Jean Lamothe v. Minister of National Revenue, [1983] CTC 2276, 83 DTC 229

Guy Tremblay [TRANSLATION]:—This appeal was heard June 17, 1982, in the City of Montreal (Quebec).

1. The Matter in Dispute

In dispute is whether the appellant, in computing his income for the 1976, 1977 and 1978 taxation years, is entitled to claim, first, child care expenses, and second, legal costs pertaining to the applications filed by his wife in Court.

2. The Burden of Proof

2.01 The burden of proof rests with the appellant, who must show that the assessments of the respondent are unjustified. This burden of proof derives not from any specific section of the Income Tax Act, SC 1970-71-72, c 63, as amended, but from a number of judicial decisions, including a decision handed down by the Supreme Court of Canada in Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

2.02 The allegations of the respondent are set forth in the three replies to the notices of appeal, and may be summarized as follows:

(a) In 1976, 1977 and 1978, the appellant claimed the sums of $3,274.77, $1,785.91 and $3,422.07 respectively as expenses in computing his income, which sums were paid to a housekeeper who, in addition to performing household tasks, cared for the appellant’s son;

(b) Also, for the 1977 and 1978 years, the appellant claimed the sums of $805 and $500 respectively as legal costs incurred in these two years with respect to two applications filed by his wife: one, in 1977, seeking a temporary living allowance, and the other, in 1978, seeking a divorce;

(c) In three notices of assessment issued December 22, 1980, the respondent disallowed the legal costs as well as the costs of the housekeeper, but agreed to deduct the child care expenses as of June 16, 1977, after which date the appellant lived apart from his wife and had custody of one child.

3. The Facts

3.01 During 1976, 1977 and 1978, the appellant was employed by Hydro- Québec as a project coordinator and his net earnings were: $36,710.87 (1976), $36,260.12 (1977) and $46,535.40 (1978).

3.02 During the years in question, the appellant had two children. One of these, born in 1970, was mentally handicapped and 95% visually handicapped. In respect of this son the appellant claimed $1,310 (1976), $1,420 (1977) and $1,520 (1978) as a disability deduction. These expenses were deducted and are not in dispute in this action.’

3.03 Throughout all of 1976, the appellant was legally married and lived with his wife and two children.

3.04 In 1977, the appellant and his wife were awaiting a divorce. A judgment on the application for temporary measures handed down June 16, 1977, awarded the appellant custody of his children. In his income tax return, the appellant stated he had been separated from his wife for 38 weeks and had had hired help for 19 weeks.

3.05 During the years in question, the following expenses were claimed by the appellant and disallowed in whole or in part by the respondent as indicated:

4. The Act—Case Law—Analysis

4.01 The Act

The main legal provision involved in the present action is section 63 of the Income Tax Act, which reads as follows:

63 (1) There may be deducted in computing the income for a taxation year of a taxpayer who is

(a) a woman, or

(b) a man

(i) who at any time in the year was not married,

(ii) who at any time in the year separated from his wife pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written agreement,

(iii) whose wife is certified by a qualified medical practitioner to be a person who,

(A) by reason of mental or physical infirmity, and her confinement throughout a period of not less than 2 weeks in the year to bed, to a wheelchair or as a patient in a hospital, asylum or other similar institution, was incapable of caring for children, or

(B) by reason of mental or physical infirmity, was in the year, and is likely to be for a long-continued period of indefinite duration, incapable of caring for children, or

(iv) whose wife was confined to prison throughout a period of not less than 2 weeks in the year,

amounts paid by the taxpayer in the year as or on account of child care expenses in respect of the taxpayer’s children, to the extent that

(c) payment of the amounts is proven by filing with the Minister receipts each of which contains the Social Insurance Number of any individual payee who issued the receipt, and

(d) the aggregate of the amounts so paid by the taxpayer in the year does not exceed the lease of

(i) $4,000,

(ii) the product obtained when $1,000 is multiplied by the number of the taxpayer’s children in respect of whom the child care expenses were incurred, and

(iii) 24 of the taxpayer’s earned income for the year.

63 (2) For the purposes of subsection (1),

(a) where the taxpayer is a man, subparagraph (1)(d)(i) shall be read as follows:

“(i) the lesser of $4,000 and an amount equal to the product obtained when the number of weeks in the year throughout which

(A) he was not married,

(B) he was separated from his wife pursuant to a written agreement, or

(C) his wife was confined as described in clause (b)(iii)(A) or subparagraph (b)(iv) or was incapable as described in clause (b)(iii)(B),

as the case may be, is multiplied by the lesser of $120 and the product obtained when $30 is multiplied by the number of children in respect of whom the child care expenses were incurred”; and

(b) where the taxpayer is a wife described in subparagraph(1)(b)(iii) or (iv),

(i) subparagraph (1)(d)(i) shall be read as follows:

“(i) $4,000 minus the amount deductible by virtue of this section in computing the income for the year of the taxpayer’s spouse”, and

(ii) subparagraph (1 )(d)(ii) shall be read as follows:

(ii) “the amount, if any, by which

(A) the product obtained when $1,000 is multiplied by the number of his children in respect of whom the child care expenses were incurred, exceeds

(B) the amount deductible by virtue of this section in computing the income for the year of the taxpayer’s spouse”.

63 (3) In this section,

(a) “child care expenses” of a taxpayer means an expense incurred by the taxpayer for the purpose of providing in Canada, for any child of the taxpayer, child care services including baby sitting services, day nursery services or lodging at a boarding school or camp, if

(i) the child was, during the year, ordinarily in the custody of the taxpayer

and

(A) under 14 years of age, or

(B) 14 years of age or over and dependant by reason of mental or physical infirmity,

(ii) the services were provided to enable the taxpayer

(A) to perform the duties of an office or employment,

(B) to carry on a business either alone or as a partner actively engaged in the business,

(C) to undertake an occupational training course in respect of which he received an adult training allowance paid to him under the Adult Occupational Training Act, or

(D) to carry on research or any similar work in respect of which he received a grant, and

(iii) the services were provided by a resident of Canada other than a person

(A) in respect of whom a deduction has been made under section 109 in computing the taxable income for the year of the taxpayer or his spouse, or

(B) who, during the year, was under 21 years of age and connected with the taxpayer or his spouse by blood relationship, marriage or adoption, except that

(iv) any such expenses incurred in the year for a child’s lodging at a boarding school or camp, to the extent that the aggregate thereof exceeds the product obtained when $30 is multiplied by the number of weeks in the year during which the child was so lodged, and

(v) for greater certainty, any expenses described in paragraph 110(1)(c) and any other expenses that are incurred for medical or hospital care, clothing, transportation or education or for board and lodging (except as otherwise expressly provided in this paragraph),

are not child care expenses; and

(b) “earned” income of a taxpayer means the aggregate of

(i) all salaries, wages and other remuneration, including gratuities, received by him in respect of, in the course of, or by virtue of offices and employments, and all amounts included in computing his income by virtue of sections 6 and 7,

(ii) amounts included in computing his income by virtue of paragraph 56(1)(m), (n) or (o), and

(iii) his incomes from all businesses carried on either alone or as a partner actively engaged in the business.

63 (4) For the purposes of this section, it shall be assumed that a child of a woman and a man who were living together without being married to each other was ordinarily in the custody of the woman and not in the custody of the man.

4.02 Case Law

The respondent’s counsel referred to the following case law:

1. Stella Bliss v The Attorney General of Canada, [1979] 1 RCS 183

2. Vincenzo Prata v MMI, [1976] 1 RCS 376;

3. A ttorney General of Canada v Cumming et al, 79 DTC 5303;

4. Luis Ayala v The Queen, [1978] CTC 2299; 78 DTC 1262; and [1979] CTC 111; 79 DTC 5083;

5. Guy A Hurtubise v MNR, [1978] CTC 2338; 78 DTC 1264;

6. Robert Martin v MNR, [1980] CTC 2006; 80 DTC 1011;

7. No 68 v MNR, 7 Tax ABC 110; 52 DTC 333;

8. Thomas Harry Benton v MNR, 6 Tax ABC 230; 52 DTC 196;

9. No 431 v MNR, 17 Tax ABC 300; 57 DTC 354;

10. Joseph Lebeau v MNR, 21 Tax ABC 272; 59 DTC 114;

11. Mary Duncan Burns Macquistan v MNR, 38 Tax ABC 23; 65 DTC 236;

12. Gilles Nadon v MNR, 40 Tax ABC 33; 66 DTC 1;

13. Louise Margaret Pipe v MNR, 41 Tax ABC 132; 66 DTC 388;

14. John Law/or v MNR, [1970] Tax ABC 369; 70 DTC 1248;

15. The Queen v Dr Beverley A Burgess, [1981] CTC 258; 81 DTC 5192;

16. Samuel Solomon v MNR, [1978] CTC 3039; 78 DTC 1760;

17. Rita Corbeil-Labelle v MNR, [1978] CTC 3226; 78 DTC 1892.

4.03 Analysis

4.03.1 Pursuant to paragraph 63(1 )(d), the appellant is entitled to claim the sum of $1,000 by way of child care expenses for his handicapped child where his wife lived apart from him for the entire year.

With regard to the 1978 year, the maximum of $1,000 should apply according to the legal provision. Since the sum of $3,422.07 actually spent is obviously greater than $1,000, can the Board allow more? As the Income Tax Act should be strictly interpreted, and as the Board is bound by the Act, it cannot allow more than the Act stipulates.

4.03.2 With regard to the 1977 year, the evidence shows that the appellant lived apart from his spouse, in accordance with the Court’s judgment, from June 16, 1977, onwards (para 3.04), that is for 28 weeks. Paragraph 63(2)(a) of the Act cited above stipulates that one of the lesser amounts to be taken into account is the number of weeks multiplied by the product obtained when $30 is multiplied by the “number of children in respect of whom the child care expenses were incurred”. In the present case, as there is only one child, the final product is therefore $840 (28 * 30 * 1).

The respondent, in computing the exemption, took only 19 weeks into account, or the number for which the appellant stated he had hired help (para 3.04), and thus allowed only $570 (19 * 30 * 1). I do not think a strict interpretation of the Act allows for such a computation. The Act says the number of weeks he has been separated from his wife pursuant to a written agreement (or, more specifically here, a judgment). It is therefore my view that the appellant is entitled to the total 28 weeks, even though he had hired help for only 17 weeks, provided the product does not exceed the amount actually spent, that is $2,355.91, which amount is not in dispute. Thus, the sum of $840 should be allowed for the 1977 year.

4.03.3 With respect to the 1976 year, no amount may be allocated since the appellant’s wife was living with him for the entire year (para 3.03).

4.03.4 As for legal expenses pertaining to the divorce proceedings (para 3.05), the Board is bound by the Federal court decision in The Queen v Dr Beverley A Burgess, (supra) in which Mr Justice Cattanach ruled that legal expenses of this nature could not be eligible for deduction in computing income.

5. Conclusion

The appeals are allowed in part and the whole matter referred to the respondent for new assessments based on the reasons for judgment outlined above.

Appeal allowed in part.