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Citation: 2004TCC716
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Date: 20041027
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Docket: 2003-4420(IT)I
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BETWEEN:
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MARC BALCER,
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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
Lamarre Proulx, J.
[1] These are appeals from assessments
for the 1999 to 2001 taxation years. The question at issue is
whether the Appellant is entitled to claim the equivalent to
spousal tax credit claimed by the Appellant in respect of his son
David, under paragraph 118(1)(b) of the Income Tax
Act (the "Act").
[2] In assessing the Appellant, the
Minister of National Revenue (the "Minister") made
the assumptions of fact described at paragraph 5 of the
Reply to the Notice of Appeal (the "Reply") as
follows:
a) the
appellant is divorced and has been living separate and apart from
his former spouse, Deborah Bourke, during the taxation years
in dispute;
b) three
children born issued of the marriage, namely:
i)
Matthew Ryan born on June 2, 1978,
ii) Daniel
Jonathan born on May 22, 1981,
iii) David
born on October 28, 1987;
c) a Consent
Agreement dated November 5, 1996 was signed by the appellant
and Deborah Bourke and they both agreed that the present
agreement was to be incorporated in the Divorce Proceedings,
namely these specific clauses:
i) the
parties declare and agree that Deborah Bourke shall have the
legal custody of the three children,
ii) from
January 1st to June 30th of
each year, the appellant shall pay to Deborah Bourke, an
alimentary pension for Deborah Bourke and the three
children, in the amount of $1,190 per month,
iii) from
July 1st to December 31st of each
year, the appellant shall pay to Deborah Bourke, an
alimentary pension for Deborah Bourke and the three
children, in the amount of $1,240 per month;
d) on January
30, 1997, the Court rendered a judgment of divorce between the
appellant and Deborah Bourke, and ratified the Consent
signed by the parties, on November 5, 1996;
e) the
appellant, in conformity with the Court order dated
January 30, 1997, was required to make alimony payments to
Deborah Bourke during the years in dispute.
[3] Paragraphs 7 and 8 of the Reply
read as follows:
7. He relies
on subsection 118(5) of the Income Tax Act, R.S.C.
1985. c. 1 (5th Supp.) as amended
(the Act).
8. He submits
that the appellant is not entitled to claim an
equivalent-to-spouse amount in respect of his son David, in the
calculation of non-refundable tax credits, for the 1999,
2000 and 2001 taxation years, because the said appellant was
living separately and apart from his former spouse because of the
breakdown of their marriage and was required to make alimony
payments for Deborah Bourke and his son David during the
said years, in accordance with subsection 118(5) of the
Act.
[4] The Appellant admitted all the
facts described at paragraph 5 above.
[5] However, the Appellant explained
that the Consent Judgment referred to at paragraph 5 c)
of the Reply, above, took into account the fiscal law as
explained by the 1996 Tax Guide. This was the basis of his
appeal. For that purpose, he referred the Court to the
explanation given at Line 305, entitled "Equivalent to
Spouse Amount" for the year 1996:
You may be able to claim all or part of the $5,380
equivalent-to-spouse amount if, at any time in the
year, you were single, divorced, separated, or widowed and,
at that time, you supported a dependant who was:
· under 18,
your parent or grandparent, or mentally or physically infirm;
· related to
you by blood, marriage, or adoption;
· living with
you in a home that you maintained; and
· living in
Canada. If the dependant is your child, the child does not have
to live in Canada, but must still live with you. ...
...
You cannot claim an equivalent-to-spouse
amount:
...
· For a child
for whom you are able to deduct support payments. ...
[6] The Appellant stated that, by the
provisions of the Consent Agreement, he was not entitled to
deduct the support payments made for his child. He referred to
paragraphs 12 to 15 of this consent agreement:
12. From January 1st
to June 30th of each year, Plaintiff,
Marc Chenevert Balcer, shall pay to Plaintiff, Deborah
Elizabeth Bourke, an alimentary pension for Plaintiff,
Deborah Elizabeth Bourke, and the three children, in
the amount of $1,190.00 per month, payable each and every month,
by means of two (2) payments each in the sum of $595.00, on the
15th and on the 30th day of each month, at Plaintiff,
Deborah Elizabeth Bourke's residence;
13. From July 1st to
December 31st of each year, Plaintiff,
Marc Chenevert Balcer, shall pay to Plaintiff, Deborah
Elizabeth Bourke, an alimentary pension for Plaintiff,
Deborah Elizabeth Bourke, and the three children, in
the amount of $1,240.00 per month, payable each and every month,
by means of two (2) payments each in the sum of $620.00, on the
15th and on the 30th day of each month, at Plaintiff,
Deborah Elizabeth Bourke's residence;
14. The alimentary pension
payable to Plaintiff, Deborah Elizabeth Bourke, shall
be indexed each year according to law;
15. All alimentary pension
paid by Plaintiff, Marc Chenevert Balcer, to Plaintiff,
Deborah Elizabeth Bourke, shall be tax free, so that
Plaintiff, Marc Chenevert Balcer, shall not deduct any
alimentary pension payments for income tax purposes, or
otherwise, and Plaintiff, Deborah Elizabeth Bourke,
shall not be required to declare any alimentary pension payments
for income tax purposes, or otherwise;
Analysis and conclusion
[7] Subsection 118(5) of the
Act, in 1996, read as follows:
118(5) Alimony and maintenance. Where an individual in
computing the individual's income for a taxation year is
entitled to a deduction under paragraph 60(b), (c)
or (c.1) in respect of a payment for the maintenance of a
spouse or child, the spouse or child shall, for the purposes of
this section (other than the definition "qualified pension
income" in subsection (7)) be deemed not to be the spouse or
child of the individual.
[8] In 1996, the provisions of the
Act were such that alimony payments paid to the spouse for
her, and or, for her children, if the spouses lived separate,
were deductible by the payer and taxable to the recipient.
Private agreements cannot change the provisions of the Act
and it was these provisions that were described by the
interpretation bulletin to which the Appellant referred. The
Appellant was therefore entitled to a deduction in respect of a
payment for the maintenance of his spouse and child and for the
purposes of section 118, the child was deemed not to be the
child of the individual. This answers the point raised by the
Appellant.
[9] If I consider the Act as it
applied for the years 1999 to 2001, subsection 118(5) now
reads as follows:
118(5) Support- 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.
[10] A "support amount" is defined
as follows in subsection 56.1(4) of the 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] The Appellant in fact did not dispute
that he was required to pay a support amount within the meaning
of subsection 56.1(4) of the Act. Counsel for the
Respondent referred the Court to the following decisions of this
Court: Mymryk v. R., 2003 DTC 1434 and Young v. R.,
2003 DTC 169.
[12] Counsel quoted paragraph 13 of
Mymryk (supra):
[13] In brief general terms,
this subsection provides that a taxpayer may not claim any credit
for a taxation year under subsection 118(1) of the
Act, including the credit with which the Court is
presently concerned, in respect of a wholly dependent child, if
the taxpayer is required to pay a support amount in respect of
that particular child.
[13] The above decisions confirmed that a
taxpayer may not claim a credit under subsection 118(1) of
the Act for a person if the taxpayer is required to pay a
support amount within the meaning of subsection 56.1(4) of
the Act in respect of that person.
[14] The technical notes regarding the
concerned provisions explain that whether or not the payer is
entitled to a deduction for child support, it is the recipient
spouse who may claim the equivalent to spousal tax credit.
[15] To conclude, subsection 118(5) of
the Act and the definition of support amount in
paragraph 56.1(4) of the Act make it clear that where
an individual pays a support amount in respect of a person, he is
not entitled for that person to the equivalent to married tax
credit provided by paragraph 118(1)(b) of the
Act.
[16] The appeals have to be dismissed.
Signed at Ottawa, Canada, this 27th day of October, 2004.
Lamarre Proulx, J.
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