G Quentin Lake v. Minister of National Revenue, [1982] CTC 2050, 82 DTC 1080

D E Taylor:—These are appeals heard in Vancouver, British Columbia, on October 19, 1981, against income tax assessments for the years 1977 and 1978 in which the Minister of National Revenue had disallowed a claim deduction for alimony in the amount of $10,000 for each year. Mr David Ingram of Cen-ta Tax Services acted for the appellant and filed the following summary of his position:

1. Section 60(b) asks for written agreement and this is looked after by

A. Offer of Feb. 23, 75

B. Accepted by letter of Feb. 28/75 which is further enforced by Mr. Lake paying of tax separately.

C. Cancelled cheques signed by Mr. Lake and endorsed by Mrs. Lake. 2X’s a

month for over 100 months are 100 separate maintenance agreements.

D. 7 Tax forms of G.Q. Lake have “in writing” stated separate & living apart at a different address and 7 corresponding files from J.B. Lake state separate & living apart. All are “certified” under penalty of perjury and duly “registered” each and every year as further written agreements with a competent tribunal, the Department of National Revenue.

E. The tax returns are not “co-signed” but are co-lateral documents and are both signed themselves.

The position of the Minister was outlined in the reply to notice of appeal:

(a) at all relevant times, there was no written Separation Agreement between the Appellant and his wife.

(b) by letter dated February 23, 1975, the Appellant offered to pay his wife $10,000 per year.

(c) by letter dated February 28, 1975, the Appellant’s wife agreed to the proposed

arrangement but asked the Appellant to also pay her income tax.

(d) the exchange of letters described in subparagraphs (b) and (c) herein does not constitute a written agreement.

(e) the amount sought to be deducted in his 1977 taxation year was not an amount paid by the taxpayer pursuant to a Decree, Order or Judgment of a competent tribunal or pursuant to a written agreement, as alimony or other allowance payable on a periodic basis for the maintenance of the recipient thereof, children of the marriage, or both the recipient and children of the marriage, as he was living apart from, but was not separated pursuant to a divorce, judicial separation or written agreement from his spouse, at the time the payment was made and throughout the remainder of the year.

The Minister, in assessing, also relied upon paragraph 60(b) of the Income Tax Act, SC 1970-71-72, c 63, as amended.

Copies of the appellant’s 1977 and 1978 income tax returns (Exhibits A-1 and A-2) were filed with the Board, together with the following document (Exhibit A-3):

Feb. 23/75

Jean,

You will have noticed that the payments into the Park Royal account are different since January. As we discussed last Thurs. they will total $10,000.00 for the year. If any more of the children leave or develop special needs we can discuss changing that amount as required. I am sorry if I left unnecessary anxiety by not taking up the maintenance matter with you formally. I know that $8400.00 was a bit rough to manage on.

Regards

(Sgd) Quentin

Feb. 28/75

Quentin —

The arrangement on the payments will be O.K. — to total $10,000 for the year.

However, I would like you to also pay my income tax when you get your refund as I cannot handle it.

(Sgd) Jean.

Jean

Formerly (510 + 320) but since two rent increases it is better for me to go (530 + 300) So last cheque was

300 - 30.00 = $270.00 (ski boots)

Are you still paying Terry an income?

(Sgd) Quentin

It was noted by the agent for the appellant that Exhibits A-1 and A-2 showed the appellant’s address in 1977 and 1978 to have been 2033 Comox St 101, Vancouver, BC; that he had clearly indicated on each return, in the appropriate space provided, that he was “separated” from his wife; that he had given his wife’s address as 3710 Glenview Cr, North Vancouver, BC; and that in reference to the $10,000 deduction in each case, he had provided the name of his wife and the appropriate reference paragraph in the relevant Income Tax Information booklet. As Mr Lake saw it, he had done all he could do to fulfill the requirements relative to the deduction in filing his return. His payments to Mrs Lake had been regular and bi-monthly, totalling the $10,000 in each year. In questioning Mr Lake, the agent for the appellant noted that section 60.1 of the Income Tax Act had been enacted effective May 6, 1974, and if there was any question raised by the Minister regarding payment, that section would be operative. The agent concentrated his initial argument on the assertion that the documentation filed, together with the explanatory testimony of the appellant regarding that documentation, provided a “written agreement” since no particular form of written agreement was specified under the Act. Further, the “$10,000 per year” was sufficient to qualify as an allowance, whether it was paid bi-monthly or annually.

Counsel for the Minister noted that the respondent did not agree with the points made by Mr Ingram. However, for purposes of these appeals, the issue did not rest with whether or not the appellant had made the payments under a written agreement so to do (the argument proposed by the agent), but the point in dispute was whether or not the appellant “was separated pursuant to .. . a . . . written agreement . . a vital requirement under paragraph 60(b) of the Act. Counsel’s point was simply that while both “written agreement” requirements under that section (that for “payment” and that for “separation”) might be and usually were contained in one covering agreement, it was at least possible (although unusual) that they could be supported in separate written agreements. If so, a written agreement regarding “separation” of necessity would have to be in existence before the payments claimed could be deductible. Therefore, according to counsel, even if Exhibit A-3 theoretically could qualify as the “written agreement” supporting payment, it did not, nor did the income tax returns filed fulfill the requirements for a “written agreement” regarding separation.In fact, in the instant case, there was nothing whatsoever to substantiate that the couple had, by written agreement, separated. There was of course no “divorce” or “judicial separation”, the other possible qualifying elements of paragraph 60(b). Counsel was mindful of the fact that under the stressful circumstances of a parting of the ways by two people, that it was often difficult to provide for such a “written agreement”, and counsel recognized that one party or the other might indeed be reluctant to so formalize the apparent break. But that did not alter the specific requirements under the Act upon which, and only upon which such a deduction could be claimed. Paragraph 60(c) of the Act could not apply in the circumstances of this case since there was no “order of a competent tribunal” upon which the appellant could base his claim. Paragraph 60(c) does not provide for a claim based upon a “written agreement”. Accordingly, it was the responsibility of the appellant to fit himself within the parameters of paragraph 60(b) of the Act.

Mr Ingram, in response to the soundness of counsel’s argument, diverted his attention to section 60.1 and, in particular, to the word therein “variation”. It was the agent’s interpretation of section 60.1 that Parliament intended in enacting it to broaden and diversify the basic requirements for a written agreement contained in the earlier enacted wording of paragraph 60(b) of the Act. In effect, that “variation” should include more flexible formats than the old fashioned standard contract form signed and accepted by both parties signifying and formalizing their separation. In the instant case, according to the agent, the material inherent in the filed tax returns of the appellant (noted above) was just such a variation and fulfilled Parliament’s intention.

I would not presume to interpret the intention of Parliament and I do not believe it to be the role of the Board so to do. Rather, it is for the Board to interpret the words used by Parliament to express its intention, whatever that may have been. Section 60.1 of the Act does permit certain flexibility in the payment process, not specifically permitted in paragraph 60(b). However, it is operative only with regard to a “decree, order, judgment or written agreement” made after May 6, 1974, and that is no change from paragraph 60(b) other than the addition of the term “decree”, which can hardly be interpreted as less rigid than a “written agreement”. The operative term “any variation thereof” should be interpreted as having application only to any variation of a “decree, order, judgment or written agreement" prepared prior to May 6, 1974 in my view. It has already been noted in this decision that the correspondence between the parties (Exhibit A-3), which is the only documentation prior to that date, does not fulfill the requirements of the “written separation agreement” called for under paragraph 60(b) of the Act, irrespective of whether they might fulfill the requirements of that section for purpose of consideration as “alimony or other allowance payable”. That same documentation cannot be compressed or subverted into serving that purpose merely by concentrating on the modifications to the deductibility process to be seen in section 60.1 of the Income Tax Act.

The appeals are dismissed.

Appeals dismissed.