance Enforcement, a new
order was issued on March 26, 1997 directing him to pay "ongoing
maintenance of $1,000 per month" and $300 per month towards the
"arrears of maintenance". Both of these monthly payments were
payable "commencing the 15th day of May, 1997 and continuing on
the 15th day of each and every month thereafter." Unlike the 1994
Interim Order, the March 1997 Order did not specify the children
for whom the maintenance was to be paid but the use of the word
"ongoing" would suggest that it was a meant to be continuation of
the 1994 Interim Order maintenance amount of $500 per month per
child, as well as of the conditions upon which it was payable. I
note that by this date, the eldest child of the three children
was 20 years old and presumably no longer in school. In such
circumstances, Clause 6 of the 1994 Interim Order would have
terminated Mr. Rivard's obligation to pay maintenance for that
child thus resulting in the $1,000 per month maintenance amount.
That amount, together with the other monthly payment for arrears
of $300 resulted in a total of all child support amounts under
the March 1997 Order of $1,300.
[4] By Divorce Judgment dated March
18, 1999, it was ordered that Mr. Rivard "...pay to the
Petitioner, Patricia Ann Rivard, the monthly sum of $1,000
($500 per month, per child), for the support of [the two
younger children of the marriage], commencing on the 1st day of
November, 1998 and continuing on the 1st day of each and every
month thereafter...". Here, the Court specified the children
for whom support must be paid. The date upon which the
maintenance became payable was changed from the fifteenth of each
month to the first. There was no order made for arrears of
maintenance; thus, under the 1999 Divorce Judgment, the total
child support amount was decreased from $1,300 to $1,000 per
month.
[5] The issue in this appeal is
whether the amounts paid by Mr. Rivard for the support of his
children in 1999, 2000 and 2001 are deductible. These amounts
were paid pursuant to court orders which span the years 1994 to
1999. In April 1997, certain changes were made to the provisions
of the Income Tax Act which, prior to that date, had
permitted child support to be deducted from the income of the
payor and required them to be included in the income of the
recipient. In David M. Krutko v. The Queen[1], Campbell,
J. explained these changes and set out the new provisions
governing the deductibility of these amounts:
[9] Before May 1997, spouses were
entitled to deduct payments which were made to separated or
ex-spouses for the support of the children. The recipient of
these support payments was required to include the amount of
these support payments in their income. This is often referred to
as the old régime or inclusion/deduction system. As a
result of the decision of the Supreme Court of Canada in
Thibaudeau v. The Queen, [1995] 2 S.C.R. 627
(S.C.C.), Parliament eliminated the old régime or
inclusion/deduction of support payments made pursuant to an
agreement or order made after April 30, 1997 that contemplated a
commencement date. The Income Tax Act was amended to
provide that if a pre-May 1997 agreement remained unchanged, the
inclusion/deduction system prevailed. If the parties entered into
a new agreement or if a new court order issued or if an old
agreement was altered in a particular way, the old régime
no longer applied and only those payments made up to the
commencement date as defined in the Act were deducted by the
payor and included by the recipient.
[10] The terms "child support
amount", "commencement date" and "support
amount" are defined in subsection 56.1(4) of the Act 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 common-law partner or former spouse or common-law
partner of the payer or who is a parent of a child of whom the
payer is a natural parent.
"commencement date" 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 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.
[11] Paragraph 60(b) of the Act
reads as follows:
60(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;
[6] There is no dispute that the
amounts paid by Mr. Rivard qualify as "child support amounts" and
"support amounts". The only issue is whether there exists in any
of the orders a "commencement date" as defined in subsection
56.1(4) of the Income Tax Act. This is an important
question as, if there is a commencement day, the Minister was
correct to disallow the deductions claimed by Mr. Rivard.
[7] Mr. Rivard was self-represented
and testified on his own behalf. Although he did not state it in
precisely these words, he took the position is that there is no
commencement day. The gist of his argument was that in each of
the orders made in 1994, 1997 and 1999, the amount of maintenance
ordered remained constant at $500 per child. The apparent
decrease from $1,500 in the 1994 Interim Order to $1,000 in the
March 1997 (and subsequently maintained in the 1999 Divorce
Judgment) was simply the result of the eldest child's having
ceased to be eligible for maintenance under the terms of the 1994
Interim Order. The effect of all this was to preserve the
deductible status the child support originally ordered under the
1994 Interim Order which pre-dated the 1997 changes.
[8] In my view, Mr. Rivard cannot
succeed on this basis. First of all, his argument overlooks the
fact of the $300 per month maintenance arrears made payable under
the March 1997 Order. The total child support amount under that
order is $1,300, not $1,000 as argued by Mr. Rivard. This change
makes it impossible to read the three maintenance orders as one
seamless order for child support as urged by Mr. Rivard. For the
purposes of identifying a commencement day, the relevant time of
the change in child support amount is between March 1997 and
1999, the transition period from the old regime to the new.
Looking then at the March 1997 Order, the child support amount
was $1,300; the 1999 Divorce Judgment reduced the maintenance
amount to $1,000. This is sufficient to bring the transaction
within subparagraph 56.1(4)(b)(iii) which, together
with the opening preamble to the subsection, reads as
follows:
(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
...
(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, ...
[12] The March 1997 Order was made before
May 1997, and by a subsequent order - namely, the 1999 Divorce
Judgment - was made after April 1997, its effect having been to
change the total child support amounts payable from $1,300 to
$1,000 per month. Pursuant to this provision, the commencement
day was November 1, 1998, the day on which the changes payment
obligations started. Thus, there is a commencement day under this
subparagraph.
[13] In closing, however, I acknowledge and
accept Mr. Rivard's statement that he thought he was "within his
rights" in claiming the child support deduction. Even the Canada
Revenue Agency officials experienced some uncertainty: under the
first reassessment in January 2003, the deductions were allowed;
after a period of reflection, a second reassessment was done in
May 2003 and they were disallowed. Given the perversely difficult
way in which Parliament has chosen to express itself in
subsection 56.1(4) and paragraph 60(b), it is not surprising that
both those affected by the legislation and those charged with
administering it are sometimes confused by these provisions.
[14] In any event, for the above reasons I
find that a commencement day was triggered and accordingly, the
child support amounts for the taxation years 1999, 2000 and 2001
are not deductible. The appeals are dismissed, without costs.
Signed at Ottawa, Canada, this 26th day of November 2004.
Sheridan, J.
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