Date: 20010726
Docket: 2001-749-IT-I
BETWEEN:
RICHARD EDMOND GIRARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Miller, J.T.C.C.
[1]
Laws change to reflect shifting attitudes in our society, for
example, commencing in 1993 the Income Tax Act
("Act") was amended to extend the meaning of
spouse to include common law relationships. It is not easy to pin
point exactly when society recognized these relationships as
equivalent-to-spouse relationships, but I would suggest it was
certainly long before the government passed this amending
legislation. The Appellant, Mr. Girard, was in such a
relationship until 1991. The Minister is denying Mr. Girard's
claim for a deduction for support amounts paid by Mr. Girard in
1998 pursuant to a 1995 Separation Agreement, on the basis that
his former partner was not a spouse within the meaning of the
Act at the time of separation and neither were the amounts
paid pursuant to a Court Order, an Order obtained subsequent to
the year in question.
[2]
There is no dispute as to the facts in this matter so I will go
over them briefly. From 1980 to September, 1991 the Appellant and
Elaine Johnstone were in a common law relationship. They never
married with a certificate or license. Together they had two
children, Richard Girard and Danielle Girard born in 1983 and
1987 respectively. By written Separation Agreement dated
April 21, 1995, a copy of which was produced in
evidence, Ms. Johnstone was provided sole custody of the children
with access privileges to the Appellant. The Agreement also
provided that the Appellant is required to pay Ms. Johnstone
$660.00 per month for support of the children. Mr. Girard
testified that the support amount was originally $600.00 but was
amended upwards to take into account the tax effect. The
Appellant was clear that the understanding at the time of signing
the Agreement in 1995 was that he would deduct payments from his
income and Ms. Johnstone would include the payments in her
income. The Appellant has made all payments since, including
throughout 1998 and the Appellant and Ms. Johnstone have treated
such payments in accordance with this understanding.
[3]
In 2001 it became apparent to the Appellant that Canada Customs
and Revenue Agency ("CCRA") would only accept the
deductibility of payments if they were made pursuant to a Court
Order. On March 8, 2001 the Appellant and Ms. Johnstone obtained
an Order from the Ontario Superior Court of Justice. It read, in
part, as follows:
1.
THIS COURT ORDERS that all child support payments made by
the Applicant to the Respondent were made pursuant to the
Separation Agreement dated April 21, 1995.
2.
THIS COURT ORDERS that paragraph 9 of the Separation
Agreement dated April 21, 1995 ... was in full force and effect
as of April 21, 1995.
[4]
Counsel for the Appellant argued that the Court Order resolves
the issue as it could now be said payments in 1998 were pursuant
to a Court Order and therefore deductible in accordance with the
definition of "support amount". In the alternative,
counsel for the Appellant argued that the definition of
"spouse" or "former spouse" applies to the
Appellant and Ms. Johnstone and therefore the support payments
fall within the definition in the Act.
[5]
The right to deduct support amounts stems from
section 60(b), as it read in 1998:
Other deductions.
There may be deducted in computing a taxpayer's income for
a taxation year such of the following amounts as are
applicable:
...
(b)
Support - the total of all amounts of 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
where living separate and apart at the time the amount was paid,
...
I need not cite the balance of the section, as it is only
relevant to note that this provision refers to the deductibility
of "support amount". Support amount in 1998 was defined
as follows:
"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 a 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 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.
[6]
If the Appellant can fall under either (a) or (b)
of that definition, then the Appellant is entitled to a deduction
pursuant to section 60(b) of the payments of $8,224.00 in 1998. I
will turn to paragraph (b) first. Were the payments in
1998 receivable under the March, 2001 Order? No they were not.
The Order itself is not worded in a way that suggests the
payments were made pursuant to the Order. It simply affirms that
payments were made pursuant to the Separation Agreement and that
the provisions requiring payment were in full force and effect.
There was never any issue that there was a binding agreement that
required these payments. That is all the Order appears to
indicate. It does not purport to deem payments three years
earlier to have been made pursuant to the Order itself. Even if
it had gone so far, which I would doubt any Court would do, I
fail to see how I can give effect to such retroactivity. In 1998
these payments were receivable pursuant to an agreement. There
simply was no Order. The Income Tax Appeal Board in Bentley v.
Minister of National Revenue, 54 DTC 510 and again in
Hobbs v. Minister of National Revenue, 70 DTC 1744 lead to
a similar conclusion.
[7]
The only legislative provision in connection with support
payments that offer some retroactive relief is found in section
60.1(3). This provision however has no application to the case
before me. I find the 1998 payments were not receivable pursuant
to the 2001 Order.
[8]
The alternative argument presented by the Appellant is whether
the Appellant is entitled to deduct the $8,224.00 in 1998 as
support payments as defined by subparagraph (a) of the
definition of support payment. If the Appellant and Ms. Johnstone
are considered to have been spouses, then payments pursuant to
the written Agreement would be deductible. The definition of
spouse is found in section 252(4) of the Act:
(4)
Idem. In this Act,
(a)
words referring to a spouse at any time of a taxpayer include the
person of the opposite sex who cohabits at that time with the
taxpayer in a conjugal relationship and
(i)
has so cohabited with the taxpayer throughout a 12-month period
ending before that time, or
(ii)
would be a parent of a child of whom the taxpayer would be a
parent, if this Act were read without reference to
paragraph (l)(e) and subparagraph
(2)(a)(iii)
and, for the purposes of this paragraph, where at any time the
taxpayer and the person cohabit in a conjugal relationship, they
shall, at any particular time after that time, be deemed to be
cohabiting in a conjugal relationship unless they were not
cohabiting at the particular time for a period of at least 90
days that includes the particular time because of a breakdown of
their conjugal relationship;
(b)
references to marriage shall be read as if a conjugal
relationship between 2 individuals who are, because of paragraph
(a), spouses of each other were a marriage;
(c)
provisions that apply to a person who is married apply to a
person who is, because of paragraph (a), a spouse of a
taxpayer; and
(d)
provisions that apply to a person who is unmarried do not apply
to a person who is, because of paragraph (a), a spouse of
a taxpayer.
[9]
Pursuant to this section I have no hesitation in finding the
Appellant and Ms. Johnstone were spouses and qualify as such
for purposes of determining "support amounts". There is
nothing in section 252(4) of the Act that indicates the
section is not to apply to relationships before a certain period
of time. This was the law in 1998, the year in which the
deduction is sought. The Respondent contends I must look at the
law at the time the couple separated. I do not accept that
argument. She cited the decision of this Court in Bromley v.
Regina 2000 CarswellNat 3033, [2001] 1 C.T.C. 2468. In
that case Judge Bell found section 252(4) "applies only to
taxation years after 1992". I find that the taxation year in
question in this case is the Appellant's 1998 taxation year.
In 1998 section 252(4) was part of our legislation and it defined
"spouse" for all purposes of the Act to include
someone who fits Ms. Johnstone's description. Section 140(4)
of the Act Amendment Revisions introducing this amendment
did not state that the conjugal relationship referred to in
section 252(4) must have existed after 1992; it simply stated
that the subsection applies after 1992. I contrast this to
subsection 20(11) of the Amendment Revisions, which differs
significantly: it states most exactly that the section refers to
a breakdown of marriage after 1992. If the legislators had used
such exact language in introducing section 252(4), my conclusion
would differ.
[10] The
interpretation put on the timing of the applicability of
section 252(4) is either:
1.
For taxation years after 1992 I am to interpret
"spouse" in accordance with section 252(4); or
2.
I am to interpret "spouse" in accordance with section
252(4) for only those conjugal relationships existing after
1992.
[11] I favour
the former approach. For the taxation year 1998 I rely on
section 252(4) and find the Appellant's relationship
with Ms. Johnstone falls within that definition notwithstanding
that relationship concluded prior to 1993.
[12] In
Bromley v. R. Judge Bell recognized that Judge Bowie also
came to a different conclusion in Carey v. R., 1999
CarswellNat 562, [1999] 2 C.T.C. 2677, DTC 3502
allowing the deductibility of amounts paid in 1994 and 1995 by a
common law husband in connection with a relationship which had
ended in 1988. It is cause for some uncertainty in the tax
community and public generally when the introduction of amending
legislation is open to differing interpretations by a Court.
Judge Bell put it as follows in paragraph 10 of his
Judgment:
10
... Lack of precision in the legislation in this regard is
extremely unfortunate because faulty legislation, not clearly
presenting the intent of Parliament, causes taxpayers concern,
time and expense in pursuing objection and appeal procedures.
I agree with those comments.
[13] The
appeal is allowed and the assessment is referred back to the
Minister for reconsideration and reassessment on the basis the
Appellant is entitled to a deduction in 1998 in the amount of
$8,224.00 with costs of $200.00 for incidental expenses.
Signed at Ottawa, Canada, this 26th day of July, 2001.
"Campbell J. Miller"
J.T.C.C.
COURT FILE
NO.:
2001-749(IT)I
STYLE OF
CAUSE:
Richard Edmond Girard v. The Queen
PLACE OF
HEARING:
Kitchener, Ontario
DATE OF
HEARING:
July 20, 2001
REASONS FOR JUDGMENT BY: The
Honourable Judge Campbell J. Miller
DATE OF
JUDGMENT:
July 26, 2001
APPEARANCES:
Counsel for the Appellant: Phaedra Klodner
Counsel for the
Respondent:
Rosemary Fincham
COUNSEL OF RECORD:
For the
Appellant:
Name:
Phaedra Klodner
Firm:
Sutherland, Mark, Bumstead, Flemming
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-749(IT)I
BETWEEN:
RICHARD EDMOND GIRARD,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on July 20, 2001 at Kitchener,
Ontario, by
the Honourable Judge Campbell J. Miller
Appearances
Counsel for the
Appellant:
Phaedra Klodner
Counsel for the
Respondent:
Rosemary Fincham
JUDGMENT
The
appeal from the reassessment made under the Income Tax Act
for the 1998 taxation year is allowed, and the matter is referred
back to the Minister of National Revenue for reconsideration and
reassessment in accordance with the attached Reasons for
Judgment.
The
Appellant is awarded costs fixed in the amount of $200.00.
Signed at Ottawa, Canada, this 26th day of July 2001.
J.T.C.C.
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