Robichaud v. R., [1999] 4 CTC 2654, 99 DTC 41

Tardif T.C.J.:

This is an appeal concerning the 1993, 1994 and 1995 taxation years. For those taxation years the respondent determined that the amounts the appellant paid his daughter France did not meet the conditions laid down in the Income Tax Act (“the Act”) for them to be deductible from his income for the years in question.

At the hearing of his appeal the appellant first admitted the accuracy of most of the facts alleged by the respondent in support of the assessment in the Reply to the Notice of Appeal.

He next set out the background to the amounts which he had paid, first to his ex-wife, and then, to his daughter France, during the years at issue, when she was a student.

At the time of their divorce proceedings in 1978 the appellant and his wife had come to an agreement on corollary relief, including support payments. The provisions dealing with support were worded as follows:

[TRANSLATION]

The respondent shall pay the petitioner support in the amount of $50.00 a month for his minor child, payable on the first of each month at the petitioner’s residence; however, the petitioner reserves all her remedies with respect to future support payments.

The appellant further indicated that the judge hearing the divorce proceeding ordered him to increase the amount of the support payment regularly. This is the appellant’s interpretation since the judgment contains no such requirement.

Concerned about this recommendation the appellant subsequently increased the amount in accordance with both his ability to pay and his daughter’s new financial needs, as she was engaged in advanced studies.

Throughout the years following the signature of the agreement the appellant undoubtedly performed his obligations well, since no application for review of the amount was ever made by the recipients of the support. The only initiative in this regard was taken by the appellant himself in December 1995: its purpose was to obtain clarification of the wording regarding support in the judgment of Henri Larue J. dated November 30, 1978. Following this initiative the parties agreed that the 1978 wording should have been as follows:

[TRANSLATION]

Support for Child

2. Paragraph 6 of the agreement on corollary relief confirmed by a judgment of Henri Larue J. dated November 30, 1978 should read as follows:

The respondent shall pay the petitioner support in the amount of $50 a month for his child, payable on the first of each month at the petitioner’s residence;

3. This clause is what should have been written in 1978 and this correction is retroactive to November 30, 1978:

4. Further, the parties confirm that this support payment has been indexed over the years.

The real distinction between the two versions lies essentially in the question of the minority of the recipient child: the wording of the first agreement limited the duration of the obligation to pay, since it referred to the minority of the recipient child.

The appellant indicated that the amendment enabled him to gain a favourable outcome with Revenu Québec and, in his submission, he should ordinarily have had the same result with Revenue Canada, especially as he had been told that no action would be taken on his file until the Revenu Québec decision was known.

Like many taxpayers, the appellant assumed that the settlement with one of the two revenue departments could automatically be set up against the other. The two departments are quite separate entities and the legislation governing them, though similar in a number of respects, is different. Consequently, Revenu Québec’s decisions are not binding on Revenue Canada, and the reverse is also true.

For the payments to be deductible as support, the recipient of the support would have to have had a discretion as to the use of the amounts in question.

Both in its original form and in the corrected version, the agreement on which the support payments were based is very clear and specific as to the complete absence of any discretion regarding use of the payments.

The original 1978 version reads as follows:

[TRANSLATION]

The respondent shall pay the petitioner support in the amount of $50.00 a month for his minor child, payable on the first of each month at the petitioner’s residence; however, the petitioner reserves all her remedies with respect to future support payments.

The 1995 corrected version reads as follows:

[TRANSLATION]

Support for Child

2. Paragraph 6 of the agreement on corollary relief confirmed by a judgment of Henri Larue J. dated November 30, 1978 should read as follows:

The respondent shall pay the petitioner support in the amount of $50 a month for his child, payable on the first of each month at the petitioner’s residence;

3. This clause is what should have been written in 1978 and this correction is retroactive to November 30, 1978:

4. Further, the parties confirm that this support payment has been indexed over the years.

The evidence as to the amounts paid is also unsatisfactory in that those amounts did not result from any judgment or written agreement between the parties.

The appellant, anxious to comply with the wishes of the honourable judge who rendered the divorce decree, unilaterally adjusted and increased over the years the amounts he paid his daughter directly. Moreover, the differences between the amounts paid are quite revealing as to the absence of any constraint; the appellant had the freedom and legal capacity to fix the amounts himself, since no judgment or written agreement limited that freedom.

Although the appellant was generous, co-operative and assiduous in his financial support, that unfortunately is not sufficient in order for the amounts paid to be characterized as deductible support payments. The evidence essentially showed that this was fatherly financial assistance to his daughter, who was pursuing advanced studies.

In this regard the appellant is certainly deserving of our respect and admiration for properly discharging his financial responsibilities toward his daughter. However, such sentiments can neither change nor remedy the situation that actually existed during those years.

To take advantage of the tax benefits associated with the payment of support it was essential that the payments be clearly determined in advance by written agreement or defined by a judgment. Further, it was equally essential that the payment be made to the recipient and that the recipient have full authority and complete capacity regarding use of the money received.

The evidence in the instant case showed that the amounts were in a way discretionary; in other words, the appellant was free to decide on the amount; he alone determined the amount, even though he felt himself bound by the comments made by the judge when the divorce decree was pronounced.

In addition, contrary to the agreement the amounts were not paid to his ex-wife. They were paid to his daughter directly to help her complete her studies. This procedure does not meet the requirements laid down by the Act for support payments to be considered deductible.

Consequently, I dismiss the appeal.

Appeal dismissed.