Elenita A. Baltazar v. Her Majesty the Queen, [1995] 1 CTC 2877

Sarchuk J.T.C.C.:—This is an appeal by Elenita A. Baltazar from assessments of tax for the 1989, 1990, 1991 and 1992 taxation years. The appellant has elected to have the provisions of section 18.1 of the Tax Court of Canada Act apply in respect of her appeal. The issue in each year is the same and arises as follows:

In computing income for the 1989 taxation year the appellant claimed the amount of $6,066 as a basic personal amount in the calculation of the non-refundable tax credit. For the 1991 taxation year the appellant claimed the amount of $5,233 as an amount for a dependent child in the calculation of non-refundable tax credits. With respect to the 1990 and 1992 taxation years she claimed the amount of $5,141 and $5,380 respectively as an equivalent-to-married amount in the calculation of her non-refundable tax credits.

The Minister of National Revenue (the "Minister") assessed the appellant for the 1989, 1990, 1991 and 1992 taxation years by notices of assessment mailed on May 8, 1990, May 15, 1991, June 3, 1992 and May 4, 1993 respectively. Objections followed and ultimately by way of reassessments, notice of which were sent on January 6, 1994, the Minister allowed an additional amount for a dependent child of $392 in the calculation of the non-refundable tax credits for taxation year 1989; disallowed $4,827 with respect to the claim for a non-refundable tax credit for a dependent child, thereby allowing a claim of $406 for a dependent child for the 1991 taxation year; and disallowed the claims for the equivalent-to- married amount, but allowed an amount for a dependent child of $399 and $417 respectively in the calculation of the non-refundable tax credits for the 1990 and 1992 taxation years.

The appellant’s position is that the assessments were based on an incorrect interpretation by the Minister of the provisions of paragraph 118(l)(b) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act"). As I understood her agents’s comments, the appellant also contends that with respect to the taxation years 1990, 1991 and 1992, the Minister initially assessed on the basis that she was entitled to claim the equivalent-to-married amount in her calculation of non-refundable tax credits but subsequently, although the facts had not changed, reversed this position. Her agent also maintained that the equivalent-to-married amount was claimed in accordance with the instructions provided in the tax return guide and those claims were approved by Revenue Canada officials.

The basic facts are not in dispute. The appellant is a single mother resident in Canada who maintained a self-contained domestic establishment. She has a daughter, Helen Kathlene (born on October 1, 1987), who throughout the taxation years in issue lived in the Philippines. At all relevant times the daughter, who was a full-time student, had no income and was dependent upon the appellant.

The question to be determined is whether the appellant is entitled to deduct the equivalent-to-married amount in the taxation years in issue. She takes the position that the Act and the relevant tax return guides create an exception to the requirement that the dependant be a resident of Canada. That exception permits her to claim her daughter as a dependant for the purposes of this deduction even if she is not a resident of Canada.

The Minister takes the position that since the dependent child did not live with the appellant in the taxation years in issue in a self-contained domestic establishment maintained by her the equivalent-to-married amount was properly disallowed.

The relevant section provides in part:

118(1) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted an amount determined by the formula....

(b) in the case of an individual not entitled to a deduction by reason of paragraph (a) who, at any time in the year,

(i) is an unmarried person or a married person who neither supported

nor lived with his spouse and is not supported by his spouse, and

(ii) whether by himself or jointly with one or more other persons, maintains a self-contained domestic establishment (in which the individual lives) and actually supports therein a person who, at that time, is LS

(A) except in the case of a child of the individual, resident in Canada,

(B) wholly dependent for support on the individual, or the individual and such other person or persons, as the case may be,

(C) related to the individual, and

(D) except in the case of a parent or grandparent of the individual, either under 18 years of age or so dependent by reason of mental or physical infirmity,

an amount equal to the aggregate of...

[Emphasis added. I

This subsection is rather awkwardly worded and it is not surprising that it was read by the appellant as entitling her to the appropriate deduction. At first glance one might conclude that the appellant’s position is arguable and the fact that a taxpayer’s child is a non-resident does not disentitle the taxpayer from utilizing the provisions of paragraph 118(l)(b). However, a careful perusal of the relevant provisions leads to a different conclusion, being that other conditions of the paragraph in issue have not been met. I specifically refer to subparagraph (ii) which requires the taxpayer, in addition to maintaining a self-contained domestic establishment, to "actually support therein a person who, at that time, is...except in the case of a child of the individual, resident in Canada" [emphasis added].

This requirement has not been complied with and in my view that failure is sufficient reason for the Minister to assess as he did. As to the exception in clause (ii)(A) I quote with approval the following comments of my colleague O’Connor J. in Ruzicka v. Canada, [1994] 1 C.T.C. 2092:

The reason for the exception in (A) is that there will be cases where a taxpayer will be deemed resident in Canada although actually residing abroad and supporting a child in that residence abroad. For example subsection 250(1) of the Act provides in part:

250(1) For the purposes of this Act, a person shall, subject to subsection (2), be deemed to have been resident in Canada throughout a taxation year if

(a) he sojourned in Canada in the year for a period of, or periods the aggregate of which is, 183 days or more,

(b) he was, at any time in the year, a member of the Canadian Forces, (c) he was, at any time in the year,

(i) an ambassador, minister, high commissioner, officer or servant of Canada, or

(ii) an agent-general, officer or servant of a province,

and he was resident in Canada immediately prior to appointment or employment by Canada or the province or received representation allowances in respect of the year,

(d) he performed services, at any time in the year, in a country other than Canada under a prescribed international development assistance program of the Government of Canada and he was resident in Canada at any time in the three months’ period preceding the day on which such services commenced,

(d.l) he was, at any time in the year, a member of the overseas Canadian Forces school staff who filed his return for the year on the basis that he was a person resident in Canada throughout the period during which he was such a member,

Reference is also made to Interpretation Bulletin IT-513 dated February 3, 1989, which although not binding, succinctly explains the point. Paragraph 19 of the bulletin reads:

An individual who is actually resident in Canada is ordinarily not entitled to the married equivalent tax credit in respect of a non-resident dependant, including the child of the individual, because the dependant is ordinarily not supported in a self- contained domestic establishment in which both the individual and the dependant lived. Where the other requirements of 118(l)(b) are met, an individual who resides abroad but is, by virtue of subsection 250(1), deemed to be resident in Canada, will be entitled to the married equivalent tax credit only in respect of

(a) the individual’s child, or

(b) a person related to the individual who is also deemed to be resident in Canada by virtue of subsection 250(1).

O’Connor J. held that Ruzicks’s claim for the married equivalent tax credit had properly been disallowed. I fully agree with the foregoing interpretation of paragraph 118( 1 )(b) of the Act.

I have concluded that the Minister’s assessments were correct. The appeal is dismissed.

Appeal dismissed.