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Citation: 2004TCC503
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Date: 20040716
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Docket: 2003-3938(IT)I
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BETWEEN:
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RICHARD BIMM,
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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
Little J.
A. Statement of
Facts:
[1] The Appellant and Patricia
Michelle Salter were married on January 5, 1980.
[2] The Appellant and his wife had two
children (the "Children").
[3] The marriage failed and the
Appellant and Patricia Michelle Salter entered into a Separation
Agreement on December 9, 1993.
[4] The Separation Agreement contains
the following provision:
Richard Bimm will provide $1,000 per month for the support of
the children.
[5] The Appellant and Patricia
Michelle Salter were divorced pursuant to a Divorce Judgment
issued on May 16, 1995.
[6] The Petition for Divorce provides
for support for the Children in the amount of $1,400.00 per
month. (The sum of $1,400.00 per month was to be increased
annually based on the cost of living ("COL")
index.)
[7] The Appellant paid his ex-wife for
the benefit of the Children the amount of $1,400.00 per month
(plus annual COL increases) pursuant to the Petition for Divorce
plus the amount of $1,000.00 per month pursuant to the Separation
Agreement. (Note: The Appellant testified that he also
paid additional amounts such as private tuition fees and other
expenses on behalf of the Children.)
[8] On October 4, 2000 the Appellant
and his ex-spouse signed a document that was referred to as
"Definition and Terms of Financial Support of Separation and
Divorce Agreement" (the "Definition Agreement")
(see Exhibit R-1, Tab 3).
[9] The Definition Agreement provided,
in part, as follows:
a) Richard shall provide
support in the amount of $1,000.00 on the first day of each month
on behalf of ... the Children.
b) Richard shall provide support
in the amount of $1,400.00 on the 15th day of each month on
behalf of ... the Children. (The payments referred to above are
hereinafter referred to as Support Payments.)
(Note: The Appellant testified
that at the request of his ex-wife he has sometimes made
Support Payments to third parties - i.e. to pay expenses on
behalf of the Children).
[10] The Appellant testified that he has
consistently made all Support Payments to his ex-spouse on behalf
of the Children as set out in the Definition Agreement.
[11] When the Appellant filed his income tax
returns for the 1994 - 1999 taxation years he claimed and was
allowed to deduct the Support Payments that he made to his
ex-spouse on behalf of the Children.
[12] When the Appellant filed his income tax
returns for the 2000 and 2001 taxation years he claimed the
following Support Payments:
2000
$31,407.25
2001
$30,664.00
[13] The Minister of National Revenue (the
"Minister") issued several Notices of Reassessment.
[14] In the Notice of Reassessment issued on
August 15, 2003 for the 2000 taxation year the Minister
allowed the Appellant to deduct Support Payments of
$14,033.00.
[15] In the Notice of Reassessment issued on
March 6, 2003 for the 2001 taxation year the Minister did
not allow the Appellant to deduct any Support Payments.
B: Issues:
[16] Is the Appellant allowed to deduct the
following Support Payments?
2000
taxation
year
$31,407.25
2001
taxation
year
$30,664.00
C: Analysis:
[17] The Appellant argued that the spirit
and intent of the Separation Agreement and the Divorce Judgment
were to be taken together. The Appellant maintains and the
records indicate that he followed the financial terms of the
Separation Agreement and the Divorce Judgment in the 2000 and
2001 taxation years. The Appellant further maintains that the
Definition Agreement did not provide for any changes to his
financial obligations to the Children regarding Support Payments.
In other words the Appellant believed that he was obliged to
continue to pay the payments required by the Separation Agreement
and the payments required by the Divorce Judgment.
[18] Counsel for the Respondent argued that
the Definition Agreement would constitute an amendment and
therefore the Support Payments that were made by the Appellant
were not Support Payments within the meaning of section 60.1 of
the Income Tax Act (the "Act").
[19] I have carefully considered the
documents that were filed with the Court and the evidence
presented to the Court and I have concluded that the Definition
Agreement document dated the 4th day of October 2000 (Exhibit
R-1, Tab 3) did not constitute a new or varied Separation
Agreement. The Separation Agreement clearly specified that the
Appellant was required to pay the amount of $1,000.00 to his
ex-spouse on behalf of the Children. The Divorce Judgment clearly
specified that the Appellant was required to pay $1,400.00 per
month (plus annual COL increases) on behalf of the Children. The
payments specified in the Definition Agreement did not change
these financial obligations.
[20] It therefore follows that the
Definition Agreement did not establish or create a commencement
date as defined in subsection 56.1(4) of the Act.
[21] I have concluded that the Appellant is
entitled to deduct Child Support Payments as follows:
2000
taxation
year
$31,407.25
2001
taxation
year
$30,664.00
[22] The appeals are allowed, without costs,
and the assessments are referred back to the Minister of National
Revenue for reconsideration and reassessment in accordance with
these Reasons for Judgment.
Signed at Vancouver, British Columbia, this 16th day of July
2004.
Little J.
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