Date: 19990119
Docket: 98-1236-IT-I
BETWEEN:
DANIEL TREMBLAY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on December 9, 1998, at Québec, Quebec, by
the Honourable Judge Pierre Archambault
Reasons for judgment
Archambault, J.T.C.C.
[1] This is an appeal under the informal procedure from an
income tax assessment for the 1995 taxation year. The Minister of
National Revenue (Minister) disallowed Mr.
Tremblay’s deduction of $10,470 as alimony. That amount
(housing expenses) was paid pursuant to article 4 of an
agreement on corollary relief (Agreement) entered into by
Mr. Tremblay and Johanne Boivin, his spouse, on September 27,
1993. The article in question provides as follows:
[TRANSLATION]
As alimony in respect of the children, the defendant shall,
until the family home is sold, make the monthly mortgage payment
and pay the loan taken out during the marriage (personal loan).
He shall likewise pay the municipal and school taxes and the
insurance on the immovable when they fall due.
[2] On October 6, 1993, in her divorce judgment, Boisvert J.
of the Superior Court of Quebec made the Agreement enforceable.
Counsel for Mr. Tremblay admitted that the housing expenses were
paid to third parties.
[3] Mr. Tremblay testified that it was important to him that
the expenses be deductible in computing his income. He said that
his lawyer confirmed to him that this would be the case. However,
there is nothing in the wording of the Agreement or the divorce
judgment to indicate that subsections 56.1(2) and 60.1(2) of the
Income Tax Act (Act) apply to the housing
expenses described in article 4 of the Agreement.
[4] The Minister argued that housing expenses paid to third
parties are not “alimony” or an “other
allowance” provided for in paragraph 60(b) of the
Act. Moreover, subsection 60.1(2) of the Act does
not apply so as to allow Mr. Tremblay to deduct the housing
expenses, since neither the Agreement nor the judgment states
that the amounts in question will be deductible under
subsection 60.1(2) of the Act.
[5] Since there is no such provision, Mr. Tremblay obviously
cannot avail himself of subsection 60.1(2) of the Act.
What remains to be determined is whether the housing expenses
constitute alimony or an “other allowance”. It is
clear from subsection 56(12) of the Act that they are not
an allowance, since Ms. Boivin did not have discretion as to
the use of the amounts paid for those expenses. Subsection 56(12)
of the Act provides as follows:
56(12) Subject to subsections 56.1(2) and 60.1(2), for the
purposes of paragraphs (1)(b), (c) and (c.1)
(in this subsection referred to as the “former
paragraphs”) and 60(b), (c) and (c.1)
(in this subsection referred to as the “latter
paragraphs”), “allowance” does not include any
amount that is received by a person, referred to in the former
paragraphs as “the taxpayer” and in the latter
paragraphs as “the recipient”, unless that person has
discretion as to the use of the amount.
[6] That leaves the question of whether housing expenses paid
to third parties can constitute alimony. Unfortunately for Mr.
Tremblay, I do not think that such expenses constitute alimony
within the meaning of paragraph 60(b) of the Act,
for a number of reasons.
[7] First of all, it must be remembered that, even though the
Agreement provides that the housing expenses are paid “as
alimony”, this does not necessarily mean that the payment
of those expenses represents alimony within the meaning of
paragraph 60(b). That is a question of law that the Court
must decide by considering the true nature of the amounts
referred to in article 4 of the Agreement.
[8] It is clear that the housing expenses Mr. Tremblay paid to
third parties were paid to benefit his children living with Ms.
Boivin and to fulfil his support obligation. However, those
expense payments did not have the attributes of a periodic sum or
allowance paid to a person. The amount was not one that Ms.
Boivin could spend as she pleased. Rather, it was the payment of
a specific expense by Mr. Tremblay.
[9] One might be inclined to give a broader meaning to the
term “alimony”, for example, that of any support
payment provided for in a written agreement or court order.
However, I believe that such an interpretation must be rejected.
First of all, there is the context in which Parliament has used
the term. By juxtaposing “alimony” and “other
allowance”, Parliament has shown that it is adopting the
narrowest meaning of “alimony”, namely that of an
allowance.
[10] I also believe that this narrow meaning is more
consistent with what Parliament intended. In Jacques v.
Canada, [1994] T.C.J. No. 561, I had an opportunity to
address the same issue as that which has arisen in this case. In
particular, I analyzed the historical context of subsection
56(12) of the Act and Parliament’s intent in
enacting it. I referred, inter alia, to budget papers
tabled in the House of Commons on February 10, 1988, by the
Honourable Michael H. Wilson, Minister of Finance, in which the
following was stated:
For the 1988 and subsequent taxation years, the amendments
will restore the status quo prior to the Gagnon decision.
Thus, third party payments after 1987 will fall within the rules
set out in sections 56.1 and 60.1 of the Act.
[11] Given the wording of paragraph 60(b), subsection
56(12) and section 60.1 of the Act, it is clear that
specific amounts paid to third parties generally cannot be
deducted under paragraph 60(b) of the Act. However,
Parliament exempts taxpayers from this general rule if both
parties to an agreement on support payments agree that those
amounts—which are not allowances (for example, the housing
expenses in the case at bar)—will be deductible by the
payer and taxable in the recipient’s hands. Likewise, a
judge may decide that this will be the case in his or her order.
However, it is important that the parties’ agreement or the
court order provide that subsections 56.1(2) and 60.1(2) of the
Act apply to any payment provided for in the agreement or
order. If the term “alimony” had to be given the
broad meaning of any amount paid under a written agreement or
order, what would have been the point of enacting subsections
56(12), 56.1(2) and 60.1(2) of the Act? I think that
adopting the narrow meaning of “alimony” is more in
keeping with those provisions of the Act.
[12] Finally, there is another possible reason to conclude
that housing expenses do not constitute alimony. Paragraph
60(b) of the Act uses the term
“alimony” in English and “pension
alimentaire” in French. As I stated in Jacques,
supra, in the common law provinces, the term
“alimony” is limited to payments made to a spouse.
Once a divorce is obtained, payments are no longer
“alimony”. It is interesting to note that sections
15.1 and 15.2 of the Divorce Act, which deal with child
and spousal “support orders”, use neither the term
“alimony” nor the term “pension
alimentaire”;[1] rather, they refer to a payment “for the
support” or “prestation pour les
aliments”. If Parliament had intended that any support
payment should be deductible under paragraph 60(b) of the
Act, it would have used the term “support
payment” (or a similar term) and not
“alimony”.
[13] In conclusion, I do not think that housing expenses
constitute “alimony or other allowance” within the
meaning of paragraph 60(b) of the Act, and the
$10,700 paid by Mr. Tremblay in 1995 cannot be deducted in
computing his income.
[14] For these reasons, Mr. Tremblay’s appeal is
dismissed without costs.
Signed at Ottawa, Canada, this 19th day of January 1999.
“Pierre Archambault”
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 7th day of September
1999.
Erich Klein, Revisor
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