Citation:
2015 TCC 287
Date: 20151119
Docket: 2015-987(IT)I
BETWEEN:
SYLVAIN
LARIVIÈRE,
Appellant,
and
HER
MAJESTY QUEEN,
Respondent.
REASONS
FOR JUDGMENT
Favreau J.
[1]
This is an appeal, under the informal procedure,
against assessment made under the Income Tax Act, R.S.C., 1985, c. 1
(5th Supp.), as amended (the Act), by the Minister of National Revenue
(the Minister) dated July 18 and 22, 2013, for the
appellant's 2010, 2011 and 2012 taxation years.
[2]
Pursuant to the assessment dated July 18,
2013, the Minister disallowed the appellant's deduction in the amount of $14,522
for spousal support and a child tax credit of $2,191 for the 2012 taxation
year.
[3]
Pursuant to the assessment dated July 22, 2013,
the Minister disallowed the deductions of $13,172 and $13,830 claimed by the
appellant for support for the 2010 and 2011 taxation years, respectively, and
imposed late-filing penalties on the appellant under subsections 162(1) and
162(2) of the Act.
[4]
In computing the tax payable, the Minister
relied on the following facts:
(a) the appellant and Marie-Claude Tessier lived
in a common-law partnership for 14 years;
(b) two children were born of their common-law
partnership, in 1995 and 1997;
(c) the appellant and Ms. Tessier have lived
apart since February 2007;
(d) on July 4, 2007, the Quebec Superior
Court rendered a judgment ordering the appellant to pay Ms. Tessier
$16,945 a year as basic child support for their two children, plus a sum of $4,820
representing 90% of their day-care and day-camp fees;
(e) by that judgment, to maintain the children's
standard of living, the appellant also had to pay Ms. Tessier $1,000 a
month for housing expenses, representing $800 for mortgage payments and $200
for taxes, amounting to $13,172, $13,830 and $14,522 for the 2010, 2011 and
2012 taxation years, respectively.
Repeat late filing penalty
(f) for the 2008 taxation year, the appellant paid
a late filing penalty;
(g) for the 2010 taxation year, the appellant was
supposed to file his income tax return no later than April 30, 2011, and
he filed it on February 22, 2013.
Late filing penalty
(h) for the 2011 taxation year, the appellant was
supposed to file tax return n later than April 30, 2012, and he filed it
on February 22, 2013.
[5]
The Minister disallowed the deduction of the payments
of $13,172, $13,830 and $14,522 that the appellant paid
to his ex-spouse in the 2010, 2011 and 2012 taxation years, respectively,
because these were not deductible support amounts within the meaning of subsection 56.1(4)
of the Act.
[6]
The appellant does not dispute the late filing
penalties. However, he submits that the recipient of the payments whose
deduction is in dispute had discretion as to their use. The payments were made
by bank transfers to the bank account designated by the recipient, and there
were no controls in place to ensure that the money was specifically spent as
stipulated in the judgment. As specified in paragraph 30 of the judgment,
the payments were made for the purpose of maintaining the children's standard
of living by covering their housing expenses.
[7]
The appellant explained that he claimed, for the
2012 taxation year, a child tax credit because his daughter moved in with him
in January 2012 for the entire year. For the 2011–2012 school year, the
appellant's daughter was registered at Collège Sainte-Anne in Lachine, while in
the 2010–2011 school year, she was registered at Polyvalente Deux-Montagnes.
The appellant continued to pay full support for his daughter despite the fact
that she was now living with her father. The appellant's daughter had the
option of going back to live with her mother at any time.
Analysis
[8]
The amounts at issue in this case were paid by
the appellant to his ex-spouse pursuant to a judgment of the Quebec Superior
Court dated July 4, 2007, which homologated an agreement between the
parties dated May 22, 2007. As the judgment was rendered after
April 1997, the date of the judgment is considered to be the commencement
date of the judgment, in accordance with the definition of the phrase
"commencement date" in subsection 56.1(4) of the Act:
56.1(4) Definitions – The definitions in
this subsection apply in this section and section 56.
"commencement
date" at any
time of an agreement or order means
(a) where the agreement or order is made after April 1997,
the day it is made;
. . .
[9]
The judgment's commencement date is important
for determining the tax regime that applies to child support amounts. Child
support amounts pursuant to an order whose commencement date is after
April 1997 is generally non-taxable for the recipient and non-deductible
for the payer, while other amounts paid to support the recipient are generally
taxable for the recipient and deductible for the person required to make the
payment.
[10]
The phrase "child support amount" is
defined in subsection 56.1(4) in the following terms:
"child support amount" means any support amount that is not identified in the agreement or
order under which it is receivable as being solely for the support of a
recipient who is a spouse or common-law partner or former spouse or common-law
partner of the payer or who is a parent of a child of whom the payer is a legal
parent.
[11]
The phrase "support amount" is also
defined in subsection 56.1(4) of the Act, as follows:
"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 common-law partner or former spouse or common-law
partner of the payer, the recipient and payer are living separate and apart
because of the breakdown of their marriage or common-law partnership and the
amount is receivable under an order of a competent tribunal or under a written
agreement; or
(b) the payer is a legal 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.
[12]
The payments made by the appellant to his ex-spouse
pursuant to paragraph 30 of the Quebec Superior Court judgment dated
July 4, 2007, qualifies as a "support amount" because they were
made for the maintenance of the recipient and her children and the recipient
had discretion as to the use of the amounts. The Canada Revenue Agency
initially concluded, in confirming the assessments, that the recipient had no
discretion as to the use of these amounts as they were intended to cover
housing expenses representing $800 for the mortgage and $200 for taxes. At the
hearing of this case, the respondent withdrew this line of argument further to
the application to strike paragraph 11 from the Amended
Reply to the Notice of Appeal.
[13]
However, the payments in question also qualify
as a "child support amount" because they are not solely for the
support of the appellant's ex-spouse; these payments were also intended to
maintain the standard of living of the children in the ex-spouse's custody.
[14]
In my opinion, the judgment under which the
payments were made is unambiguous, and there was no apportionment of the
support amounts between the ex-spouse and the children. Accordingly, all the
payments constitute child support amounts within the meaning of the Act.
[15]
For the 2012 taxation year, the Minister
disallowed the child tax credit that the appellant claimed for one of his
children on the basis that the appellant was required to pay his ex-spouse
support amounts within the meaning of subsection 56.1(4) of the Act.
[16]
Paragraph 118(1)(b) of the Act
establishes a personal tax credit for a taxpayer who supports a dependent, and
paragraph 118(1)(b.1) of the Act establishes a personal tax credit for
a tax payer who tends to the needs of a child. However, subsection 118(5)
of the Act states that no amount may be deducted under subsection 118(1) where
the taxpayer is required to pay a support amount, within the meaning of
subsection 56.1(4) of the Act, to his or her ex-spouse in respect of the
person in question.
[17]
Subsection 118(5) of the Act reads as
follows:
(5) Support - No amount may be deducted under subsection (1) in computing
an individual’s tax payable under this Part for a taxation year in respect of a
person where the individual is required to pay a support amount (within the
meaning assigned by subsection 56.1(4)) to the individual’s spouse or
common-law partner or former spouse or common-law partner in respect of the
person and the individual
(a) lives separate and apart from the spouse or common-law
partner or former spouse or common-law partner throughout the year because of the
breakdown of their marriage or common-law partnership; or
(b) claims
a deduction for the year because of section 60 in respect of a support
amount paid to the spouse or common-law partner or former spouse or common-law
partner.
[18]
The definition of "support amount" is
reproduced in paragraph 11 above.
[19]
A parent who is required to pay a child support
amount, as in this case, is not entitled to the personal tax credit under
subsection 118(1) of Act, even if the amount cannot be deducted in
computing the payer's income, and even if the child resides with the payer in
the taxation year in question and there could no longer be a requirement to pay
a support.
[20]
Subsection 118(5) of the Act is very clear
on this issue, and the exception under subsection 118(5.1) of the Act does not apply in this case.
[21]
For these
reasons, the appeal is dismissed.
Signed
at Montréal, Canada, this 19th day of November 2015.
"Réal
Favreau"
Translation certified true
on this 4th day of January 2016
Michael Palles,
Translator
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