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Citation: 2003TCC478
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Date: 20030710
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Docket: 2003-487(IT)I
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BETWEEN:
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KEVIN A. MacDONALD,
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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
Bowman, A.C.J.
[1] These appeals are from assessments
for the appellant's 1999 and 2000 taxation years. The issue
is the deductibility of child support payments made by him to his
former spouse in those years.
[2] The appellant and his wife were
married in 1987 and had two children who were born in 1988 and
1992. They separated in 1994 and were divorced in 1997. They
entered into a separation agreement on April 10, 1995 under which
the appellant was obliged to pay $325 per month to his wife for
each child. The children lived with the wife.
[3] In May, 1998 the older son, Marc,
came to live with the appellant and on the advice of his lawyer
the appellant stopped making any payments to his wife.
[4] Upon the Appellant's
application, by order dated June 16, 1999 and signed on December
14, 1999, the Ontario Superior Court of Justice ordered that the
appellant pay his former spouse $235 per month commencing on May
1, 1998 for the support of the younger son Michael. It also
ordered that he pay her arrears of $3,200.
[5] The Appellant deducted $4,400 and
$4,200 in computing his income for 1999 and 2000 respectively.
This appears to have been the $2,820 paid under the order signed
on December 14, 1999 plus a portion of the $3,200 arrears ordered
by the Court.
[6] Mr. MacDonald testified that he
was not informed by either the Canada Customs & Revenue
Agency or his own lawyer that under new rules that came into
effect on May 1, 1997, payments made after the "commencement
day" were not deductible by the payor or taxable in the
hands of the recipient. I accept that he was not made aware of
the full impact of the rules but this unfortunately does not
change the effect of those rules.
[7] Under paragraph 60(b) the
support amounts that are deductible are determined by the formula
A-(B+C).
Paragraph 60(b) reads as follows:
There may be deducted in computing a taxpayer's income for
a taxation year such of the following amounts as are
applicable:
...
(b) the total of all amounts each of which is an amount
determined by the formula
A - (B +
C)
where
A is the total of
all amounts each of which is a support amount paid after 1996 and
before the end of the year by the taxpayer to a particular
person, where the taxpayer and the particular person were living
separate and apart at the time the amount was paid,
B is the
total of all amounts each of which is a child support amount that
became payable by the taxpayer to the particular person under an
agreement or order on or after its commencement day and before
the end of the year in respect of a period that began on or after
its commencement day, and
C is the total of
all amounts each of which is a support amount paid by the
taxpayer to the particular person after 1996 and deductible in
computing the taxpayer's income for a preceding taxation
year;
Essentially A is the amount paid and B is the amount that
became payable under an agreement or order on or after its
commencement date. C is not relevant in this case.
[8] "Commencement day" of an
agreement or order is defined in section 56.1 of the Income
Tax Act as follows:
"commencement day" at any time of an agreement or order
means
(a) where the agreement or order is made after April 1997, the
day it is made; and
(b) where the agreement or order is made before May 1997, the
day, if any, that is after April 1997 and is the earliest of
(i) the day specified as the commencement day of the agreement
or order by the payer and recipient under the agreement or order
in a joint election filed with the Minister in prescribed form
and manner,
(ii) where the agreement or order is varied after April 1997
to change the child support amounts payable to the recipient, the
day on which the first payment of the varied amount is required
to be made,
(iii) where a subsequent agreement or order is made after
April 1997, the effect of which is to change the total child
support amounts payable to the recipient by the payer, the
commencement day of the first such subsequent agreement or order,
and
(iv) the day specified in the agreement or order, or any
variation thereof, as the commencement day of the agreement or
order for the purposes of this Act.
[9] The Order of December 14, 1999
reads as follows:
This court orders as follows:
1. The
Applicant, Kevin MacDonald the father to pay to the Respondent,
Brenda MacDonald, the mother, for support of the child Michael
Andrew MacDonald born July 10th, 1992, the sum of $235.00 per
month commencing on May 1st, 1998 and the first day of each month
thereafter.
2. Arrears as
of June 1st, 1999 are fixed in the amount of $3,200.00 less any
additional payments already made through Family Responsibility
Office.
3. The
principal residence of the child Marc Allan MacDonald born March
11th, 1988 to be with the Applicant, Kevin MacDonald as of April
1st, 1998 subject to reasonable access to the Respondent Brenda
MacDonald on reasonable notice.
4. No
costs.
5. Unless the
support Order is withdrawn from the office of the Director of the
Family Responsibility Office, it shall be enforced by the
Director and amounts owing under the support Order shall be paid
to the Director, who shall pay them to the person to whom they
are owed. Support Deduction Order to be issued.
The question which concerns me is whether we are dealing with
a new order to which paragraph (a) of the definition of
commencement date applies, in which case the commencement day is
either June 16, 1999 or December 14, 1999, or a variation of the
1995 agreement in which case subparagraph 60(b)(ii) of
definition would apply. The order makes no reference to the
earlier agreement. Nonetheless I think the better view is that we
are dealing with a variation of the 1995 agreement. I think this
is implicit in the order. For one thing the arrears appear to be
calculated on the new amount of $235 per month (14 months x 234
is $3,290, which the Appellant stated was rounded down to
$3,200). On this interpretation what then is the commencement
day? Counsel for the respondent contended that it was May 1,
1998, the day mentioned in the order.
[10] If that is the correct interpretation
obviously the payments made after that date form part of the B
component in the formula and result in no deduction. Let us
proceed on the hypothesis that the commencement day is December
14, 1999 either because of paragraph (a) of the definition
or because we interpret subparagraph (b)(ii) of the
definition to mean that the payments under the order were
required to be made upon the date the order was signed. On either
hypothesis the payments would nonetheless still not be
deductible.
[11] The appeal is dismissed.
Signed at Winnipeg, Canada the 10th day of July, 2003.
Bowman, A.C.J.
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