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Citation: 2003TCC760
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Date: 20031024
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Docket: 2002-1108(IT)I
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BETWEEN:
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CLIFF MYMRYK,
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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
GARON, C.J.
[1] This is an appeal from an income
tax reassessment for the 2000 taxation year. By his reassessment,
the Minister of National Revenue disallowed the equivalent to
spousal tax credit claimed by the Appellant in respect of his son
under paragraph 118(1)(b) of the Income Tax Act
(the "Act").
[2] In reassessing the Appellant in
respect of the year 2000, the Minister of National Revenue made
the following assumptions of fact set out in paragraph 7 of the
Reply to the Notice of Appeal. Paragraph 7 reads as follows:
7. In so reassessing the Appellant, the Minister made the
following assumptions of fact:
(a) the facts stated in paragraphs 4 and 6 above;
(b) the Appellant and Lynnette Mymryk, (hereinafter the
"former spouse") are the parents of two children of
their marriage, . . . *[hereinafter referred as the
daughter and son];
(c) pursuant to a Consent Interim Order made on May 6, 1992
(the "Consent Interim Order"), the Appellant was
required to pay to the former spouse, interim maintenance for the
support of the former spouse and the children of the marriage,
being [the daughter and son], in the amount of $1,000.00 per
month, commencing February 15, 1992;
(d) pursuant to a Consent Interim Variation Order made
August 4, 1993, the Consent Interim Order was amended to
change the support that the Appellant was required to pay to the
former spouse in respect of herself and the children of the
marriage, to $700.00 per month, commencing September 15,
1992;
(e) pursuant to a Separation Agreement made on December 28,
1993, the Appellant agreed to pay to the former spouse, child
support in respect of [the daughter and son] in the amount of
$700.00 per month, commencing October 1, 1993;
(f) the Appellant and the former spouse became divorced by
Divorce Judgment pronounced April 10, 1997;
(g) pursuant to a Consent Judgment made on April 10, 1997, the
Appellant was required to pay to the former spouse child support
in respect of [the daughter and son] in the amount of $250.00 per
month per child, for a total of $500.00 per month, commencing
April 1, 1997;
(h) [the son] commenced living with the Appellant in or about
January, 2000;
(i) pursuant to a statutory declaration made on January 22,
2000, the former spouse agreed that she only required child
support for one child in the amount of $250.00 per month
commencing January 30, 2000;
(j) the Appellant made child support payments in the amount of
$3,800.00 in the 2000 taxation year;
(k) in respect of the child support made in the 2000 taxation
year, $3,050.00 was on account of current child support owing for
the 2000 taxation year and $750.00 was on account of arrears
child support owing prior to the 2000 taxation year;
(l) the arrears child support in the amount of $750.00 that
was paid by the Appellant in the 2000 taxation year included
amounts owing in respect of [the son]; and
(m) the Appellant was living separate and apart from his
former spouse throughout the 2000 taxation year because of a
breakdown of their marriage.
*[The words in brackets in paragraph 7 of the Reply to the
Notice of Appeal are substituted for the names of the
children.]
[3] Since subparagraph 7(a) of the
Reply to the Notice of Appeal indicates that the Minister of
National Revenue assumed, inter alia, the facts stated in
paragraphs 4 and 6 of the said Reply to the Notice of Appeal,
these latter two paragraphs should be reproduced:
4. In
computing his income tax liability for the 2000 taxation year,
the Appellant claimed:
(a) a
deduction for child support in the amount of $3,800.00; and
(b) a personal
credit in respect of the amount for wholly dependent person (the
"Credit") for his son, . . ., in the amount
of $6,140.00, 17% of which is the actual non-refundable tax
credit for the year.
. . .
6. In
reassessing the Appellant for the 2000 taxation year on July 6,
2001, the Minister allowed the Appellant a deduction for child
support in the amount of $3,800.00.
[4] The Appellant and Mr. Richard Guy
Gamble, C.A., were the only witnesses at the hearing of this
appeal.
[5] The Appellant denied subparagraph
7(l) of the Reply to the Notice of Appeal and admitted the
allegations set out in the remaining subparagraphs of this
pleading, including subparagraph 7(a), which expressly
incorporates paragraphs 4 and 6 of the Reply to the Notice
of Appeal.
[6] At the Court's request,
written submissions were made by both parties following the first
segment of the hearing of this appeal. In these submissions,
reference was made to seven documents, which had not previously
been filed with the Court. In these circumstances, I decided to
reopen the hearing of this appeal conducted by way of a telephone
conference for the purpose of filing with the Court this
additional material subject to any objection that one of the
parties may have with respect to the filing of any document by
the opposite party. The parties were also permitted to advance
any additional arguments arising out of the additional evidence
that the parties were to be permitted to adduce before the
Court.
[7] Following this telephone
conference at which seven exhibits were filed and additional
arguments were heard, it became apparent that the Court needed
additional evidence to dispose of the case. Fresh evidence was
required in connection with five specific questions that were
outlined in a Court's letter dated May 8, 2003. For
that purpose, a further hearing in open court was held recently.
In the latter segment of the hearing, seven additional exhibits
were filed in the course of the deposition of the Appellant's
representative, Mr. Richard Guy Gamble, C.A.
[8] The evidence of the Appellant in
general terms is that the payment of $750 made in the year 2000
represented arrears of support but these payments were not made
to his ex-wife but to the Minister of Finance of Manitoba. When
he was asked by the Court to which of his two children the
payment of $750 related, the Appellant was unable to answer
precisely, as appears from the following passage:
HIS
HONOUR:
-- was in respect of who?
THE
WITNESS:
That I'm not sure, it could have been in respect all of my
daughter, because there were payments made, it could be for my
daughter. The payments could be for my daughter.
HIS
HONOUR:
And it could be for both, I suppose?
THE
WITNESS: I
guess it could be, yes.
HIS
HONOUR:
I see. So you do not know really what that amount of $750.00
represents? You know it represents arrears, but you do not know
in respect of which of your children this amount was paid in the
year 2000?
. . .
THE
WITNESS:
Yes, that's clear, that's true. But also, the payments in
the year 2000 were not made to my children, they were made to the
Minister of Finance - -
[Transcript of October 25, 2002, at page 18, lines 2 to 17
incl.]
[9] With regard to the balance of the
evidence, it seems to me to be useful to reproduce portions of
the evidence of the Appellant's representative,
Mr. Gamble, given in the last segment of the hearing which
deal with some specific questions posed by the Court in its
letter of May 8, 2003 referred to earlier.
Question 1: When did the $750 of support paid by the
Appellant in 2000, first become due? That is, how late was his
payment?
Answer (transcript of September 25, 2003 at page 10):
EVIDENCE BY MR. GAMBLE:
THE WITNESS:
. . .
And that $750.00 were payments Mr. Mymryk made during 2000
under the consent default order and they form a part of the
$4,817.00 and with a result of arrears between April 1, 1995 and
April 1, 1997.
Question 2: What Order or Judgment required the
Appellant to make the $750 payment? Was it the Consent Judgment
of April 10, 1997 or some other Order? Please file a copy of the
applicable Order or Judgment, if any, at the next hearing.
Answer (transcript of September 25, 2003 at page 11):
HIS
HONOUR:
So the answer to the second question is that it was the consent
order, dated?
THE
WITNESS:
April 22, 1999.
. . .
THE
WITNESS: I
gather it was signed by Master Ring on May 10, 1999.
Question 3: The Court has copies of two assignments
dated December 10, 1996. If some other assignment applies to the
$750 at issue, please file it with the Court.
Regarding this question, it appears, although it is not too
clear, that the witness stated that in addition to the two
assignments dated December 10, 1996 reference should be made to a
document entitled "Termination of Assignment" dated
April 1, 1997, which is Exhibit A-9.
Question 4. The Court has a copy of a Termination of
Assignment dated April 1, 1997. If another Termination of
Assignment applies, please file it with the Court.
Answer (transcript of September 25, 2003 at page 14):
. . . There is no other termination that we're aware
of.
Question 5. Please submit evidence linking the $750 payment to
one or both of the Appellant's children.
Answer (transcript of September 25, 2003 at page 14):
. . . I would have to admit, it's impossible to link it to
one of the children.
HIS
HONOUR:
Impossible.
THE
WITNESS:
The payments made during the support period always exceeded the
amount for one child but they're not linked to a child.
Analysis
[10] The general question in issue is
whether the Appellant is entitled regarding the year 2000 to
the equivalent to spousal tax credit in respect of his son. This
tax credit is set out in paragraph 118(1)(b) of the
Act, as mentioned earlier. This credit is also described
in the Act as a tax credit in respect of a wholly
dependent person.
[11] It is not disputed that all the
criteria spelled out in paragraph 118(1)(b) of the
Act in respect of the entitlement to this credit are
applicable in the Appellant's case with respect to the year
2000. Among other components of this provision, the Appellant was
during the year 2000 an unmarried person who maintained a
self-contained domestic establishment and who actually supported
his son. However, subsection 118(5) of the Act denies an
individual in specific circumstances the tax credit provided by
any of the paragraphs of subsection 118(1) of the Act,
including paragraph 118(1)(b), which is in issue in the
present case. The impact of subsection 118(5) of the Act
must therefore be looked into.
[12] Subsection 118(5) of the Act as
it applied to the year in issue reads:
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 (as defined in subsection
56.1(4)) to the individual's spouse or former spouse in
respect of the person and the individual
(a) lives separate and apart from the spouse or former
spouse throughout the year because of the breakdown of their
marriage; or
(b) claims a deduction for the year because of section
60 in respect of a support amount paid to the spouse or former
spouse.
[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.
[14] The phrase "support amount"
referred to in subsection 118(5) of the Act is defined 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 former spouse of the
payer, the recipient and payer are living separate and apart
because of the breakdown of their marriage 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.
[15] I must therefore determine if
subsection 118(5) of the Act precludes the Appellant
in the circumstances of this case from claiming the tax credit
provided by paragraph 118(1)(b) of the
Act.
[16] Having regard to the respective
positions of the parties, I am called upon to deal with two
general questions:
1. Was the Appellant
required in the year 2000 to pay to his former spouse a support
amount as provided by subsection 118(5) of the Act?
2. If the answer to the
preceding question is in the affirmative, was the support amount
in question payable in respect of the Appellant's son?
[17] In view of the contents of Exhibit A-6
and the deposition of Mr. Gamble, it is clear that the
payment of $750 that was made in the year 2000 by the
Appellant represented arrears of support that had accumulated
between the period of April 1, 1995 and
April 30, 1997. More generally, it is beyond dispute
from the whole of the evidence that the Appellant was required in
the year 2000 to pay arrears of support to his former spouse. In
this connection, it is of interest to refer to the Consent
Default Order dated May 10, 1999, where it is set out
inter alia that the arrears of maintenance accumulated to
the date of April 22, 1999 (some 8 months prior to the
beginning of the year 2000, the year in issue), were declared to
be $4,817.66. Pursuant to the same Order, the periodic payments
of maintenance (at the semi-monthly rate of $50), which were to
commence on June 1st, 1999, were payable to the
Appellant's ex-spouse and were to be sent to the Designated
Officer of the Maintenance Enforcement Program of the Manitoba
Government. However, there is no evidence as to the precise
amount of support arrears that was owing by the Appellant in
respect of his children throughout the year 2000.
[18] In connection with the first question,
two arguments were made on behalf of the Appellant in support of
the proposition that the Appellant was not required in the year
in issue to pay a support amount to his former wife.
[19] On behalf of the Appellant, it was
contended that because of the existence of the Assignments of
support arrears referred to earlier, the support arrears were not
payable by the Appellant to his former wife but to the Manitoba
Government. Consequently, according to the Appellant, subsection
118(5) of the Act is not applicable.
[20] It is true that the support arrears
were the subject of two assignments respectively dated December
10, 1996 and February 3, 1997 (Exhibits A-2 and A-11), where the
assignee is the Executive Director of Social Services of the
Manitoba Government. The first assignment covers the period of
April 1st, 1995 up to and including
December 5, 1996 and the second assignment relates to
the period beginning on December 1st, 1996 and ending on
February 3, 1997. I do not have to determine which of the
two assignments is applicable to the amount of $750 paid by the
Appellant in the year 2000 since the relevant operative part of
each assignment is couched in the same terms, which provides as
follows: "Therefore, I, Lynnette Mymryk [the Appellant's
former spouse] do hereby assign to the Executive Director of
Social Services all rights to the arrears of support for that
period during which I was in receipt of Social Allowances
benefits." [Words in brackets added.]
[21] Reference was also made by the
Appellant to an Exhibit (A-4)[1] entitled "Termination of Assignment"
dated April 1st, 1997. This "Termination of Assignment"
has no effect on the operation of the two assignments of support
arrears since there is a stipulation in the "Termination of
Assignment", which reads: "The Executive Director of
Social Services hereby also maintains a claim to arrears of
support which accumulated between April 1, 1995 and April 30,
1997."
[22] In considering this first argument
propounded by the Appellant, it is clearly implied that under the
two Court Orders mentioned in the two Assignments, which Court
Orders were not filed with the Court, the payments were to be
made by the Appellant to his former spouse. Also, the payments
made by the Appellant under these two Assignments to the
Executive Director of Social Services must be considered to have
been made to his former spouse since they were made pursuant to
her consent and direction. See subsection 56(2) of the Act
regarding indirect payments.
[23] I am therefore of the opinion that the
first argument put forward by the Appellant is not
well-founded.
[24] I shall now turn to the Appellant's
second argument according to which the Appellant's
ex-spouse had no discretion as to the use of the support
arrears in question.
[25] In view of the fact that the Appellant
was obligated to make payments of arrears of support to the
Executive Director of Social Services, under the Court Orders
(referred to in the two assignments), respectively dated
September 14, 1993 and April 12, 1996, the Appellant contends
that the Appellant's ex-spouse did not have discretion as to
the use of the support amount that was payable in the year 2000.
In the Appellant's view, the support arrears do not meet the
definition of support amount in subsection 56.1(4) of the
Act.
[26] In support of his position, the
Appellant relied on the decision of Judge Kempo of this
Court in the case C. Bishop v. M.N.R., [1993] 1 C.T.C.
2333. This was a case where Mrs. Bishop did not receive any
support payments that her former husband was required to make
pursuant to a Court Order. In order to support herself and her
children, she was forced to seek social assistance. Because of
this situation, she assigned to the (Ontario) Minister of
Community and Social Services her right to receive support
payments. The Court decided in that case that Mrs. Bishop had
divested herself of all her rights to the support payments from
her ex-husband and therefore had no discretion as to the use of
the amounts paid by Mr. Bishop. According to Judge Kempo,
Mrs. Bishop's right to receive social assistance
benefits arose from the Ontario social assistance legislation and
not from the assignment.
[27] I did not follow the Bishop
decision in the case Pepper v. R., [1997] C.T.C.
2716. In the Pepper decision, I stated that I could not
see how a person entitled to receive maintenance payments could
by her own act deprive the payor of such payments of the benefit
of the deduction to which he would otherwise be entitled under
the relevant paragraphs of section 60 of the Act,
by simply making an assignment to a third party. Likewise,
in the present case, it would not be logical and fair that his
former spouse can prevent the Appellant from treating as support
amount any amount paid or payable to the Executive Director of
Social Services under the two assignments mentioned earlier. In
this respect, it is noteworthy that the Appellant in computing
his income for the 2000 taxation year deducted, and the Minister
of National Revenue allowed as a deduction, the amount of $750,
which represented support arrears paid by the Appellant in the
year 2000.
[28] I have not been referred to any
restrictions in the two Court Orders mentioned in the Assignments
of support arrears pursuant to which the Appellant was required
to pay a support amount. In view of the conclusion at which I
have arrived on this question, I have not found it necessary to
consider the impact on the Assignments mentioned earlier, if any,
of the Consent Default Order dated May 10, 1999.
[29] I therefore conclude that the
Appellant's second argument according to which the
Appellant's ex-spouse had no discretion as to the use of the
support amount cannot be accepted.
[30] I will now turn to the second general
question of whether the Appellant was required in the year 2000
to pay a support amount to his former wife in respect of his
son.
[31] It is common ground that the payment of
$750 represented arrears of support in respect of either one of
the Appellant's children or both of them. From the evidence,
the arrears of support with which the Court is concerned, as
indicated earlier, refer to a period beginning in April 1995 and
ending in April 1997.
[32] The Appellant stated in his testimony
that he did not know if any portion of the amount of $750 paid by
him in the year 2000 represented support arrears in respect of
his son.
[33] Mr. Gamble asserted in his deposition
that it is impossible to determine if any portion of the amount
of $750 paid by the Appellant as support amount was in respect of
the Appellant's son.
[34] Counsel for the Respondent (at page 35
of the transcript of the proceedings of September 2003) indicated
that he had no evidence to contradict the possibility that the
payment of $750 could relate to the Appellant's daughter
only. He appeared to have recognized the validity of Mr.
Gamble's assertion in this respect. However, he did not state
that the assumption made by the Minister of National Revenue in
subparagraph 7(l) of the Reply to the Notice of Appeal was
wrong.
[35] Most questions posed in the Court's
letter of May 8, 2003, mentioned earlier, related to the payment
of support arrears in the amount of $750 that was made by the
Appellant in the year 2000. I now believe I was wrong in
restricting these questions to the subject payment of $750 in
view of the wording of subsection 118(5) of the Act, which
speaks of situations "where the individual is required to
pay a support amount . . . to the individual's spouse or
former spouse." [Emphasis added]. I should have referred to
the broader question whether the Appellant was required in the
year 2000 to pay any support amount, irrespective of the precise
figure, to his former spouse in respect of his son.
[36] As indicated earlier, the evidence does
not disclose the exact amount of support arrears owed by the
Appellant throughout the year 2000. However, the evidence
reveals, as it appears from the Consent Default Order dated May
10, 1999, that a) the arrears of maintenance accumulated to the
date of April 22nd, 1999 amounted to $4,817.66 and b) that such
arrears of maintenance were to be paid at the rate of $50
semi-monthly commencing on June 1st, 1999. It is also clear from
the evidence that the payment of $750 paid in the year 2000
represented a portion of such arrears.
[37] Having regard to the above, it is
likely that the amount of arrears of maintenance owing by the
Appellant at the beginning of the year 2000 was close to $4,000
or at the very least substantially greater than $750. Mr. Gamble
also mentioned in his evidence that "the payments made
during the support period always exceeded the amount for one
child but they are not linked to a child." (Transcript -
September 25, 2003 - page 14).
[38] The idea that the payments in arrears
were only paid in respect of the daughter is baseless. In my
view, the payments in arrears were, in part, made in respect of
the Appellant's son. During the period between April 1995 and
April 1997, the period during which arrears had accumulated,
the monthly payments to be made by the Appellant were in the
amount of $700 per month. There has been no suggestion that the
Appellant wrote two cheques one in respect of his son's
maintenance and one in respect of his daughter's maintenance.
Furthermore, when he defaulted on his support obligations during
the above-mentioned period and paid less than the required
amount, there is no suggestion that the Appellant specifically
apportion a fraction of the amount between his son and daughter,
assuming that such apportionment would have been valid.
Accordingly, it is reasonable to suggest that when the arrears
payments are made they are intended to benefit both children
equally. Thus, the payments in arrears were, in part, paid in
respect of the Appellant's son.
[39] Looking at the evidence as a whole, I
find that it is likely that the Appellant was required in the
year 2000 to pay a support amount in respect of his son.
CONCLUSION
[40] Since I have determined that the
Appellant was required in the year 2000 to pay a support amount
to his former spouse and that a portion of the support was in
respect of the Appellant's son it follows that the Appellant
is precluded by subsection 118(5) of the Act from claiming
the equivalent to spousal tax credit referred to in paragraph
118(1)(b) of the Act.
[41] For these reasons, the appeal is
dismissed.
Signed at Ottawa, Canada, this 24th day of October 2003.
Garon, C.J.
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