|
Citation: 2003TCC106
|
|
Date: 20030313
|
|
Docket: 2002-1115(IT)I
|
|
BETWEEN:
|
|
HONORA ZAKRISON,
|
|
Appellant,
|
|
and
|
|
|
|
HER MAJESTY THE QUEEN,
|
|
Respondent,
and
ROBERT L. ZAKRISON,
Third Party.
|
____________________________________________________________________
For the Appellant: The Appellant herself
Counsel for the Respondent: Nimanthika
Kaneira
Counsel for the Third Party: Mark
Greenstein
____________________________________________________________________
REASONS FOR JUDGMENT
(Delivered orally from the Bench on
February 14, 2003, at Toronto, Ontario)
Sarchuk J.
[1] This an appeal by Honora Zakrison
from an assessment of tax with respect to her 1999 taxation year.
In computing income for that year, the Appellant did not include
any child support amounts. In reassessing her for that year by
Notice of Reassessment dated July 6, 2001, the Minister of
National Revenue on behalf of Canada Customs and Revenue Agency
(CCRA), included child support amounts totalling $12,000 in the
Appellant's income.
[2] Subsequently, on October 29,
2001, the Minister made an application under section 174 of
the Income Tax Act (the "Act") for an
Order joining Robert L. Zakrison to the appeal of Honora Zakrison
and for the determination of questions in relation to a Notice of
Assessment dated April 7, 2000 in respect of the 1999 taxation
year of Ms. Zakrison and a proposed reassessment in respect
of the 1999 taxation year of Mr. Zakrison, should the
answers to the questions be answered in the negative.
[3] More specifically, the questions
in respect of which a determination is sought are :
(a) whether the amounts paid by
Mr. Zakrison to Ms. Zakrison in the 1999 taxation year
were paid pursuant to a written agreement;
(b) whether amounts paid by
Mr. Zakrison to Ms. Zakrison in the 1999 taxation year
are deductible in computing Mr. Zakrison's income
pursuant to paragraph 60(b) of the Act; and
(c) whether amounts paid by
Mr. Zakrison to Ms. Zakrison in the 1999 taxation year
are includable in computing her income pursuant to paragraph
56(1)(b) of the Act.
[4] At the commencement of the trial,
the parties filed an Agreed Statement of Facts as follows:
1. The
taxation year under appeal is 1999;
2. Both the
Appellant and the Added Party were residents of Canada for the
purposes of the Income Tax Act (herein "the
Act");
3. The
Appellant and the Added Party were married on August 6, 1983 and
separated in October, 1993;
4. At all
material times, since October 1993, the Appellant has lived
separate and apart from the Added party;
5. There are
two children of the marriage and their names and dates of birth
are as follows: Michelle Zakrison, September 30, 1982, Danielle
Zakrison, September 3, 1985;
6. The
Appellant and the Added Party executed a document entitled
'Separation Agreement'. The Appellant and the Added Party
are not in agreement with respect to the significance of this
document and the date the document was executed;
7. The Added
Party in computing his income for the 1999 taxation year deducted
the amount of $12,000 as support amounts paid;
8. The
Appellant in computing her income for the 1999 taxation year did
not include any amounts as support payments received;
9. The
Minister of National Revenue (herein "the Minister")
assessed the Appellant for the 1999 taxation year by a Notice of
Assessment dated April 7, 2000;
10. The Minister
reassessed the Appellant for the 1999 taxation year by a Notice
of Reassessment dated July 6, 2002;
11. The Minister assessed
the Added Party for the 1999 taxation year by a Notice of
Assessment dated April 3, 2000.
12. The Minister
reassessed the Added Party for the 1999 taxation year by a Notice
of Reassessment dated January 15, 2001 to allow a deduction for
contribution to a RRSP and to allow a tuition credit, transferred
from his daughter, Tanya Zakrison;
13. The Minister
reassessed the Added Party for the 1999 taxation year by a Notice
of Reassessment dated March 8, 2001, disallowing the support
payment;
14. The Minister
reassessed the Added Party for the 1999 taxation year by a Notice
of Reassessment dated June 28, 2001, to allow a deduction for
support payments;
15. On March 22, 2002, the
Appellant filed an appeal with the Tax Court of Canada.
16. Pursuant to section
174 of the Income Tax Act, the Respondent made an
application, dated September 28, 2002, to have Robert Zakrison
joined as a party to the appeal of Honora Zakrison;
17. On November 28, 2002,
Associate Chief Judge G. H. Bowman of the Tax Court of Canada
ordered that Robert Zakrison be joined as a party in the current
appeal;
18. The Appellant received
payment in the amount of $12,000 from the Added Party in the 1999
taxation year.
In addition to the facts admitted, evidence was adduced on
behalf of both the Appellant and the joined party.
[5] The Appellant testified that, as a
result of marital problems, she and Robert Zakrison agreed
to separate in or about 1993. According to her, legal advice was
sought from a lawyer and they were provided with a sample
separation agreement for their consideration. That document was
filed as Exhibit A-1. She says the sample is different from
the one she signed, referring to the agreement in issue which is
Exhibit R-1, Tab 4. Furthermore, she maintains that this
agreement, although bearing the date "September 3,
1994", was not signed on that date, but was in fact signed
by her in 2001 while under duress and with no independent legal
advice.
[6] Mr. Zakrison, for his part,
testified that at the time of the breakup they discussed
separation and put together a preliminary list of matters to be
sorted out. He said that the Appellant alone spoke to her lawyer,
a Mr. McKee, who practices in the field of matrimonial
disputes, matrimonial law. Mr. Zakrison further testified
that he and the Appellant subsequently worked out an arrangement
which formed the basis of the separation agreement which they
both signed on September 3, 1994. According to him, the form was
provided to him by the Appellant, was filled out or completed by
him and then was signed by both. He then took it to his house,
photocopied it for his records, and returned the original to
her.
[7] The primary argument advanced by
the Appellant is that the document relied upon by CCRA contained
errors and, more importantly, had not been executed until
sometime in 2001, and even then, as noted earlier, under duress.
Thus, she maintains the document is not valid. This submission is
contradicted by Mr. Zakrison. Furthermore, evidence was
adduced that at the request of CCRA, he had forwarded a copy of
the document to it on November 20, 2000. There can be no doubt
that the document, that is the agreement in issue, existed well
before the time the Appellant alleges it was signed by her.
[8] To put it charitably, I have grave
misgivings regarding the Appellant's testimony with respect
to the signing of the separation agreement. There is, in my view,
no credible evidence before the Court from which it could be
concluded that the agreement was not executed on September 3,
1994. There is, as well, no cogent evidence capable of
establishing her claim that it was signed under duress.
[9] The Appellant further contends
that the agreement is null and void because it was not signed in
the presence of a witness as required under an Ontario Statute
relating to, I believe, marital issues. There is no substance to
this argument. An agreement means nothing more than that two or
more persons together express a common intention to alter their
duties and rights. Thus, an oral agreement may well be, in some
instances, sufficient. If in any particular case the legislators
decide that for a specific purpose a written agreement is
necessary, and the statute reflects that, then it is required,
and that is all that is required. If they, on the other hand,
felt it was necessary to have it witnessed, that requirement
would have been in the legislation.
[10] The Appellant also submitted that the
payments required to be made pursuant to the agreement, that is,
$500 per month per child, were not made to her during the tax
year in question. Rather, the payments were made by way of
monthly deposits to a bank account which was referred to by both
parties as "the mortgage account". The evidence before
me is that at the time of the marriage break-up they were
substantially indebted. These debts included both personal and
business outlays, the latter arising, for the most part, I
gather, from Mr. Zakrison's business problems. Indeed,
the evidence given by both parties indicates that their financial
situation at the time was quite bleak and that Mr. Zakrison,
in order to protect the family residence, transferred his
interest in the family residence to the Appellant. As well, the
Appellant agreed that the child support payments would not be
made until the debt situation was stabilized. I further note that
notwithstanding that agreement, during this period
Mr. Zakrison continued to make some payments with respect to
family bills and debts.
[12] By 1997, the situation appears to have
improved and as of that year, Mr. Zakrison commenced making
specific payments of child support as required. Furthermore, by
mutual agreement, these payments were deposited by him into
"the mortgage account". The Appellant now argues that
these amounts were not paid to her and thus, were not
discretionary amounts of child support. Accordingly, she says
there is no entitlement to a deduction by Mr. Zakrison and
equally ought not to be included in her income.
[13] A "support amount" is defined
in section 56.2 of the Act and requires, inter
alia, that the recipient has discretion as to the use of the
amount. That discretion can be exercised in a number of ways. In
these particular circumstances, it is clear that the arrangement
to deposit the payments, i.e. $500 bi-monthly into "the
mortgage account" was the result of a mutual agreement.
Although the bank account had remained in both names because of
the mortgage the evidence is that Mr. Zakrison never used it for
personal purposes at any relevant period of time. In my view, the
deposits made by him into this account cannot in any sense be
considered as payments to a third party. Furthermore on the facts
before me, I am satisfied that once deposited by Mr. Zakrison,
the amounts in issue were at the complete disposition of the
Appellant. She was able to use the amount for whatever purpose
she chose at the time it was received and thus it constitutes an
allowance within the meaning of subsection 56(12) of the
Act.
[14] Accordingly, the Court's
determination of the questions in issue is as follows:
(a) The amounts paid by
Mr. Zakrison to Ms. Zakrison in the 1999 taxation year
were paid pursuant to a written agreement;
(b) The amounts paid by
Mr. Zakrison to Ms. Zakrison in the 1999 taxation year
are deductible in computing his income pursuant to paragraph
60(b) of the Act; and
(c) The amounts paid by
Mr. Zakrison to Ms. Zakrison in the 1999 taxation year
are includable in computing Ms. Zakrison's income
pursuant to paragraph 56(1)(b) of the Act.
Signed at Ottawa, Canada, this 13th day of March, 2003.
J.T.C.C.
Email this Content