Date: 19991029
Docket: 98-1286-IT-I
BETWEEN:
RICHARD BEAUCHAMP,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for judgment
Somers, D.J.T.C.C.
[1] This appeal was heard at Ottawa, Canada, on October 5,
1999. It is an appeal under the informal procedure from an income
tax assessment for the 1994, 1995 and 1996 taxation years.
[2] In notices of reassessment dated December 15, 1997, the
Minister of National Revenue (“the Minister”)
disallowed amounts of $4,800, $5,825 and $6,125 paid as alimony
or other allowance payable on a periodic basis in computing the
appellant’s income for the 1994, 1995 and 1996 taxation
years, respectively. The issue to be decided is whether those
amounts were deductible as alimony or other allowance payable on
a periodic basis.
[3] In issuing the notices of reassessment, the Minister
assumed, inter alia, the following facts, which the
appellant admitted or denied or of which he said he had no
knowledge:
[TRANSLATION]
(a) after receiving documents from the Ministère du
Revenu (Quebec), the Minister questioned the appellant by
telephone about his claim in respect of the alimony he had
allegedly paid; (admitted)
(b) the appellant told the Minister that the amounts paid to
his former spouse, Suzanne Dumouchel, were not paid under a
decree, order or judgment of a competent tribunal or under a
written agreement signed by both parties; (denied)
(c) the appellant told the Minister that, to support his
claims, he could submit receipts duly signed by his former
spouse, Suzanne Dumouchel; (admitted)
(d) the former spouse, Suzanne Dumouchel, did not report any
alimony income whatsoever for any of the taxation years at issue;
(no knowledge)
(e) the Minister cannot allow any amount whatsoever to be
deducted as alimony or other allowance payable on a periodic
basis because the amounts paid to the former spouse,
Suzanne Dumouchel, were not paid under a decree, order or
judgment of a competent tribunal or under a written agreement
signed by both parties. (denied)
[5] The appellant and his spouse separated in September 1993.
Following their separation and six mediation sessions that they
attended before a notary, the notary prepared a draft agreement
on the alimony to be paid by the appellant.
[6] The agreement was drawn up and sent to each party. The
year 1995 was noted at the top of the first page of the
agreement. The appellant and his spouse admitted that they did
not sign the agreement.
[7] Paragraph 4 of the “Financial contributions for the
children” section of the agreement reads as follows:
[TRANSLATION]
The alimony paid prior to the signing of this agreement,
namely one hundred twenty-five dollars ($125.00) a week from
April 29, 1995, until now, was arranged to be payable in that way
and shall be considered to have been paid and received under the
agreement. It shall be deductible for the father and taxable for
the mother.
[8] The appellant and his former spouse, who both testified at
the Court’s hearing, admitted that the specified amounts
were paid and received for 1994, 1995 and 1996 starting on
September 17, 1993. The witnesses admitted that they signed an
agreement dated March 17, 1998, under which the appellant’s
former spouse was to pay him $80 a week in alimony because
custody of the children had changed. A judgment was rendered by
the Superior Court (Family Division) on July 19, 1999, granting
the parties a divorce and ratifying the agreement they had
entered into on March 17, 1998, as an integral part of the
judgment. The appellant stopped paying alimony to his former
spouse in June 1997. The former spouse paid $80 a week in alimony
starting on June 21, 1997.
[9] The appellant argued that he could deduct the amounts paid
to his former spouse as alimony based on the unsigned agreement
dated 1995. The fact that there was an agreement and that it was
complied with entitles him to make the appropriate deductions. He
relied on an article of the Civil Code of Québec
providing that an agreement entered into and ratified by the
payment of the amounts owed must be considered an agreement
signed by the parties.
[10] The Minister relied on section 60 and paragraph
60(b) of the Income Tax Act, which read in part as
follows:
SECTION 60: 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) Alimony payments — an amount paid by
the taxpayer in the year as alimony or other allowance payable on
a periodic basis for the maintenance of the recipient, children
of the recipient or both the recipient and the children, if the
taxpayer, because of the breakdown of the taxpayer’s
marriage, was living separate and apart from the spouse or former
spouse to whom the taxpayer was required to make the payment at
the time the payment was made and throughout the remainder of the
year and the amount was paid under a decree, order or judgment of
a competent tribunal or under a written agreement . . . .
[11] The courts have been consistent when it comes to the
application of paragraph 60(b) of the Income Tax
Act.
[12] The Federal Court of Appeal dismissed the appeal in
Hodson v. The Queen (88 DTC 6001). Heald J.A., who wrote
the reasons for judgment, stated the following at page 6003:
Parliament has spoken in clear and unmistakable terms. Had
Parliament wished to extend the benefit conferred by
paragraph 60(b) on separated spouses who, as in this
case, do not have either a Court order or a written agreement, it
would have said so. The rationale for not including separated
spouses involved in payments made and received pursuant to a
verbal understanding is readily apparent. Such a loose and
indefinite structure might well open the door to colourable and
fraudulent arrangements and schemes for tax avoidance. I hasten
to add that there is no suggestion in the case at bar of any such
fraudulent or colourable arrangement. The Minister agrees that,
in the case at bar, the appellant has made the alimony payments
to his spouse in good faith. Nevertheless, such a possible
scenario in other cases commends itself to me as the rationale
for the carefully worded restrictions set out in the paragraph.
If the words used by Parliament create hardships, as suggested by
the appellant, it is Parliament, and not the Court, that has the
power to redress those hardships.
[13] Although the parties acted in good faith by submitting to
mediation before a notary, the evidence confirms that they did
not sign the draft agreement prepared by the notary. The
appellant paid $125 a week in alimony, but the courts have
consistently held in similar circumstances that amounts paid by
consensus of the parties are not deductible if the agreement is
not signed. In the case at bar, the agreement was not signed and
no judgment was rendered by a tribunal ordering the payment of
alimony for the 1994, 1995 and 1996 taxation years.
[14] Accordingly, the appeal is dismissed.
Signed at Ottawa, Canada, this 29th day of October 1999.
“J.F. Somers”
D.J.T.C.C.
Cases consulted
Risula v. Canada, [1996] T.C.J. No. 540
Curley v. Canada, [1992] T.C.J. No. 583
Daniel Kapel v. M.N.R., 79 DTC 199
Lorne Victor Ardley v. M.N.R., 80 DTC 1106
Reid v. M.N.R., 72 DTC 1540
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true on this 9th day of February
2000.
Stephen Balogh, Revisor
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