Date: 19990407
Docket: 98-169-IT-I
BETWEEN:
JOHN CAREY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor
Judgment
Bowie J.T.C.C.
[1]
The issue in this appeal is the deductibility under the Income
Tax Act (the Act) of certain child support payments
made by the Appellant in the years 1994 and 1995. The facts are
not in dispute.
facts
[2]
The Appellant and his former common-law spouse lived together in
a conjugal relationship between July 1984 and January 1988. They
had one child, born in 1985. When they separated in 1988 they
signed a separation agreement whereby the Appellant agreed to pay
$400.00 per month for support of the child. The payments fell
into arrears, and in July 1993 the Appellant's former
spouse took steps to enforce the agreement by garnishment of his
wages. The separation agreement was filed in the Ontario Court
(Provincial Division) pursuant to section 35 of the
Family Law Act.[1] On June 19, 1994, a notice of garnishment was issued
by the Clerk of that Court, directed to the Appellant's
employer, the Crown in right of Canada, requiring that the
arrears and current payments due under the separation agreement
be deducted from the Appellant's salary and paid to the
Director of the Family Support Plan. Pursuant to this notice, the
amounts of $6,756.00 in 1994 and $4,940.00 in 1995 were paid to
the Director, and ultimately to the former spouse, in
satisfaction of the Appellant's obligation under the
separation agreement. The Appellant deducted these amounts in
computing his income for the years under appeal. The Minister of
National Revenue (the Minister) has reassessed him to disallow
the deductions.
statutory provisions
[3]
The provisions of the Act governing the matter[2] read, at the relevant
time, as follows:
60(b) an amount paid by the taxpayer in the year,
pursuant to a decree, order or judgment of a competent tribunal
or pursuant to a written agreement, as alimony or other allowance
payable on a periodic basis for the maintenance of the recipient
thereof, children of the marriage, or both the recipient and the
children of the marriage, if he was living apart from, and was
separated pursuant to a divorce, judicial separation or written
separation agreement from, his spouse or former spouse to whom he
was required to make the payment at the time the payment was made
and throughout the remainder of the year;
60(c) an amount paid by the taxpayer in the year,
pursuant to an order of a competent tribunal, as an allowance
payable on a periodic basis for the maintenance of the recipient
thereof, children of the recipient, or both the recipient and
children of the recipient if, at the time the payment was made
and throughout the remainder of the year, he was living apart
from his spouse to whom he was required to make the payment;
252(4) 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) is a parent of a child of whom the taxpayer is a parent
(otherwise than because of the application of 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.
the Appellant's position
[4]
The Appellant's position is that subsection 252(4) puts him
in the same position as if he and his former common-law spouse
had been married to each other, so that paragraph 60(c)
then has the effect of entitling him to the deduction. Counsel
argued, in the alternative, that the combined effect of filing
the agreement under the Family Law Act and obtaining a
notice of garnishment under that Act was that the amounts,
when deducted and paid, were paid pursuant to a court order.
the Respondent's position
[5]
Counsel for the Respondent argued that paragraphs 60(b)
and 60(c) as they read at the relevant time, provided for
two different situations. Paragraph 60(b) alone applied to
the separation of a married couple, and paragraph 60(c) to
the separation of an unmarried couple living in a common-law
relationship. In the former case, payments made under a court
order or a separation agreement were deductible. In the latter
case, only payments made pursuant to a court order were
deductible.
analysis
[6]
In Yakubu v. The Queen[3] Associate Chief Judge Christie, as he then was,
quoted with approval the following passage from the Canadian
Tax Reporter:[4]
For 1993 and subsequent years, paragraph 252(4)(a)
provides that the term ‘spouse' includes common-law
spouses. Therefore a taxpayer's spouse includes a person of
the opposite sex who is cohabiting with the taxpayer in a
conjugal relationship provided they have cohabited throughout a
twelve-month period ending before that time. He term
‘spouse' also includes a person who is a parent of a
child of whom the taxpayer is also a parent.
[7]
In my view, this commentary correctly describes the effect of the
paragraph. The result, in the present case, is that the Appellant
is entitled to the deduction, by reason of paragraph
60(b). This accords with the plain words of that
paragraph, and of paragraph 252(4)(a). Counsel for the
Respondent offered no persuasive rationale for rejecting those
plain words in favour of the interpretation favoured by the
Minister.
[8]
The Appellant's alternative argument appears to be
foreclosed by the reasoning of Bowman J. in Fantini v. The
Queen,[5] with which I agree, and by the decision of the
Federal Court of Appeal in Armstrong v. Canada,[6] which is binding on me.
I say no more about this, in view of the result that I have
arrived at above.
[9]
The appeals are allowed, and the assessments are referred back to
the Minister for reconsideration and reassessment on the basis
that the Appellant is entitled to the deductions claimed by him
of $6,756.00 and $4,940.00, respectively, in the 1994 and 1995
taxation years. He is also entitled to his costs.
Signed at Ottawa, Canada, this 7th day of April, 1999.
"E.A. Bowie"
J.T.C.C.
COURT FILE
NO.:
98-169(IT)I
STYLE OF
CAUSE:
John Carey and Her Majesty the Queen
PLACE OF
HEARING:
Ottawa, Ontario
DATE OF
HEARING:
March 18, 1999
REASONS FOR JUDGMENT
BY:
The Honourable Judge E.A. Bowie
DATE OF
JUDGMENT:
April 7, 1999
APPEARANCES:
Counsel for the
Appellant:
Michael G. Carey
Counsel for the
Respondent:
Michelle Farrell
COUNSEL OF RECORD:
For the
Appellant:
Name:
Michael G.
Carey
Firm:
Carey
& Power
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
98-169(IT)I
BETWEEN:
JOHN CAREY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeals heard on March 18, 1999, at Ottawa,
Ontario, by
the Honourable Judge E.A. Bowie
Appearances
Counsel for the
Appellant:
Michael G. Carey
Counsel for the
Respondent:
Michelle Farrell
JUDGMENT
The appeals from assessments of tax made under the Income Tax
Act for the 1994 and 1995 taxation years are allowed, with
costs, and the reassessments are referred back to the Minister of
National Revenue for reconsideration and reassessment on the
basis that the Appellant is entitled to the deductions claimed by
him of $6,756 and $4,940 respectively in the 1994 and 1995
taxation years.
Signed at Ottawa, Ontario, this 7th day of April, 1999.
J.T.C.C.
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