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Citation: 2004TCC193
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Date: 20040302
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Docket: 2003-3463(IT)I
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BETWEEN:
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CHRISTIAN RIOUX,
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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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[OFFICIAL ENGLISH TRANSLATION]
REASONS FOR JUDGMENT
Louise Lamarre Proulx J.
[1] This is an appeal under the
informal procedure concerning the taxation year 2001.
[2] The issue is whether the Appellant
may deduct legal fees paid to contest an application filed by his
ex-spouse to determine the shared custody conditions for a child,
to set child support amounts and grant a provision for the
Applicant's legal fees.
[3] The facts of this case were not
debated. They are described as follows in Paragraph 6 of the
Reply to the Notice of Appeal (the "Reply"):
[translation]
(a) The Appellant
and Cynthia Brosseau lived common-law from 1991 to September
1998;
(b) A child,
Jonathan Brosseau-Rioux, was born of this union, on June 10,
1992;
(c) After their
separation, the child was always shared between the Appellant and
Ms. Brosseau, living with them for one week each,
alternately;
(d) During the year
in question, the Appellant incurred fees to contest Ms.
Brosseau's motion to receive child support payments from the
Appellant;
(e) The hearing of
Ms. Brosseau's motion was held on December 5, 2001;
(f) In his
February 5, 2002, decision, Roger E. Baker J. determined that the
Appellant was to pay his ex-spouse $183.33 per month;
(g) When the
Appellant produced his income tax declaration for the taxation
year in question, he provided statements of the following
payments to the law firm Ferland, Marois, Lanctot:
(i) For the
year 2002 [sic], $7,150.89 in legal fees incurred for a
case to determine child support payments for a minor in a shared
custody case;
(ii) For the year
2002, $3,795.97 in legal fees incurred for a case to determine
child support payments for a minor in a shared custody case.
[4] The evidence was submitted by
consent as exhibits I-1 to I-4. They are: the
Appellant's 2001 income tax claim, the Superior Court of
Québec judgment of February 5, 2002, and the confirmations
of counsel for the Appellant that he paid $7,150.89 in legal fees
for 2001, and $3,795.97 for 2002.
[5] The judgment,
Exhibit I-2, showed that the parties agreed on the
shared custody arrangement. The two points at issue were whether
Mr. Rioux should pay child support for his son and how much, and
whether Mr. Rioux's ex-spouse was entitled to a provision for
costs.
[6] The last point was dismissed by
the court, but the court ordered child support payments for his
son, of $183.83 per month.
Arguments
[7] The Appellant relied on Paragraph
17 of the Interpretation Bulletin IT-99R5. I quote the
relevant part:
Support amounts
... However, since children have a pre-existing right, arising
from legislation, to support or maintenance, legal costs to
obtain an order for child support are deductible...
[8] He claimed that his legal fees
were incurred to obtain child support payments.
[9] Counsel for the Respondent
referred to the following decisions: Bayer v. M.N.R.,
91 DTC 1035; Bergeron v. Canada, [1999] T.C.J.
No. 510 (Q.L.); Nadeau v. The Queen, 2003 DTC
1557; and Nadeau v. Canada, [2003] F.C.J.
No. 1611 (Q.L.).
[10] The last decision is from the Federal
Court of Appeal. It deals with deducting legal fees incurred to
contest an application to increase child support payments. This
deduction application was submitted by the payer of child
support.
[11] I cite paragraphs 8, 10, 11, 28,
32, 33, 34, 36 and 37:
8 The
applicant, in his appeal before Archambault T.C.J., claimed the
right to be treated in the same way as the recipient of support,
that is, to be able to deduct the legal costs he had incurred. In
doing so, the applicant, who represented himself, attempted to
invoke the Charter [Canadian Charter of Rights and
Freedoms, being Part I of the Constitution Act, 1982,
Schedule B, Canada Act 1982, 1982, c. 11 (U.K.) [R.S.C.,
1985, Appendix II, No. 44]] without having served the necessary
notice of constitutional question under section 57 [as am. by
S.C. 1990, c. 8, s. 19] of the Federal Court Act [R.S.C.,
1985, c. F-7].
10 In support of his
application for judicial review, the applicant contends that
Archambault T.C.J. wrongly held that he was not a victim of
discrimination...
11 It is not easy to
discern the sense of the constitutional issue that the applicant
is attempting to raise. But in reading between the lines, the
applicant's position seems to be that, to the extent that
paragraph 18(1)(a) prevents the payer of support from deducting
the legal costs incurred while allowing the recipient of that
support to do so, it is discriminatory and contrary to the
Charter.
28 The income from
support is a clear illustration of how two seemingly distinct
sources may link up with one another. Although the taxation of
support payments as income is explicitly provided for in
subdivision d, which deals with "Other Sources of
Income", it still remains that the right to support is
"property" under the Act. If the right to support is
"property", it is hard to dissociate this
"property" from the income which flows from the
exercise of this right. That is where lies the statutory
authority invoked by the courts, over the years, to allow the
deduction of costs pertaining to support in the circumstances we
have seen by invoking subdivision b and in particular paragraph
18(1)(a).
32 The amendments to
the Act that accompanied the decision made in 1997 to no longer
tax support payments intended for the children of the marriage
are, in this regard, unequivocal. This decision could have had a
significant impact on the deduction that support recipients could
claim under paragraph 18(1)(a), since paragraph 18(1)(c)
stipulates that no expense may be deducted "in connection
with property the income from which would be exempt".
33 To maintain the
right to the deduction, Parliament amended the definition of
"exempt income" [as am. by S.C. 1997, c. 25, s. 71] in
subsection 248(1) to exclude the part of the support that is
intended for children, even if it is now non-taxable. Clearly,
this amendment would be pointless if Parliament was of the view
that income from support was not income from porperty
[sic] within the meaning of subdivision b.
34 It appears from
this that not only has Parliament accepted the solution adopted
by the courts over the years, it has intervened to preserve that
solution when confronted with an amendment that effectively would
have precluded it. This jurisprudential solution, I repeat, is a
function of the fact that the income from a support payment is
income from property, and as such the expenses incurred in order
to earn this income may be deducted.
36 This brings us to
the applicant's argument that paragraph 18(1)(a) is contrary
to the Charter. The applicant, who did not serve a notice of
constitutional question in the Tax Court of Canada, remedied this
defect in this Court. As stated previously, the applicant alleges
that paragraph 18(1)(a) is contrary to the Charter because it has
the effect of imposing differential treatment on the payer and
recipient of support.
37 Paragraph
18(1)(a) of the Income Tax Act may lead to differential
treatment, but not all distinctions are discriminatory...
[12] I quoted much of this decision because
it is vital to the outcome of this case. The Federal Court of
Appeal did not amend this court's case law that states that legal
fees incurred to contest an order for support payments are not
deductible because these fees are not paid to gain income from
property. In this case, the evidence clearly showed that the
legal fees were incurred to contest the determination of child
support payments. Therefore, the Appellant may not deduct these
fees.
[13] Accordingly, the appeal must be
dismissed.
Signed at Ottawa, Canada, this 2nd day of March, 2004.
Lamarre Proulx J.
Translation certified true
on this 2nd day of December 2004.
Elizabeth Tan, Translator
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