Citation: 2013 TCC 277
Date: 20130911
Docket: 2011-472(IT)I
BETWEEN:
CLAUDE MASSON,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
and
CHANTAL BOUTHILLIER,
Added party.
[OFFICIAL ENGLISH
TRANSLATION]
REASONS FOR JUDGMENT
Favreau J.
[1]
These are appeals under
the informal procedure from reassessments made by the Minister of National
Revenue (the Minister) under the Income Tax Act, R.S.C. 1985 (5th
Supp.), c. 1, as amended (the Act), dated December 14, 2010, for the 2007
taxation year and dated September 17, 2009, for the 2008 taxation year.
[2]
Under a Court order
dated April 17, 2012, issued under paragraph 174(3)(b) of the Act,
Chantal Bouthillier was joined to Claude Masson’s appeals from the above‑mentioned
reassessments. At the beginning of the hearing, the parties agreed that the
appeals be heard despite the added party’s absence.
[3]
The issues are as
follows:
(a) May Claude Masson
deduct, in computing his income for the 2007 and 2008 taxation years, the following
amounts paid to Chantal Bouthillier during each of those taxation years as
child support:
2007: $4,812
2008: $4,440
(b) Must Chantal
Bouthillier include in computing her income for the 2007 and 2008 taxation
years the following amounts received from Claude Masson during each of those
taxation years as child support:
2007: $4,812
2008: $4,440
[4]
In making the
reassessment dated December 14, 2010, for the 2007 taxation year and in making
and confirming the reassessment for the 2008 taxation year, the Minister based
himself on the following findings and assumptions of fact, stated at paragraph 8
of the Reply to the Notice of Appeal:
(a) The appellant and Chantal Bouthillier, his former
common-law spouse, separated on January 1, 1997; (admitted)
(b) Child
J was born of their union in 1996; (admitted)
(c) Since their separation, the appellant has been paying to
his former spouse a support amount of $340 per month, which is equivalent to
$4,080 per year; (admitted)
(d) A motion for custody of a child and for support was filed
with the Quebec Superior Court in or around April 1997 and was served on the
appellant on May 7, 1997; (admitted)
(e) On July 17, 1997, a judgment was rendered by the Superior
Court ratifying the consent on corollary relief concluded between the parties. The
judgment recognized that, since January 1997, the appellant had always paid a
support amount of $340 per month and confirmed that, starting on June 1, 1997,
the appellant would pay to his former spouse a support amount of $340 per
month; (admitted)
(f) In August 2003, the parties reciprocally applied for
motions before the Court in order to amend the judgment rendered on July 17,
1997, regarding custody, access rights and support; (denied for support)
(g) Given the lengthening of the child custody periods, the
appellant was informed by his counsel, on August 15, 2003, that he may be
justified in requesting a reduction of the support amount to $4,019.30 per
year; (admitted)
(h) He was also informed that unless he stated otherwise, the
support amount would be kept the same; (admitted)
(i) On August 20 and 26, 2003, the parties and their
respective counsel signed a consent to judgment, which stated that the child
support paid by the appellant to his former spouse would be $4,019.30 per year,
payable in accordance with the Act to Facilitate the Payment of Support,
in two instalments on the 1st and 15th of each month, starting on September
1, 2003; (admitted)
[5]
Under the judgment
rendered by the Superior Court of Québec dated July 17, 1997, the support
amount payable to Chantal Bouthillier had to be indexed based on the Consumer
Price Index for Montréal (Montréal CPI) in January of the following year based
on the average of the preceding twelve 12 months.
[6]
Under the consent to
judgment ratified by the Superior Court of Québec on August 28, 2003, the
support amount that the appellant had to pay to his former spouse was
established at $4,019.30 per year starting on September 1, 2003, and the
support amount had to be indexed in accordance with the Act (Civil Code of
Québec) on January 1 of each year.
[7]
It has been put in
evidence that Ms. Bouthillier did not originally report in her income for the
2007 and 2008 taxation years the support amounts paid to her by her former spouse,
but, on November 24, 2011, she filed a request for adjustment of her T-1 for
each of those years by adding at line 156 of her income tax returns an amount
of $4,812 for 2007 and of $4,740 for 2008. The taxable part of the support
amounts was not specified.
[8]
The appellant put in
evidence all of the letters and documents from his counsel, Edith Provost, relating
to his conjugal file.
[9]
In a letter addressed
to counsel for Ms. Bouthillier, Yves Barron, dated November 15, 2002,
Ms. Provost proposed that the support amount previously established be
kept as is and continue to be subject to taxation.
[10]
In another letter dated
August 15, 2003, addressed to the appellant, Ms. Provost stated the
following at page 4 of her letter filed as Exhibit A-3:
[Translation]
We
have noted your wish to keep unchanged the previous support amount given that
your only objective is an increased presence and protection for your daughter
and Ms. Bouthillier’s promise to abstain in her presence.
[11]
In a motion to the
Superior Court of Québec dated July 1, 2008, the following was alleged:
[Translation]
14.
The respondent, however, agreed to shared custody starting in 2003, only on the
condition that the support and tax benefits would be maintained, as shown more
fully by the undertaking made in support of this motion filed as Exhibit P-4;
[12]
In a letter to an
unknown recipient dated October 23, 2009, Ms. Provost provided the
following information:
[Translation]
Thus,
our client, concerned with obtaining additional custody days for his child J,
agreed to make no changes to the previous support amount despite the extension
of the time he has custody of his daughter.
[13]
In another letter without
a recipient dated December 6, 2010, Ms. Provost indicated that she had received
from the other party a draft consent stating a support amount of $4,019.30,
which she presumed was identical to the previous support amount paid. Below are
some excerpts from pages 2 and 3:
[Translation]
Therefore,
it was by mistake that the undersigned then specified that there was no issue of
re-specifying the current support amount because it was the same amount,
without making an in-depth verification.
Indeed,
it would have been more appropriate to specify that the support amount established
in the previous agreement was kept the same without specifying the amount and
running the risk of a clerical error.
Unfortunately,
a clerical error was made in transcribing the previous support amount in that
the support amount of $4,019.30 per year indicated in the consent should rather have been $4,571.66.
Parties’ submissions
[14]
The appellant alleges
that he always intended to continue paying the support set out in the agreement
dated July 1997, and that, in reality, in the last few years, he always paid
Ms. Bouthillier higher support amounts than those he had to pay under the
August 2003 agreement.
[15]
Ms. Bouthillier’s
position is that there is an agreement modifying the support amount after April
30, 1997, which made the appellant lose the benefit of deductibility of support
payments.
Analysis and conclusion
[16]
The tax treatment of a
child support amount depends on the date on which the agreement between parties
was concluded or on the date on which an order by a court having jurisdiction
in these matters was made. This concept was brought into the Act by the
definition of “commencement day” found at subsection 56.1(4), which reads as
follows:
(4)
The definitions in this subsection apply in this section and section 56.
“commencement
day” 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; and
(b)
where the agreement or order is made before May 1997, the day, if any, that is
after April 1997 and is the earliest of
(i)
the day specified as the commencement day of the agreement or order by the
payer and recipient under the agreement or order in a joint election filed with
the Minister in prescribed form and manner,
(ii)
where the agreement or order is varied after April 1997 to change the child
support amounts payable to the recipient, the day on which the first payment of
the varied amount is required to be made,
(iii)
where a subsequent agreement or order is made after April 1997, the effect of
which is to change the total child support amounts payable to the recipient by
the payer, the commencement day of the first such subsequent agreement or
order, and
(iv)
the day specified in the agreement or order, or any variation thereof, as the
commencement day of the agreement or order for the purposes of this Act.
[17]
The Act is very clear. If
an agreement or order made before May 1997 is varied after April 1997
to change the child support amount payable to the recipient, the commencement
date of the agreement or order is that on which the first payment of the varied
amount is to be paid.
[18]
Without taking into
account the indexing factor, the support amount paid in 1997 changed from
$4,080 per year to $4,019.30 in 2003. Taking into account the indexing factor,
the support amount should have been $4,608.08 according to the Montréal CPI and
$4,571.66 according to the Civil Code of Québec. Therefore, there was a
substantial reduction of the support amount attributable to the increase in
custody time with the child’s father.
[19]
Based on the evidence,
not only was the support amount reduced, but there was also a variation with
regard to the indexing conditions and the way in which the support was paid. Based
on the 2003 order, the support amount must be indexed in accordance with the
Act, on January 1 of each year, while under the 1997 order, the support amount must
be indexed under the Montréal CPI in January of the following year based on the
average of the preceding twelve (12) months. Regarding the way in which the
support was paid, the 1997 order provided for the payment of support payable on
the first day of each month, while the 2003 order provided for the payment of a
support amount of $4,019.30 per year, payable in accordance with the Act to
Facilitate the Payment of Support by way of two instalments on the 1st and 15th
of each month. It should be mentioned here that the parties agreed that the
father be exempted from having to pay the support directly to the Ministère du
revenu du Québec for the child’s benefit in accordance with section 3 of the Act
to Facilitate the Payment of Support on the condition of his undertaking to
provide the security required by the Ministère du revenu du Québec to guarantee
the payment of support.
[20]
The appellant’s main
claim is based on the fact that his former spouse and he did not intend to vary
the support amount payable under the 1997 agreement and he referred to his
counsel’s letters to confirm the parties’ intention.
[21]
Counsel for the
respondent referred to Friedberg v. Canada, (F.C.A.) [1991] F.C.J. No.
1255, to establish the principle that “evidence of subjective intention cannot
be used to ‘correct’ documents which clearly point in a particular direction”. According
to them, the letters from the appellant’s counsel have no probative value
because the author of these letters could not be cross-examined and because
Ms. Bouthillier was not party to these letters, some of which were drafted
on the appellant’s request as part of his dispute with the Canada Revenue
Agency more than seven (7) years after the events that took place in 2003.
[22]
Regardless of the
parties’ intention at the time of the 2003 order, the evidence does not show
that the amounts paid by the appellant as support for 2007 and 2008 correspond
to the amount payable under the April 5, 1997 agreement. Even though the
appellant always paid more than the amount of $4,019.30 per year starting on
September 1, 2003, this does not confer on him the benefit of deductibility
of the support payments if the eligibility criteria set out in the Act are no
longer met.
[23]
I cannot agree with the
appellant’s position that the reduction of the support amount starting on
September 1, 2003, was moot and fictitious and out of step with reality.
[24]
At the hearing, the
Court was informed that Judge Georges Massol of the Court of Québec rendered a
decision on May 29, 2012, in which he dismissed Claude Masson’s appeal
concerning the deductibility, for the purposes of the Quebec Taxation Act,
of support payments paid to Ms. Bouthillier during the 2005, 2006, 2007 and
2008 taxation years.
[25]
For these reasons the
appellant’s appeals are dismissed.
Signed at Ottawa, Canada, this 11th day of
September 2013.
“Réal Favreau”
Translation certified true
on this 29th day of October 2013
Margarita Gorbounova, Translator
Email this Content