F Lome Hellyer v. Minister of National Revenue, [1979] CTC 3037, 79 DTC 831

Roland St-Onge:—The appeal of F Lome Hellyer and the case of Betty Hellyer came before me on June 26, 1979 at the City of Montreal, Quebec, following an order to join the parties which I rendered on January 24, 1979.

The issue is whether the amounts paid by Lome Hellyer to Betty Hellyer in the 1973, 1974 and 1975 taxation years are either deductible by the husband or taxable in the hands of the wife. There is another issue involving the husband only and it is whether he is entitled to deduct certain expenses from his alleged professional income.

The facts and numerous figures of this appeal were set out in the reply of notice of appeal at paragraphs 2 to 10 inclusive which read as follows:

2. In his income tax return for the relevant taxation years, the Appellant declares the following employment income and professional income:

	Employment	Professional
	Income	Income
1972	$24,448	—
1973	$16,917	$ 3,036
1974	$19,893	$ 3,323
1975	$22,919	$11,034

3. In computing his income for the relevant years, the Appellant claimed to deduct from his declared professional income as expenses incurred for the purpose of gaining the said income the following amounts:

1972	$ 743.00
1973	$1,890.00
1974	$1,556.59
1975	$1,997.39

4. In computing his income for the relevant taxation years, the Appellant claimed to deduct the following amounts as alimony or other allowance payable on a periodic basis for the maintenance of his wife and children:

1972	$ 9,397.52
1973	$ 5,201.15
1974	$ 7,906.42
1975	$11,208.93

5. By notice of reassessment dated April 1, 1977, the Respondent refused to allow the deductions referred to in paragraphs 3 and 4 of the present Reply to Notice of Appeal.

6. In computing the Appellant’s income for the relevant years, the Respondent relied, inter alia, on the following assumptions of facts:

(a) At all material times during the relevant taxation years, the Appellant was employed as a teacher and “Conseiller Pédagogique” in different colleges, universities and other institutions. (Hereinafter referred to as the “payors”);

(b) At all material times, the Appellant was under the control of the different payors;

(c) The relationships between the Appellant and the payors were governed by a contract of services under which the payors paid to the Appellant the amounts claimed as professional income;

(d) The said amounts were received by the Appellant by virtue of his office or employment with the payors;

(e) The Appellant was not ordinarily required to carry on the duties of his employment away from his different payors’ places of business or in different places;

(f) The Appellant was not required by his contracts of employment to pay any office rent or cost of supplies;

(g) The amounts of $743, $1,890, $1,556.59 and $1,997.39 which the Appellant claimed to deduct in computing his income for the 1972, 1973, 1974 and 1975 taxation years constitute personal or living expenses;

(h) Under a written separation agreement dated September 1, 1966, the Appellant and his wife convenanted and agreed together as follows:

“The husband shall pay for and on behalf of the suport and maintenance of the wife and the said children all amounts in respect of rent, light, heat and water, medical expenses, education and any and all income taxes, if any, payable by the wife in respect of such support and maintenance and in addition shall pay directly to the wife for food, clothing and general household expenses an amount of not less than $45 per week.

The wife hereby accepts the provisions made for herself and the said children as full, adequate and complete provision for her own support and maintenance and for the maintenance and education of the said children subject, however, to the express condition that any income tax returns filed by the wife shall be subject to the terms and provisions of this Agreement and shall be executed by the wife only on the condition that all income taxes, if any, payable by the wife on the basis of said returns shall be paid and totally discharged for and on her behalf by the husband and the wife shall not be liable for any further tax payments or any penalties or any payments in respect of interest or otherwise in connection therewith.”

(i) In each of the taxation years under appeal, in accordance with the separation agreement referred to in the preceding paragraph, the Appellant sent to his wife an allowance of $45 per week. The Appellant also purportedly paid to his wife’s creditors the following amounts in respect of specific actual expenses including rent, light, heat and water, medical expenses, education and income taxes;

1972	$ 9,397.52
1973	$ 5,201.15
1974	$ 7,906.42
1975	$11,208.93

(B) STATUTORY DISPOSITIONS AND REASONS:

7. The Respondent relies, inter alia, on sections 3, 5, 8(2), 60(b), 60(c) and 60.1 of the Income Tax Act SC 1970-71-72, chap 63 as amended.

8. The amounts of $9,397.52, $5,201.15, $7,906.42 and $11,208.93 for the 1972, 1973,1974 and 1975 taxation years respectively do not constitute alimony or other allowance payable on a periodic basis for the maintenance of his wife and children within the meaning of section 60(b) of the Act with the consequence that they cannot be deducted in computing the Appellant’s income for the said year.

9. The income claimed by the Appellant as professional income constitutes income from employment within the meaning of the Income Tax Act.

10. The amounts of $743, $1,890, $1,556.59 and $1,997.39 for the respective taxation years under appeal are personal and living expenses and therefore, cannot be deducted in computing his income by virtue of any of the provisions of the Income Tax Act.

At the hearing, the appellant was not represented by counsel and testified as follows: Besides being a regular salaried employee, he worked at several jobs on a contractual basis and taught in several institutions. In 1975 he was a consultant for the Quebec Government and received therefrom some $8,639 in salary and $2,395 from McGill University. In 1973 and 1974 he received from McGill University $3,036 and $3,323 respectively. In 1974 he was compensated by the Quebec Government for his travelling expenses. He also stated that for his professional income, he never got any kind of security of employment such as pension or sick benefits, that he had to use his home as an office and never claimed the cost of going to his first place of employment each day or that of returning home at night.

Upon cross-examination, the respondent filed five documents to show that the appellant, with respect to his alleged professional income, was an ordinary employee under the control of different payors, that he was governed by a contract of services under which the payors paid to the appellant the amounts claimed as professional income, and that he was not ordinarily required to carry on the duties of his employment away from his different payors’ places of business or in different places, nor was he required by his contracts of employment to pay any office rent or cost of supplies.

As may be seen, the appellant was an ordinary employee even with respect to what he calls his professional income which constitutes income from employment within the meaning of the Income Tax Act.

Once a person is an employee, he is not entitled to any of the expenses claimed by the appellant and these expenses become personal living expenses and cannot be deducted in computing his income by virtue of any of the provisions of the Income Tax Act. Consequently, on this issue, the appeal is dismissed.

On the alimony issue, counsel for the respondent referred the Board to a substantial jurisprudence and more particularly to the definition of allowance in Attorney General of Canada v James C Weaver and Freda J Weaver, [1975] CTC 646; 75 DTC. 5462, and I quote:

An allowance is, in our view, a limited predetermined sum of money paid to enable the recipient to provide for certain kinds of expenses; its amount is determined in advance and, once paid, it is at the complete disposition of the recipient who is not required to account for it. A payment in satisfaction of an obligation to indemnify or reimburse someone or to defray his or her actual expenses is not an allowance; it is not a sum allowed to the recipient to be applied in his or her discretion to certain kinds of expense.

The amounts that the appellant paid to his wife’s creditors in respect of light, heat and water, medical expenses, education and income tax are not an allowance within the meaning of this definition for the following reasons:

(1) The amount is not a limited predetermined sum of money;

(2) It is not determined in advance;

(3) It is not at the complete disposition of the recipient, and

(4) It is not a sum allowed to the recipient to be applied at her discretion to certain kinds of expenses.

For these reasons, the appellant’s appeal is dismissed and it is further decided that the amounts received by Betty Hellyer in her 1972, 1973, 1974 and 1975 taxation years are not taxable.

Appeal dismissed.