Date: 20010615
Docket: 2000-2500-IT-I
BETWEEN:
GARY A. NORTHCOTT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
O'Connor, J.T.C.C.
[1]
This appeal was heard at Windsor, Ontario on May 31, 2001.
[2]
The issue in this appeal is whether, in the 1998 taxation year,
the Appellant was entitled to deduct as support payments an
amount of $2700.00 which he paid directly in that year to his
son, Ryan Edward Northcott.
[3]
The relevant facts are as follows:
1.
The Appellant and his ex-spouse, Stephanie Ellen Northcott
(Ellen Bajc), ("ex-spouse"), had three children of
the marriage, namely, Stephanie Lynn Northcott, born July
28, 1976, Ryan Edward Northcott ("Ryan"),
born December 8, 1978, and Shevon Marie Northcott, born January
2, 1980.
2.
The Supreme Court of Ontario Order dated October 27, 1987, which
divorced the Appellant and his ex-spouse, provided for support
payments of $675.00 (i.e. $225.00 for each of the three children)
per month by the Appellant to his ex-spouse.
3.
By 1998 Ryan had attained the age of majority and was attending
college and he acknowledged receipt of the said $2,700.00. The
Appellant and the ex-spouse determined that the better
arrangement would be for the Appellant to pay the $2,700.00
directly to Ryan rather than the ex-spouse receiving the amount
and remitting it to Ryan.
4.
On September 1, 1999 the Appellant and his former wife entered
into an Agreement which provided as follows:
1)
Gary Alan Northcott [sic] pay all support payments due pursuant
to the said Divorce Judgment directly to Ryan Edward Northcott in
full satisfaction of his support obligation for Ryan Edward
Northcott.
2)
This Agreement confirms the verbal agreement that existed
throughout the 1998 Year and the parties acknowledge that monthly
payments of $225.00 were paid by Gary Alan Northcott throughout
the 1998 year.
It is noted that although the Agreement was dated the 1st day
of September, 1999 it was actually signed by the ex-spouse on
October 10, 1999 and by the Appellant on October 8,
1999.
[4]
The only issue in the appeal is whether, under the applicable
provisions of the Income Tax Act ("Act")
namely, sections 56, 56.1, 60, and 60.1, the said payment of
$2,700.00 was deductible by the Appellant in 1998.
[5]
Counsel for the Respondent summarizes the applicable provisions
of the Act as follows:
7.
The general scheme for the deduction of support amounts is set
out in sections 60 and 60.1, and section 56, ...
8.
Section 60 of the ... Act provides for deductions in
computing a taxpayer's income for a taxation year, including
support payments pursuant to paragraph 60(b).
9.
Subsection 56.1(4) defines the meaning of support amounts for the
purposes of sections 60 and 60.1, and requires that such payments
be, inter alia:
a)
payable or receivable on a periodic basis
b)
for the maintenance of the payor's former spouse ... , the
children of the spouse or both the children and the spouse
c)
that the spouse have discretion as to the use of the amount;
d)
the amount is receivable pursuant to a written agreement or under
an order of a competent tribunal.
10.
Section 60.1 deems deductible support payments made to a third
[party] for the benefit of the person, children in the
person's custody, or the person and the children. These
payments must still provide the spouse with discretion over the
use of the payment, as well as be made pursuant to a written
agreement. ...
11.
Furthermore, in order to be deductible, support payments must be
clearly determined in advance in a written agreement or judgment,
as an agreement cannot be applied retroactively.
Robichaud v. Her Majesty the Queen, 99 DTC 41 (T.C.C.)
...
Payments Made Directly to a Child for Educational
Expenses
12.
Discretion of the supported spouse in the use of the payments is
required by section 60.1(1). ...
13.
Payments made directly to a child to assist ... with educational
expenses are not support payments within the meaning of section
56.1(4) as the spouse is not the recipient and does not have
discretion to the use of the payments. ...
Payments Made Directly to a Child Not in the Custody of the
Supported person
14.
Where a child of the marriage is not a child within a supported
spouse's custody, section 60.1 does not deem payments
received by the child to have been received by the supported
spouse; such payments are not deductible under paragraphs 60(b)
of the Act. ...
15. A
child of the marriage ceases to be a child within a person's
custody where a custody order could no longer be enforced as
against a child of the marriage. Where a child of the marriage
has reached the age of majority, ... and has withdrawn from
parental control by leaving the family home, that person is no
longer within a parent's custody. Payments made to such a
child are not payments within the meaning of section 60.1.
...
[7] I
accept the analysis of counsel for the Respondent. In particular
I refer to Robichaud. The headnote in that decision reads
in part as follows:
During divorce proceedings in 1978, the taxpayer and his
spouse, W, agreed, in a written agreement included in the divorce
judgment, that he would pay W an alimentary pension of $50 per
month for their minor daughter. ... In December 1995, the
taxpayer and W agreed, in a written agreement that the divorce
judgment ought to have been interpreted retroactively so as to
require the payments to be indexed, and to be made to W for the
daughter (with no reference to her minority). In assessing the
taxpayer for 1993, 1994 and 1995, the Minister disallowed the
deduction of increased payments made by the taxpayer to his
daughter while she was engaged in her studies. The taxpayer
appealed to the Tax Court of Canada.
Held: The taxpayer's appeal was dismissed. ... In
addition, the payments made by the taxpayer had not been made
pursuant to any judgment or written agreement between the
parties. Indeed, in order to qualify for beneficial tax
treatment, the payments in issue ought to have been clearly
determined in advance in a written agreement, or in a judgment.
The payments, therefore, were not deductible. The Minister's
assessments were affirmed accordingly.
[8]
In my opinion this appeal cannot succeed for the simple reason
that the payments by the Appellant to Ryan were not made pursuant
to a written agreement or court order. Further, I accept the
Respondent's submissions as to lack of custody and the lack
of discretion in the ex-spouse.
[8]
Consequently for all the above reasons the appeal is
dismissed.
Signed at Ottawa, Canada this 15th day of June
2001.
"T. O'Connor"
J.T.C.C.
COURT FILE
NO.:
2000-2500(IT)I
STYLE OF
CAUSE:
Gary A. Northcott and The Queen
PLACE OF
HEARING:
Windsor, Ontario
DATE OF
HEARING:
May 31, 2001
REASONS FOR JUDGMENT BY: The
Honourable Judge Terrence O'Connor
DATE OF
JUDGMENT:
June 15, 2001
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Rosemary Fincham
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-2500(IT)I
BETWEEN:
GARY A. NORTHCOTT,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 31, 2001 at Windsor,
Ontario, by
the Honourable Judge Terrence O'Connor
Appearances
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Rosemary Fincham
JUDGMENT
The
appeal from the assessment made under the Income Tax Act
for the 1998 taxation year is dismissed in accordance with the
attached Reasons for Judgment.
Signed
at Ottawa, Canada this 15th day of June 2001.
J.T.C.C.
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