Laurence Gifford v. Minister of National Revenue, [1991] 2 CTC 2254, 91 DTC 953

Mogan, T.CJ.:— The appellant and his former wife whom I I shall refer to as "W" were married in 1975. There were two children born of the marriage: Laura born in 1976 and Graham born in 1981. The appellant and W separated in 1986 and, according to minutes of settlement dated September 30, 1986, they agreed to shared custody of the two children upon the following terms:

(c) Commencing with the evening of Sunday, September 28, 1986, the children shall reside as follows:

(i) first week: Laura with father Graham with mother

(ii) second week: Laura and Graham with father

(iii) third week: Laura with mother Graham with father

(iv) fourth week: Laura and Graham with mother

(v) the above change of residence shall occur on the Sunday evening of each and every week, upon the completion of the above forth week cycle, said will repeat.

When this appeal was heard in May 1991, the above four-week cycle had been in operation since 1986 subject to certain lengthy periods when Graham had required hospitalization to treat consequences of Down's syndrome.

The only document which the appellant produced in evidence was a copy of his Decree Nisi dated May 2, 1988 which incorporated the shared custody provisions from the minutes of settlement dated September 30, 1986. The Decree Nisi also provided "that the husband shall pay child support to the wife in the amount of $700 per month ($350 per child per month) commencing October 1, 1987”. The taxation years under appeal are 1987 and 1988. For those two years, the appellant was required to pay to W the following amounts pursuant to an order or judgment of a competent tribunal:

The appellant in fact paid the above amounts to W in accordance with the order or judgment and he deducted those amounts in computing his income under section 60 of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72,

c. 63) (the "Act"). The respondent allowed the deductions and so there is no issue concerning those amounts.

The primary issue in this appeal is whether the appellant is entitled to deduct what is referred to as the “equivalent to married amount" with respect to one of his children. For 1987, it was a deduction in computing taxable income under section 109 of the Income Tax Act. For 1988, it was a deduction of a non-refundable tax credit under section 118 of the Act. Because of the significant change in the legislation, I shall have to consider each year separately. For 1987, the relevant provisions of section 109 read as follows:

109.(1) For the purpose of computing the taxable income of an individual for a taxation year, there may be deducted such of the following amounts as are applicable:

(a) in the case of an individual who, during the year, was a married person who supported his spouse, an amount equal to the aggregate of

(i) $1,600, and

(ii) $1,400 less the amount, if any, by which the spouse's income for the year while married exceeds $200;

(b) in the case of an individual not entitled to a deduction under paragraph (a) who, during the year,

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

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

(ii) whether by himself or jointly with one or more other persons, maintained a self-contained domestic establishment (in which the individual lived) and actually supported therein a person who, during the year, was

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

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

(C) connected, by blood relationship, marriage or adoption, with the taxpayer, or the taxpayer and such person or persons, as the case may be,

an amount equal to the aggregate of

(iii) $1,600, and

(iv) $1,400 less the amount, if any, by which the income for the year of the dependent person exceeds $200;

One can easily see why the deduction permitted by paragraph 109(1)(b) is referred to as the “equivalent to married amount”. Under paragraph 109(1)(b), the appellant deducted $3,700 (the correct adjusted amount for 1987) with respect to his daughter Laura. The first question is whether the appellant satisfies the conditions in that paragraph.

In order to construe the provisions of paragraph 109(1)(b), it is necessary to read that paragraph in conjunction with subsections 109(2) and (4) which contain special rules applying to that paragraph. For convenience, I shall repeat only the relevant parts of paragraph 109(1)(b) and all of subsections 109(2) and (4)

(b) in the case of an individual . . . who, during the year,

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

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

(ii) whether by himself or jointly with one or more other persons, maintained a self-contained domestic establishment (in which the individual lived) and actually supported therein a person who, during the year, was

(A) . . .

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

(C) connected, by blood relationship, marriage or adoption, with the taxpayer, or the taxpayer and such person or persons, as the case may be,

109.(2) For the purpose of a deduction under paragraph (1)(b), the following rules apply:

(a) no deduction may be may made under that paragraph by any taxpayer in respect of more than one person;

(b) where a taxpayer is entitled to a deduction under that paragraph in respect of any person described therein neither the taxpayer nor any other taxpayer is entitled to deduction under paragraph (1)(d) in respect of that person; and

(c) no more than one taxpayer is entitled to a deduction under that paragraph in respect of the same person or the same domestic establishment, and in the event of failure on the part of two or more taxpayers otherwise entitled to a deduction under that paragraph to agree as to the taxpayer by whom the deduction may be made, no deduction thereunder may be made by either or any of them.

109.(4) Where a taxpayer is entitled to a deduction in computing his income for a taxation year under paragraph 60(b), (c) or (c.1) in respect of a payment for the maintenance of a spouse or child, the spouse or child shall, for the purposes of this section, be deemed not to be the spouse or child of the taxpayer.

Having regard to subsection 109(4), the appellant was entitled to a deduction in computing his income for 1987 under paragraph 60(b), (c) or (c.1) in respect of payments for the maintenance of the two children (see part of the Decree Nisi quoted above). Therefore, the two children (Laura and Graham) shall, for the purposes of section 109, be deemed not to be the children of the appellant. With this important "deeming" provision in mind, I shall determine whether the appellant can satisfy the conditions in subparagraph 109(1)(b)(ii). All of clauses (A), (D) and (C) are conjunctive. In other words, all three must be satisfied.

After separating from W, the appellant lived with his mother and, in those weeks when he would have custody of Laura or Graham or both children, they would reside in the self-contained domestic dwelling where the appellant and his mother lived. If "during the year" means "throughout the ear” then neither child was "wholly dependent for support" on the appellant or W throughout 1987. In Thomson v. M.N.R., [1946] S.C.R. 209; [1946] C.T.C. 51; 2 D.T.C. 812 a majority of the judges in the Supreme Court of Canada rejected the argument that "during the year” meant "throughout the year". Also, an Interpretation Bulletin (IT-191R2, May 29, 1987) issued by the respondent contains the following statement:

2. The expression “during the year", as it appears throughout section 109, means “at any time in the year", rather than "throughout the whole of the year". For instance, a dependent child reaching the age of 21 in a taxation year is under 21 years of age during that year.

I would not ordinarily use an Interpretation Bulletin as an aid in construing the Income Tax Act. But when the respondent's suggested interpretation of section 109 is consistent with high judicial authority and supports the appellant's case, I am more inclined to accept the interpretation which is in effect put forward by both parties.

Applying the above interpretation of the words "during the year" where they appear in paragraph 109(1)(b) and in subparagraph 109(1)(b)(ii), I find that, at some time in 1987, the appellant jointly with his mother maintained a self- contained domestic establishment in which the appellant lived and that he actually supported therein a person (i.e., Laura) who, at some time in 1987, was wholly dependent for support on the appellant. This finding satisfies the condition in clause (B). Similarly, Laura would easily satisfy the condition in clause (A) because she was resident in Canada at all material times. This leaves clause (C) as the remaining condition in subparagraph 109(1)(b)(ii).

Laura, as the appellant's daughter, was connected by blood relationship with the appellant and his mother (Laura's grandmother) within the meaning of subsection 251(6) of the Act. But, under subsection 109(4), Laura is deemed not to be the child of the appellant for the purposes of section 109. And if Laura is deemed not to be the appellant's child, then she is not connected by blood relationship with the appellant or his mother. In my view, the appellant's claim to deduct the equivalent to married amount under paragraph 109(1)(b) fails because he cannot satisfy the condition in clause 109(1)(b)(ii)(C).

I specifically have not considered whether the appellant satisfies the condition in subparagraph 109(1)(b)(i) as affected by subsection 109(4) because the conditions in subparagraphs 109(1)(b)(i) and (ii) are conjunctive, as are the conditions in clauses (A), (B) and (C); and his failure to satisfy clause (C) is fatal to his claim under paragraph 109(1)(b) for 1987.

Having regard to the provisions of paragraphs 109(2)(b) and (c), the shared custody arrangement and certain oral testimony given by the appellant, I am puzzled as to why the respondent did not apply to this Court under subsection 174(1) of the Income Tax Act for the determination of a question concerning the appellant, W and the wholly dependent status of Laura and Graham.

For 1987, the appellant also deducted in computing taxable income under paragraph 110(1)(e.1) of the Act the amount of $1,445 with respect to Graham's disability. The relevant words of paragraph 110(1)(e.1) are as follows:

110. (1) For the purpose of computing the taxable income of a taxpayer for a taxation year, there may be deducted such of the following amounts as are applicable;

(e.1) where the taxpayer has claimed, in respect of a person resident in Canada at any time in the year who was entitled to a deduction for the year under paragraph (e), a deduction under

(i) paragraph 109(1)(b), or

(ii) paragraph 109(1)(d), where that person was his child or grandchild,

or could have claimed such a deduction had that person no income for the year the amount, if any, by which $1,000 exceeds that person’s taxable income for the year (computed before taking any deduction under paragraph (e));

Graham was certainly resident in Canada during 1987 and, although the point was not argued, I shall assume that Graham would have been entitled to a deduction for 1987 under paragraph 110(1)(e). In order to qualify for a deduction under paragraph 110(1)(e.1), the appellant must have actually claimed a deduction under paragraph 109(1)(b) or (d) or been permitted to claim such a deduction if Graham had no income for 1987. On the evidence, it is clear that the appellant did not claim a deduction under paragraph 109(1)(b) or (d) with respect to Graham for 1987. The critical question is whether the appellant “could have claimed such a deduction".

When reviewing the first issue in this appeal as to whether the appellant was entitled to deduct the “equivalent to married amount" with respect to Laura, I decided that Laura was not connected by blood relationship with the appellant or his mother in 1987 because, under subsection 109(4), Laura was deemed not to be the child of the appellant. The same principle applies to Graham. The appellant could not have claimed a deduction under paragraph 109(1)(b) with respect to Graham. Also, the appellant could not have claimed a deduction under paragraph 109(1)(b) with respect to Graham because Graham would be a "dependent" of the appellant under subsection 109(6) only if he were the appellant's child; and Graham is deemed not to be the child of the appellant under subsection 109(4).

Therefore, the appellant cannot deduct any amount under paragraph 110(1)(e.1) with respect to Graham because he cannot satisfy the basic condition of having claimed a deduction under paragraph 109(1)(b) or having been permitted to claim such a deduction with respect to Graham for 1987. In summary, the appeal for 1987 must be dismissed because the only two issues for that year were the deduction for the equivalent to married amount under paragraph 109(1)(b)) and the deduction for a disabled dependent under paragraph 110(1)(e.1).

The deductions which the appellant had claimed in 1987 in computing taxable income under paragraphs 109(1)(b) and 110(1)(e.1) were, in 1988, converted into deductions of non-refundable tax credits under paragraphs 118(1)(b) and 118.3(2)(a) respectively. For 1988, the appellant claimed $5,000 with respect to Laura for the equivalent to married amount and he claimed $1,618 with respect to Graham for a disabled dependent; and he used those two amounts as the basis for non-refundable tax credits. For all practical purposes, the words in paragraph 118(1)(b) for 1988 are the same as the words in paragraph 109(1)(b) for 1987; and the words in paragraph 118.3(2)(a) for 1988 are similar to the words in paragraph 110(1)(e.1) for 1987. Also, the words in subsection 118(5) for 1988 are almost identical to the words in subsection 109(4) for 1987.

By applying to the appeal for 1988 the same reasoning that I applied above to the appeal for 1987, I have concluded that the appellant is not entitled to a non-refundable tax credit with respect to Laura as the equivalent to married amount under paragraph 118(1)(b) because, under subsection 118(5), Laura is deemed not to be the child of the appellant.

Similarly, I have concluded that the appellant is not entitled to a non- refundable tax credit with respect to Graham as a disabled dependent under paragraph 118.3(2)(a) because, under subsection 118(5), Graham is deemed not to be the child of the appellant.

Hearing the appellant plead his own case, there would appear to be certain equities running in his favour but, in my view, the legislation has anticipated and prohibited the possibility of two or more adults claiming a deduction with respect to the same dependent child in these circumstances.

The appellant has also raised a constitutional argument in his notice of appeal. He states that if the legislation reviewed above would otherwise prohibit the deductions which he has claimed, then such legislation is unconstitutional because it provides for gender discrimination because "in the vast majority of cases of this type it is the ex-husband who pays support”. Even if I assume that the husband/father pays support in most cases, I would not conclude that the above legislation violates section 15 of the Charter of Rights and Freedoms. I adopt the reasoning of Garon, J. in Tiberio v. M.N.R., [1990] 2 C.T.C. 2545; 91 D.T.C. 17 in which he quotes the following passage from the judgment of McIntyre, J. in the decision of the Supreme Court of Canada in Andrews v. The Law Society of British Columbia, [1989] 1 S.C.R. 143; 56 D.L.R.

(4th) 1 at 182 (D.L.R. 23-24):

However, in assessing whether a complainants rights have been infringed under s. 15(1), it is not enough to focus only on the alleged ground of discrimination and decide whether or not it is an enumerated or analogous ground. The effect of the impugned distinction or classification on the complainant must be considered. Once it is accepted that not all distinctions and differentiations created by law are discriminatory, then a role must be assigned to s. 15(1) which goes beyond the mere recognition of a legal distinction. A complainant under s. 15(1) must show not only that he or she is not receiving equal treatment before and under the law or that the law has a differential impact on him or her in the protection or benefit accorded by law but, in addition, must show that the legislative impact of the law is discriminatory.

In my view, the legislative impact of paragraphs 109(1)(l)) and 110(1)(e.1) of the Income Tax Act is not discriminatory. Nor is the legislative impact of paragraphs 118(1)(b)) and 118.3(2)(a) discriminatory. Those provisions are part of a rational scheme without gender discrimination which permits deductions with respect to dependent persons. If two separating parents can agree on some form of shared custody for their children, there may be an opportunity to allocate alimony or maintenance payments between or among two or more children in a manner which would permit each parent by agreement to claim the equivalent to married amount. Whether such opportunity exists would have to be tested in a particular set of circumstances. The appeals herein are dismissed.

Appeals dismissed.