Citation: 2013TCC84
Date: 20130429
Docket: 2012-2667(IT)I
BETWEEN:
DARRYL DOUGLAS HAYNES,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller J.
[1]
The Appellant has
appealed the reassessment of his 2010 taxation year wherein the Minister of
National Revenue (the “Minister”) determined that the Appellant was not
entitled to receive the credit for a wholly dependent person and the child tax
credit in respect of his children for the 2010 year.
Preliminary Matter
[2]
At the beginning of the
hearing, counsel for the Appellant stated that the receipt of the child tax
credit was no longer an issue.
Facts
[3]
During 2010, the Appellant
and his former spouse lived separate and apart because of a breakdown of their
marriage. They have two children and in 2010 they shared custody of the
children.
[4]
Pursuant to a Consent
Order entered into by the Appellant and his former spouse on September 14, 2009
and issued out of the Supreme Court of Newfoundland and Labrador, child support
was payable “pursuant to the straight ‘set-off’ approach” in the Federal
Child Support Guidelines, SOR/97-175 (the “Federal Guidelines”). In
2010, the Appellant was required to pay child support to his former spouse in
the amount of $410.25 per month. This amount represented the set-off between
the total amount ($783) the Appellant was required to contribute to his
children’s support and the total amount ($372.75) his former spouse was
required to contribute as set out in the Federal Guidelines.
[5]
In his income tax
return for 2010, the Appellant claimed the wholly dependant person credit for
one of his children. The Minister of National Revenue (the “Minister”)
disallowed the claim on the basis that subsection 118(5) of the Income Tax
Act (the “Act”) prevented the Appellant from receiving the credit.
The Law
[6]
Paragraph 118(1)(b)
of the Act provides a tax credit in respect of a wholly dependant
person. There are several conditions that must be met; however, none of them
are at issue in this appeal.
[7]
Subsection 118(5) of
the Act provides that an individual may not claim a tax credit for a
wholly dependant person where that individual is required to pay a support
amount to his/her former spouse.
[8]
Subsection 118(5.1) of
the Act provides that subsection 118(5) does not apply if it would deny
the credit to both parents. In such a case, paragraph 118(4)(b) would
apply and the parents must agree which of them will claim the credit on an
annual basis. If there is no agreement, neither of the parents will be allowed
the credit for the year.
Appellant’s Position
[9]
It was the Appellant’s
position that both he and his former spouse were required to pay child support
in 2010. In order to avoid exchanging cheques for the child support amount that
each had to pay, he paid his former spouse the difference between the amounts
payable.
[10]
Counsel for the Appellant
argued that since both the Appellant and his former spouse paid child support,
subsection 118(5) would prevent both of them from claiming the credit. However,
subsection 118(5.1) of the Act remedied the situation and subsection
118(5) did not apply to either him or his former spouse.
Analysis
[11]
It is clear from the
Consent Order that only the Appellant was required to pay child support in
2010. With respect to child support, the Consent Order reads:
“Currently, based
on the parties’ respective incomes, the parties agree that the amount of child
support payable by the Applicant to the Respondent is $410.25 per month,
calculated as follows:
2008 income of the Applicant: $56,297.00 ($783.00 per month child
support obligation)
2008 income of the Respondent: $24,523.00 ($363.00 per month child
support obligation)
Respondent’s portion of Children’s medical insurance: $9.75 per
month
$783.00
- $363.00 - $9.75 = $410.25”
In the Consent Order, the Appellant was the
Applicant and his former spouse was the Respondent.
[12]
The issue raised in
this appeal was recently considered by the Federal Court of Appeal in Marc
Verones v The Queen, 2013 FCA 69. In Verones, the facts were almost
identical to those in the present appeal. In that case, the appellant paid
monthly child support to his former spouse. The amount of child support
represented a set-off between the total amount the appellant was required to
contribute to his children’s needs and the amount his former spouse was
required to contribute as set out in the Federal Guidelines. Trudel J.A.
stated:
[5] I am of the view that the Tax Court correctly rejected the
appellant’s thesis. The Tax Court observed that the Order of the Court of
Queen’s Bench of Alberta directed only the appellant to make child support
payments, notwithstanding that his former spouse’s income was taken into
consideration in determining the amount that he, as the higher income spouse,
was directed to pay. It is clear that the child support payments made by the
appellant constitute a "support amount" as contemplated by subsection
56.1(4) of the Act. The mother’s contribution to the children’s needs does not
meet the requirement of that subsection as there is no order or written
agreement requiring her to make child support payments to the appellant. As a
result, subsection 118(5) is applicable and the appellant is not entitled to
the tax credits (see Perrin v. Canada, 2010 TCC 331; Ladell v. Canada,
2011 TCC 314, cited at paragraph 6 of the Tax Court’s reasons).
[6] The whole discussion about the concept of set-off is a mere distraction
from the real issue, i.e. whether or not the appellant is the only
parent making a "child support payment" in virtue of "an order
of a competent tribunal or an agreement", as defined under the Act.
[7] In Contino v. Leonelli-Contino, 2005 SCC 63; [2005] 3
S.C.R. 217 [Contino], Bastarache J. clearly articulated that the
underlining principle relating to child support in the Divorce Act,
R.S.C. 1985, c. 3 (2nd Supp.) (s. 26.1(2)), and the Federal Guidelines (s. 1),
consists of the parents’ “joint financial obligation to maintain the children
of the marriage in accordance with their relative abilities to contribute to
the performance of that obligation" (at paragraph 32).
[8] Once each parent’s obligation vis-à-vis the children is
determined, the higher income parent may be obligated to make child support
payments to the lower income parent as part of his or her performance of said
obligation. However, in the end, the set-off concept does not translate the
parents’ respective obligation to contribute to child rearing into a
"support payment” as defined in the Act.
[9] Thus, the appellant’s argument as to the impact of the Federal
Guidelines on child support payments cannot succeed. Moreover, subsection
118(5.1) of the Act does not apply to the present factual situation. As found
by the Tax Court Judge, "(s)ubsection 118(5.1) was introduced in 2007
presumably to provide relief where both parents do, in fact, pay an amount of
child support" which, as mentioned above, is not the case here. As for the
appellant’s suggestion that subsection 118(5.1) of the Act should be repealed,
it is a matter which only Parliament can address.
[13]
As in Verones,
subsection 118(5) of the Act applies and the Appellant is not
entitled to the tax credit for a wholly dependant person.
[14]
In a letter dated March
14, 2013, counsel for the Respondent informed the court that it was his view
that the decision in Verones applied to the present appeal. I agree.
[15]
On March 18, 2013, the
court asked counsel for the Appellant to provide any written
representations/comments concerning the decision in Verones. Counsel
wrote that a response would be forwarded by April 12, 2013. No response has
been received.
[16]
The appeal is
dismissed.
Signed at Ottawa, Canada, this 29th
day of April 2013.
“V.A. Miller”
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