Michel Fortin v. Minister of National Revenue, [1979] CTC 2907, 79 DTC 751

Guy Tremblay [TRANSLATION]:—This case was heard at Rouyn, Quebec on June 4, 1979.

1. Point at Issue

The question is whether the appellant is correct in deducting in the calculation of his income for the 1975 taxation year the sums paid by the appellant in settlement of his wife’s taxes, the whole in accordance with separation and divorce decrees.

2. Burden of Proof

The burden is on the appellant to show that the respondent’s assessment is incorrect. This burden of proof derives not from one particular section of the Income Tax Act, but from a number of judicial decisions, including the judgment of the Supreme Court of Canada in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. Facts

The facts are not really in dispute.

3.01 In the 1975 taxation year, the appellant was legally separated from his wife by a decree of the Superior Court, No 818-115, dated December 28, 1971 (Exhibit A-1).

3.02 This decree provided for a monthly payment of $1,800 as alimony.

3.03 The conclusions of the decree further required the appellant to pay the amount of tax payable on the alimony. These conclusions read as follows:

And the respondent shall send the petitioner, when necessary, money to pay taxes on this alimony.

3.04 By a judgment of the Superior Court, divorce side, No 605-12-000149-75, dated August 18, 1975, the appellant obtained a decree nisi (Exhibit A-2).

3.05 In its first paragraph the conclusions of this decree provided for a weekly payment of $200, or $400 semi-monthly, as alimony.

3.06 The conclusions of the decree further required the appellant in the case at bar to pay:

All her arrears of taxes, federal as well as provincial, which represents the sum of approximately $12,000.

3.07 The fourth paragraph of the same decree further provided the following:

Petitioner Dr Michel Fortin further undertakes to pay the tax of respondent, Dame Gloria Fortin, for 1975 up to the date of this decree.

The appellant thereafter had no further obligation to pay his wife’s taxes.

3.08 In calculating his income for 1975 the appellant claimed as a deduction the sum of $29,999 paid, in the appellant’s submission, as alimony in accordance with the two aforementioned decrees.

3.09 By a notice or re-assessment, dated October 12, 1977, the respondent included in calculating the appellant’s income as taxable income a part of the amount claimed as a deduction, namely the sum of $12,699.

3.10 This amount of $12,699 represents, in the appellant’s submission, the total sum spent by the latter in 1975 to pay the taxes of Dame Gloria Fortin relating to alimony, and this amount may be broken down for greater precision as follows:

4. Act— Case Law—Comments

4.1 Act

Paragraph 60(b) and section 60.1 of the new Income Tax Act are the ones particularly concerned in the case at bar:

60. Other deductions.

There may be deducted in computing a taxpayer’s income for a taxation year such of the following amounts as are applicable:

(b) Alimony payments.—An amount paid by the taxpayer in the year, 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, if he was living apart from, and was separated pursuant to a divorce, judicial separation or written separation agreement from, his spouse or former spouse to whom he was required to make the payment at the time the payment was made and throughout the remainder of the year;

60.1 Maintenance payments.

Where, after May 6, 1974, a decree, order, judgment or written agreement described in paragraph 60(b) or (c), or any variation thereof, has been made providing for the periodic payment of an amount by the taxpayer to or for the benefit of his spouse, former spouse or children of the marriage in the custody of the spouse or former spouse, the amount or any part thereof, when paid, shall be deemed to have been paid to and received by his spouse or former spouse if the taxpayer was living apart from the spouse or former spouse at the time the payment was received and throughout the reminder of the year in which the payment was received.

4.2 Case Law

Counsel for the respondent cited the following cases:

1. Carl Caleb Cotton v The Queen, [1976] CTC 406; 76 DTC 6232;

2. The Queen v Gerald G Fisch, [1978] CTC 438; 78 DTC 6332;

3. Gerhard Hausmann v MNR, [1978] CTC 3038; 78 DTC 1757;

4. The Queen v Morton Pascoe, [1975] CTC 656; 75 DTC 5427;

5. Peter D L Roper v MNR, [1977] CTC 602; 77 DTC 5408;

6. Takis P Vellotis v The Queen, [1974] CTC 237; 74 DTC 6190;

7. The Attorney General of Canada v James C Weaver and Freda J Weaver, [1975] CTC 646; 75 DTC 5462;

8. Gordon A Bryce v MNR, [1978] CTC 3144; 78 DTC 1833;

9. Wayne Bruce Biles v MNR, [1979] CTC 2411; 79 DTC 358.

4.3 Comments

4.3.1 The conditions on which a payment provided for in paragraph 60(b) will be allowed as a deduction are the following:

1. the sum must be paid under a decree or written agreement;

2. as alimony or other allowance;

3. payable on a periodic basis;

4. for the maintenance of the recipient and/or children of the marriage.

4.3.2 Pursuant to a decree

The decrees (Exhibit A-1 and A-2) fulfil the first condition. The taxes were paid pursuant to these decrees, the latter (Exhibit A-2) confirming the former (Exhibit A-1).

4.3.3 Alimony or allowance

Was the amount for taxes alimony? In Takis P Veliotis, cited above, one aspect of alimony is emphasized:

Alimony is a periodic allowance not only in the sense that the person paying must make payments at regular intervals, but also in the sense that at regular intervals the person paying must provide an adequate amount to maintain the beneficiary until the next payment.

Since there is no definition of “alimony” in the Act, reference must be made to the dictionary to determine its true meaning. The Petit Dictionnaire Larousse, under the word “alimentaire”, states: “pension alimentaire, pension destinée à assurer la subsistance du créancier et de sa famille. (Son montant est en fonction des besoins du créancier et des possibilités du débiteur; parfois, on peut l’acquitter en nature)”—alimony: a payment designed to provide for the maintenance of the recipient and the family. (Its amount depends on the needs of the recipient and the payer’s finances; it may sometimes be paid in kind.)

The same dictionary defines the word “subsistance” as “nourriture et entretien” (food and upkeep).

The ‘‘Petit Robert” defines the word “subsistance” as “ce qui sert à assurer l’existence matérielle”—a provision for material needs.

Under the word ‘‘alimony’’, which is the translation of “pension alimentaire”, the Living Webster states: “A monetary allowance made by a man for the support of a woman divorced or legally separated from him”.

In my opinion the word ‘‘alimony” necessarily implies an amount paid to fulfil the ordinary obligations or meet the regular needs of the person or persons receiving it: food, clothing, accommodation and so on. Are taxes payable an obligation of this kind? The Board believes that they are. Taxes are part of life and form part of the ordinary obligations of a citizen, unless sweeping changes occur in the economic life of the world. It is hardly necessary to repeat the words of Benjamin Franklin: “In this world nothing is certain but death and taxes”.

Another point to be considered is that if the decree had not provided specifically that the taxes payable by the wife would be reimbursed by the appellant, his wife would nonetheless have had to pay them out of the sum of $1,800 received monthly. This was her obligation as a citizen. I do not think that providing for reimbursement of taxes causes the latter to lose their nature as a fundamental obligation.

The Board is of the opinion that the amounts provided for taxes form part of the alimony paid by the appellant, although the decree granting the alimony distinguished between the “alimony” and the taxes payable upon it.

4.3.4 Payable on a periodic basis

In Morton Pascoe, cited above, it is again clearly specified that “the periodicity required by the statute refers to the manner in which the allowance is payable, not to the manner in which it is in fact paid”.

The conclusions of the 1971 decree state “send the petitioner, when necessary”. Does this provide for a periodic manner of payment? Prima facie it would not appear so. However, when it is remembered that the payment related to income tax, and that this tax is by its very nature annual and consequently payable annually, is it not sufficient to say that the periodicity of the Income Tax Act itself fulfils the condition of being “payable on a periodic basis” contained in paragraph 60(b) of that Act? The Board considers that it does. Counsel for the respondent in fact admitted this point at the hearing.

Were the conclusions of the 1975 decree to the same effect? By referring to arrears of tax and to 1975 tax “up to the date of this decree”, it in fact referred to taxes payable as provided in the 1971 decree, the periodicity of the payments in which was decided above.

Finally, the Board wishes to emphasize that in the conclusions of the decree providing for the payment of taxes it states:

The respondent the appellant in the case at bar shall send the petitioner the appellant’s wife when necessary, money to pay taxes on this alimony.

In fact, the appellant was to send the money to his wife under the decree. As in 1975 he sent it directly to the Department of Revenue, section 60.1, cited above, must be applied. The decree providing for the taxes paid in 1975 was made after May 6, 1974, the date required by section 60.1. It was in fact made on August 18, 1975. The payment was therefore made to benefit the appellant’s wife.

4.3.5 For the maintenance of the recipient: it was admitted by counsel for the respondent during the hearing that the fourth condition was met.

4.3.6 The Board allows the appellant’s claims, except for the amount of $567 (not $310), as to which it was admitted during the hearing that there had been an error.

5. Conclusion

The appeal is allowed in part and the matter referred back to the respondent for re-assessment in accordance with the foregoing reasons for judgment.

Appeal allowed in part.