[OFFICIAL ENGLISH TRANSLATION]
Date: 20001115
Docket: 1999-4801(IT)I
BETWEEN:
MICHEL FOSTER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(rendered orally on the bench
on September 8, 2000, at Montréal,
Quebec
and edited for greater clarity)
Archambault, J.T.C.C.
[1] Michel Foster objects to a notice
of assessment made by the Minister of National Revenue (the
Minister) for the 1997 taxation year. In computing Mr.
Foster's income, the Minister disallowed a deduction for an
amount of $22,500 paid to Andrée Boivin on November
5, 1997. The Minister claims that this amount does not represent
support that may be deducted under section 60 of the Income
Tax Act (the Act).
[2] At the outset of the hearing, Mr.
Foster's counsel admitted the following paragraphs of the Reply
to the Notice of Appeal: 3(a), (b), (c), (d), (e) and (f). The
only other evidence adduced at the hearing consists of two
documents: the first, the "amended divorce declaration" of
Andrée Boivin and, the second, the decision handed
down on August 7, 1997, by the Superior Court of Quebec allowing
the action for divorce and determining certain terms and
conditions for the payment of support and a lump sum.
[3] The amended divorce declaration
contains the following relevant passages:
[TRANSLATION]
17. The applicant seeks a support amount of $500 per week for
her maintenance, payable in advance at her place of residence, on
the Thursday of every week, and asks that the said support be
indexed according to the method provided for in Article 590
of the Civil Code of Québec;
18. The applicant further asks that the defendant pay
her, at the beginning of each term, on presentation of her
proof of registration as a full-time student, the amount of
$765.55 in payment of her basic university fees;
19. The applicant also seeks a lump sum of $7,000 for the
purchase of a used motor vehicle;
20. The applicant seeks a lump sum of $60,000 in full and
final settlement of all the defendant's support obligations,
representing:
$6,698 for dentist expenses;
$7,000 for the purchase of a used motor vehicle;
$5,000 representing two and one-half years of tuition
fees;
$9,400 to cover the partial payment of the applicant's
debts;
$32,000 as support;
in order to facilitate the re-establishment of the applicant
and to keep her from being dependent in any way whatever on the
defendant in future;
21. The applicant asks the Court to divide the value of the
family patrimony of the parties.
[4] In the relief sought in the
divorce declaration, the following is stated:
[TRANSLATION]
ORDERS the defendant to pay the applicant, for her support, a
weekly support amount of $500, payable in advance at her
residence;
ORDERS the said support amount to be indexed ...;
ORDERS the defendant to pay the applicant a lump sum of $7,000
for the purchase of a used motor vehicle;
In the alternative, ORDERS the defendant to pay the
applicant a lump sum of $60,000 in full and final
settlement of all support obligations;
[Emphasis added.]
[5] At page 2 of his decision,
the Superior Court justice refers to the "decision on provisional
measures" of his colleague Mr. Justice Tremblay:
[TRANSLATION]
A judgment for provisional measures was issued on December 21,
1994, by Mr. Justice Roland Tremblay, awarding the applicant
$100 in support per week, indexed to inflation, plus an
amount for tuition fees and another amount for the reimbursement
of dental expenses.
[Emphasis
added.]
[6] At page 9 of the decision,
the following passage may be found:
[TRANSLATION]
The applicant seeks support and a lump sum. Counsel agreed
that, if support were granted, it would be retroactive to the
date on which the motion to amend the order on provisional
measures was filed, that is, December 18, 1995. Thus,
an amount of money would be determined that would be, as
it were, a lump sum. This is granted for support, in the same
manner as support amounts.
The parties' situation is unequal. The applicant has no income
other than the support, a benefit from IVAQ, and the tuition fees
paid by the defendant. According to her statement of income and
expenses, she thus receives $171.76 a week in this way. As
mentioned above, she is a student at the Université du
Québec, and I do not see that she could not complete her
bachelor's degree, which would probably enable her to find a job.
She reported debts amounting to $40,000, comprising of $10,000,
Visa bills, dental care and so on.
The defendant receives a salary of at least $90,000 a year. He
also receives a reimbursement for his representation expenses and
automobile expenses.
[Emphasis added.]
[7] Further on, at page 10, the
Superior Court Judge adds:
[TRANSLATION]
Although the defendant's statement of capital does not show
much in the way of assets, his income is certainly enough for
him to pay support and a lump sum equivalent to retroactive
support. Judgment was rendered on a motion for provisional
measures and the support amount has been paid since that date.
This must be taken into account in assessing the lump sum,
which also takes into account the retroactive support.
The applicant seeks a lump sum of $60,000, which seems
excessive to me, considering the length of the marriage, the
age of the parties, the opportunity for the applicant to find a
new job by allowing her to finish her education. I believe
that an amount of $22,500 will pay off her loan for the
purchase of an automobile, which is for her a necessity, the
orthodontic treatments that she began during the marriage, which
were partially paid for by the defendant, her overdue tuition
fees, and the student loan that she has to repay.
In addition, I am partially allowing her claim for support
at $225 per week payable every week to the applicant in advance
to serve both as support and as tuition fees. The support
will end on June 30, 1998, when she obtains her degree, which
will allow her to find herself a job.
[Emphasis added.]
[8] In the disposition of his
decision, the Superior Court Judge writes:
[TRANSLATION]
ORDERS the defendant to pay the applicant a lump sum of
$22,500 payable in two instalments, the first, 30 days after the
date of this judgment and the second, 60 days after the date of
this judgment;
ORDERS the defendant to pay support of $225 per week to the
applicant payable in advance at the applicant's residence every
week until June 30, 1998;
ORDERS that the division of the family patrimony, by a payment
of $5,035 by the defendant to the applicant ...
Analysis
[9] The parties agree that essentially
the only point at issue here is whether the amount of $22,500 was
paid as support or as a payment of capital. Section 60 of
the Act allows a deduction only in respect of support.
Paragraph (b) provides:
(b) Support - the total of all amounts 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 were living
separate and apart at the time the amount was paid,
B is the
total of all amounts each of which is a child support amount that
became payable by the taxpayer to the particular person under an
agreement or order on or after its commencement day and before
the end of the year in respect of a period that began on or after
its commencement day, and
C is the total
of all amounts each of which is a support amount paid by the
taxpayer to the particular person after 1996 and deductible in
computing the taxpayer's income for a preceding taxation
year;
[10] The term "support amount" is
defined in subsection 56.1(4):[1]
(4) Definitions - The definitions in this subsection apply in
this section and section 56.
...
"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 the 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 a 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.
[11] It is also acknowledged by the parties
that, if the judge had made it clear in the wording of his
judgment that the amount of $22,500 represented retroactive
support, there would have been no dispute before this Court.
[12] Counsel for Mr. Foster argues that it
is clear that the amount of $22,500 represents support paid
retroactively to December 18, 1995. Counsel for the respondent
argues the contrary. The Court must therefore decide.
[13] Even if the wording of the disposition
of the decision is not as explicit as one might wish, I believe
that it is reasonable to conclude that a portion of the lump sum
of $22,500 represents support paid retroactively and that another
portion is intended to reimburse specific expenses incurred
before August 7, 1997. I underlined the relevant portions of the
above decision that support this conclusion. Among the most
important relating to retroactive support, there is the
following: [TRANSLATION] "his income is certainly enough for
him to pay support and a lump sum equivalent to retroactive
support". There is also the passage where the judge wrote
that, in determining the lump sum, the support paid under the
decision on provisional measures should be taken into
consideration: [TRANSLATION] "This must be taken into account
in assessing the lump sum, which also takes into account the
retroactive support." On the issue of reimbursing expenses,
there is a passage where the judge asserts that [TRANSLATION]
"the lump sum of $22,500 will allow Ms. Boivin to pay certain
specific expenses, such as orthodontic treatments and tuition
fees."
[14] I also note that this approach is
similar to the one taken by Judge Tremblay in his decision on
provisional measures. Judge Tremblay granted Ms. Boivin two
rights: the first was the right to $100 in support and the
second was the right to be reimbursed for certain
expenses¾dental expenses and tuition fees. The $100
support constitutes "a support amount" within the meaning of
subsection 56.1(4) of the Act and is therefore
deductible from Mr. Foster's income while reimbursement for
specific expenses does not as a general rule constitute a
"support amount"[2]
within the meaning of the Act and is therefore not
deductible.
[15] Since the judge did not explicitly
break down the lump sum, it must be determined whether this may
be done in reading the judge's reasons. An analysis of the
reasons of the Superior Court judge leads me to believe that the
amount awarded as retroactive support was $225 a week. There is
nothing that enables me to believe that the $225 paid in support
beginning on August 7, 1997, (that is, the date of the judge's
decision) is different from that for the period prior to the
decision. There is no evidence establishing that the support
needs of Ms. Boivin during the period from December 18, 1995, to
August 7, 1997, were greater or less than those in the period
following the judgment. Since Ms. Boivin has already received an
amount of $100 awarded by Judge Tremblay in his decision on
provisional measures, the net amount of the retroactive support
is $125 a week. I determined that there were 85 weeks from the
date on which the amended divorce declaration was filed (December
18, 1995) to the date of the final decision of the Superior Court
(August 7, 1997). I come therefore to the conclusion that an
amount of $10,625 [$125 x 85] represents support. The
balance, that is, $11,875 represents reimbursement for specific
expenses.
[16] For these reasons, the appeal of
Mr. Foster is allowed, and the assessment is referred back
to the Minister for reconsideration and reassessment on the basis
that Mr. Foster is entitled to a deduction for an additional
amount of $10,625 as support. Since this amount is less than half
of the amount at issue, no costs are awarded.
Signed at Ottawa, Canada, this 15th day of November 2000.
J.T.C.C.
Translation certified true
on this 30th day of September 2003.
Sophie Debbané, Revisor
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