Leclair v. The Queen, docket 2001-2522-IT-I (Informal Procedure)

Date: 20011126

Docket: 2001-2522-IT-I

BETWEEN:

BRENDA LECLAIR,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

and

JOHN P. DOYON

Intervenor

Reasonsfor Judgment

Beaubier, J.T.C.C.

[1]            These appeals pursuant to the Informal Procedure were heard at Sudbury, Ontario on November 20, 2001.

[2]            At the opening of the hearing the Respondent moved under Section 174 of the Income Tax Act ("Act") that a question be determined:

"Whether support payments paid by Mr. John P. Doyon to Ms. Brenda Leclair in the 1997 and 1998 taxation years were paid pursuant to a Divorce Judgment of the Ontario Court (General Division) dated June 27, 1994 (the "Divorce Judgment") for which there is no commencement day or whether those payments were paid pursuant to the Divorce Judgment for which a valid election form was signed and filed with the Minister."

[3]            It was ordered that the question be determined and John P. Doyon was joined as an Intervenor, whereupon the matters of the question and the appeals were heard together.

[4]            The Appellant testified. The Respondent called John P. Doyon ("Mr. Doyon") as a witness and Mr. Doyon also testified on his own behalf.

[5]            Paragraphs 10 to 14 of the Reply to the Appellant's Notice of Appeal read:

10.            In so reassessing the Appellant's income tax returns for the 1997 and 1998 taxation year on April 12, 2001, the Minister made the following assumptions of fact:

a)              the Appellant and her former spouse, namely John Doyon (the "Former Spouse") married on June 7, 1980 and divorced on July 28, 1994;

b)             at all relevant times, the Appellant and the Former Spouse had three children, namely Chelsey Doyon born April 5, 1983, Bryan Doyon born March 19, 1987 and Shannon Doyon born October 1, 1988 (the "Children");

c)              pursuant to a Divorce Judgment of the Ontario Court (General Division) dated June 27, 1994, (the "Judgment"), the Former Spouse was required to pay $200.00 per child per month to the Appellant with respect to the Children in regard to child support and said payments were to commence on or about July 1, 1994;

d)             on February 18, 1997, the Appellant wrote a letter to the Former Spouse's solicitor requesting that certain amendments be made to the Judgment referred to in subparagraph 10(c) herein and included in said amendments was a reduction in monthly child support from $600.00 to $400.00 effective March 1, 1997 and a one time annual payment of $600.00 payable on August 1^st with respect to school clothing for the Children;

e)              on February 25, 1997, the Appellant and Former signed Form T1157 - ELECTION FOR CHILD SUPPORT PAYMENTS;

f)              the purpose of the form referred to in subparagraph 10(e) herein is to elect to have child support payments made under an existing court order or written agreement received on or after April 30, 1997 be not taxable to the recipient or not deductible to the payer;

g)             the amount indicated as the annual child support payments to be made under this order or agreement on Form T1157 was $5,400.00 which is the total referred to in subparagraph 10(d) herein comprising $400.00 x 12 = $4,800.00 + $600.00 = $5,400.00;

h)             the amount of $5,400.00 indicated in subparagraph 10(g) herein was not with respect to an existing order or agreement;

i)               the amounts of $7,727.00 and $7,427.00 included as child support in the Appellant's income tax returns for the 1997 and 1998 taxation years were based on information indicated on statements provided by the Ontario Court (Provincial Division) with respect to payments made to the Appellant by the Former Spouse;

j)               the amounts referred to in subparagraph 10(i) herein were "support amounts" within the meaning of subsection 56.1(4) of the Income Tax Act (the "Act"); and

k)              the child support payments paid pursuant to the Judgment referred to in subparagraph 10(c) herein do not have a 'Commencement Day' as defined in subsection 56.1(4) and paragraph 56(1)(b) of the Act.

C.             ISSUES TO BE DECIDED

11.            The issue is whether the Appellant is required to include in computing her income with respect to the 1997 and 1998 taxation years, child support in the amounts of $7,727.00 and $7,427.00 respectively.

D.             STATUTORY PROVISIONS, GROUNDS RELIED ON AND RELIEF SOUGHT

12.            He relies on sections 3 and 4, subsection 56.1(4) and 248(1) and paragraph 56(1)(b) of the Act.

13.            He submits that Form T1157 referred to in subparagraphs 10(e) to 10(h) herein is not valid as the annual child support payments of $5,400.00 indicated on the said form were not paid with respect to an existing court order or agreement as required.

14.            He further submits that the Appellant was required to include the amounts of $7,727.00 and $7,427.00 respectively as child support payments in the computation of her income for the 1997 and 1998 taxation years as the said payments were made pursuant to a Judgment dated prior to May 1, 1997 and they were not paid pursuant to a 'Commencement Day' within the meaning of subsection 56.1(4) and paragraph 56(1)(b) of the Act.

[6]            None of the assumptions in paragraph 10 were refuted by the evidence.

[7]            The Appellant submitted Exhibit A-1 dated February 25, 1997, duly signed by her and Mr. Doyon on February 25, 1997. It is the Minister's form T1157, the text and signatures of which read as follows, with various tax centre addresses and social insurance and telephone numbers omitted:

ELECTION FOR CHILD SUPPORT PAYMENTS

Before you start completing this form, you should read our Support Payments Information Sheet carefully. It contains information about the new tax rules for support payments announced in the 1996 federal budget.

Complete this form if both the payer and the recipient of child support payments made under an existing court order or written agreement want to elect to have child support payable after a certain date (not earlier than May 1, 1997), be not deductible and not taxable.

If you are making this election for more than one court order or written agreement, complete a separate form for each one. Please attach a copy of your court order or written agreement if it requires the payment of separate amounts for spousal and child support.

...

Part A - Personal information (please print)
Name of recipient "Brenda Lee Grassi"	Telephone number ...	Social insurance number ...
Name of recipient "John Patrick Doyon"	Telephone number ...	Social insurance number ...

Part B - Election for a court order or written agreement

Year Month Day This election will apply to child support payments starting on (enter date):                                     [C]      "1997 05 01" Enter the annual child support payments to be made under this order or agreement.                                  [D]      "$5,400.00" Enter the annual spousal support payments, if any, to be made under this order or agreement.                          [E]            "N/A" Enter the date spousal support payments are scheduled to             Year Month Day end under this order or agreement.                       [F]    ____ ____ ___                                                    "until children no                                                   longer dependants" Will these amounts of support be changed in any way while this order or agreement is in effect?                          [G] Yes    1 No "x" 2 (For example, changed in accordance with increases in the Consumer Price Index.)

We elect that child support payments made under the terms of the court order or written agreement to which we made reference on this form will not be taxable or deductible. _______ "Brenda Grassi"________________      ______"Feb 25/97"_________        Signature of recipient                        Date _______ "John Doyon"__________________      ______"Feb 25/97"_________        Signature of payer                           Date T1157

[8]            The Appellant drew up Exhibit A-1 with the intent that $5,400. per year of the child support payments would be exempt from income tax by her and that the excess would be taxable to her and she signed it. The only witnesses to Mr. Doyon's signature were their children. Mr. Doyon testified that he signed it on the basis that his payments would be reduced to a total of $5,400. per year because he had lost his good paying job. He returned it to the children on that basis.

[9]            This testimony of Mr. Doyon is confirmed by Exhibit R-1, Tab 6 which consists of a letter from Mr. Doyon's lawyer dated March 17, 1997 to the Appellant which enclosed an appropriate agreement, together with a letter from the Appellant to the same lawyer dated March 14, 1997. The Appellant's letter confirms Mr. Doyon's interpretation of what he thought when he signed Exhibit A-1.

[10]          The Appellant would not sign the agreement sent by Mr. Doyon's lawyer to her on March 17, 1997.

[11]          Form T1157 speaks for itself. It is not an agreement by the parties to amend the court order or to amend the written agreement. Rather, form T1157 is merely an election as it states on its face.

[12]          Mr. Doyon did not file the form T1157 and only signed the one copy of Exhibit A-1. The Appellant did file form T1157 but did not attach a copy of her only court order, namely the judgment dated June 27, 1994.

[13]          In these circumstances, the only court order or written agreement between the parties is the court order dated June 27, 1994 which was filed as Exhibit R-1, Tab 3 and which is summarized in subparagraphs 6 as quoted.

[14]          For these reasons:

1.              The question is answered that the payments paid by John P. Doyon in the 1997 and 1998 taxation years were paid pursuant to the Divorce Judgment of the Ontario Court (General Division) dated June 27, 1994.

                2.              The appeals of Brenda Leclair are dismissed.

Signed at Ottawa, Canada this 26^th day of November, 2001.

"D.W. Beaubier"

J.T.C.C.

COURT FILE NO.:                                                 2001-2522(IT)I

STYLE OF CAUSE:                                               Brenda Leclair v. Her Majesty The Queen

PLACE OF HEARING:                                         Sudbury, Ontario

DATE OF HEARING:                                           November 20, 2001

REASONS FOR JUDGMENT BY:                      The Honourable Judge D. W. Beaubier

DATE OF JUDGMENT:                                       November 26, 2001

APPEARANCES:

Agent for he Appellant:                       Colette Lepage

Counsel for the Respondent:              Gabrielle St-Hiliare

For the Intervenor:                                The Intervenor himself

COUNSEL OF RECORD:

For the Appellant:                

Name:                               

Firm:                 

For the Respondent:                             Morris Rosenberg

                                                                Deputy Attorney General of Canada

                                                                                Ottawa, Canada

2001-2522(IT)I

BETWEEN:

BRENDA LECLAIR,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent,

and

JOHN P. DOYON

Intervenor.

Appeals heard on November 20, 2001 at Sudbury, Ontario

by the Honourable Judge D.W. Beaubier

Appearances

Agent for the Appellant:                       Colette Lepage

Counsel for the Respondent:                Gabrielle St-Hilaire

For the Intervenor:                               The Intervenor himself

JUDGMENT

          The appeals from the reassessments made under the Income Tax Act for the 1997 and 1998 taxation years are dismissed in accordance with the terms of the attached Reasons for Judgment.

Signed at Ottawa, Canada this 26^th day of November, 2001.

"D.W. Beaubier"

J.T.C.C.