Gartner v. The Queen, docket 1999-4130-IT-I (Informal Procedure)

Date: 20000427

Docket: 1999-4130-IT-I

BETWEEN:

VERONICA GARTNER,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Beaubier, J.T.C.C.

[1] This appeal pursuant to the Informal Procedure was heard at Edmonton, Alberta on April 14, 2000. The Appellant was the only witness. She was completely credible and her evidence is accepted in its entirety.

[2] The Appellant has appealed reassessments for the 1995, 1996 and 1997 which redetermined her entitlement to the Goods and Services Tax Credit and to the Canada Child Tax Benefit.

[3] Paragraphs 2 to 12 inclusive of the Notice of Appeal were either admitted or established by the evidence. They read:

2. In the Reassessments, the Respondent

a) denied the Appellant's claims under paragraph 118(1)(b) to an "equivalent-to-married" non-refundable tax credit,

b) determined that the Appellant was not eligible to receive the GST/HST Credit under section 122.5, apparently due to her family net income exceeding the threshold amount for receiving such a credit, and

c) reduced the amount of the Appellant's CCT Benefits under section 122.6, apparently on the basis of her family net income exceeding the allowable threshold.

3. As a result of the Reassessments, the Appellant owes the Respondent:

a) additional federal and provincial taxes (excluding interest and penalties) for the 1996 and 1997 taxation years of $1,358.70 and $1,361.05 respectively,

b) repayment of GST/HST Credits for the 1995, 1996 and 1997 taxation years of $189.50, $334.65 and $44.95 respectively; and

c) repayment of the CCT Benefits for the 1995, 1996 and 1997 taxation years of $2,131.78, $1,790.35 and $319.34 respectively,

for a total aggregate outstanding balance of $7,530.32 (excluding interest and penalties).

B. STATEMENT OF FACTS

4. The Appellant is an individual who was born in Manning, Alberta and who, at all material times, resided at 1904 - 151 Avenue in the City of Edmonton in the Province of Alberta (the "Residence"). The Residence is owned jointly by the Appellant and Mr. Gartner.

5. The Appellant married Mr. Severin Gartner on May 15, 1976 in Manning, Alberta. During the marriage, the Appellant and Mr. Gartner had three children named Nicholas Patrick Gartner (born February 26, 1979), Becky Jo Gartner (born April 16, 1980) and Jordan Steven Gartner (born July 21, 1982) (collectively referred to as the "Children").

6. On or about March 28, 1992, the Appellant and Mr. Gartner separated from each other and ceased living as husband and wife due to a breakdown in the marriage. For approximately two years after this date of separation, Mr. Gartner resided in a location other than the Residence. During this period, the Appellant lived in the Residence with the Children, over who she assumed complete care and responsibility for their upbringing. During this time, the Appellant and Mr. Gartner lived separate and distinct lives from each other and had minimal contact with each other.

7. After separation, the Appellant visited a lawyer to determine the process and cost of obtaining a formal divorce judgment and a matrimonial property order. The lawyer informed the Appellant that the latter action would require the Appellant to "buy out" Mr. Gartner's joint interest in the Residence (as the Appellant wished to continue to reside in the Residence with the Children). Further, the Appellant was aware that Mr. Gartner would actively resist any action requiring him to pay any child support. Given these facts and the Appellant's financial situation (i.e. earning after-tax income of approximately $1,800 per month, $550 of which was required to service an outstanding car loan), the Appellant was financially unable to take the steps necessary to formally and legally terminate the marriage and obtain sole ownership and possession of the Residence.

8. During 1994, Mr. Gartner moved back into and occupied one bedroom in the Residence. While the Appellant did not agree to Mr. Gartner's return to the Residence, she felt powerless to stop such action given that Mr. Gartner had a 50% joint interest in the Residence. Mr. Gartner continues to live in his bedroom to the present day.

9. Since returning to the Residence, Mr. Gartner has purchased some of the groceries consumed by the household and has paid the utility bills for the Residence. While he eats the food prepared by the Appellant, either immediately after being prepared or after being refrigerated, he does so alone in his bedroom. Absent special circumstances (i.e. the birthday of one of the Children), the Appellant does not eat any meals with Mr. Gartner.

10. Except as described above, the Appellant and Mr. Gartner intended to and did live separate and distinct lives from each other during the periods under consideration by the Reassessments. In particular:

a) The parties did not engage in any sexual relations with each other;

b) The parties did not socialize, eat meals together, take vacations together or travel in the same vehicle. (During the Reassessment Period, the Appellant owned and used a 1991 Toyota Camry and Mr. Gartner owned and used several vehicles);

c) The parties did not attend family functions together. More specifically, the Appellant did not attend functions hosted by Mr. Gartner's family and Mr. Gartner did not attend functions hosted by the Appellant's family;

d) The Appellant did not provide any domestic services (i.e. housecleaning, laundry and/or ironing) to Mr. Gartner;

e) The Appellant personally paid all childcare expenses and received no child support payments from Mr. Gartner. The Appellant also paid the vast majority of the property taxes and all of the insurance on the Residence as well as the television cable costs;

f) The Appellant did not make any claims against nor receive any health care benefits from Mr. Gartner's employment health care plans;

g) The Appellant and Mr. Gartner each filed their personal income tax returns indicating their marital status as "separated".

11. After receiving several increases in remuneration over the last few years, the Appellant now feels she is financially able to legally terminate the marriage and obtain a division of matrimonial property. Consequently, the Appellant has filed a Statement of Claim for Divorce and Division of Matrimonial Property (the "Statement of Claim") with the Court of Queen's Bench of Alberta on or about July 23, 1999. In the Statement of Claim, the Appellant pleaded that the date of separation of the parties was March 28, 1992 and that the ground for the divorce is the breakdown of the marriage by reason of the parties living separate and apart in excess of one year.

12. In the Notices of Reassessment dated November 23, 1998, the Respondent denied the Appellant's claims to "equivalent to married" non-refundable tax credits for the 1996 and 1997 taxation years. The Respondent also determined that the Appellant was overpaid GST/HST Credits (on Notices of Redetermination dated November 20, 1998) and CCT Benefits (on CCT Benefit Notices) for the 1995 through 1997 taxation years. Apparently, the Reassessments were based on the Respondent's position that the Appellant and Mr. Gartner were not living separate and apart during the material time.

The evidence in the Appellant's favour was far stronger than is expressed in the Notice of Appeal.

[4] The Appellant's children and financial situation were best summarized, along with the Respondent's position, in assumptions 18(a) to (d) inclusive; assumptions (b) and (c) were not refuted by the evidence, assumption (a) and (d) were refuted. They read:

18. In so reassessing the Appellant for the 1996 and 1997 Taxation Years, determining the Appellant's CTB for the 1995, 1996 and 1997 "base taxation years" and redetermining the Appellant's GST Credit for the 1995, 1996 and 1997 Taxation Years, the Minister made the following assumptions of fact:

(a) at all relevant times to the years in appeal, the Appellant was married to, lived with and was supported by the Spouse;

(b) the Appellant and her Spouse had three children (hereinafter the "Children") as follows:

Name	Date of Birth
Nicholas Patrick Gartner	February 26, 1979
Becky Jo Gartner	April 16, 1980
Jordan Steven Gartner	July 21, 1982

(c) the combined net incomes of the Appellant and the Spouse (hereinafter referred to as the "Family Net Income") are as follows:

	1995	1996	1997
Net Income – Appellant	$32,191	$33,488	$35,082
Net Income – Spouse	43,710	52,834	51,025
Family Net Income	$75,901	$86,322	$86,107

(d) the Appellant's Spouse is considered a "cohabiting spouse" of the Appellant;

[5] Finally, the Appellant was able to afford to proceed to divorce and obtained a judgment dated April 4, 2000 (Exhibit A-1, Tab 2) which reads, in part, that the couple "commenced living separate and apart (although under the same roof) on March 28, 1992" and that they continued so until the date of judgment. This judgment by an Alberta Court of Queen's Bench which has jurisdiction in such matters was merely verified by the evidence in this Court.

[6] In the absence of proof of fraud respecting the Queen's Bench judgment, there is no reason why the Appellant should have been put through the agony of approximately three hours of recitation of this very unfortunate episode in her life. Moreover, quite properly, she had to hire competent counsel to put her case forward. That expense arose because of the complicated system whereby the government uses the Income Tax Act to first take from someone of very modest means and then in self professed beneficence, to "give" "credits" and "benefits". All of this was done at great expense to the public and at great expense to the Appellant, who had to borrow to pay the assessments and her lawyer so as to proceed with this appeal.

[7] This Court confirms the finding of the Court of Queen's Bench that, while under the same roof, the Appellant and her then husband were not cohabiting. They were living separate and apart during all the time after March 28, 1992. Any expenses that either bore were for the benefit and support of the children of the marriage and not the other spouse. Given their modest circumstances, it was the only way that they could provide opportunities for their children, although there is no evidence that that was their intention at the time. But the evidence is clear that the children were overjoyed to have their father back in the house in 1994 despite the Appellant's own discomfort about the situation.

[8] Therefore, the appeals are allowed.

[9] The Respondent obviously did not accept the truth of the Appellant's statements about the living arrangements and the condition of the marriage, even though the Notice of Appeal refers to divorce proceedings. Indeed, Respondent's counsel suggested that the assessments triggered the divorce action (as if that might be a credit to the Minister of National Revenue). In the Court's view, given the two years of separate living quarters, the modest means of both spouses, the existence of three children and the current state of marriages and the cost of living in Canada, the Court proceeding itself should not have been required, especially once divorce proceedings had commenced and certainly once the judgment of April 4, 2000 existed. For these reasons, the Appellant is awarded costs. The case was very well pled, prepared, and led into evidence. The Court has considered the facts in this matter and the law relating to this appeal as to the award of costs. In my discretion, I find that an award of $4,500 in costs is appropriate, and it is so ordered.

Signed at Ottawa, Canada this 27^th of April 2000.

"D.W. Beaubier"

J.T.C.C.