The
Assistant
Chairman:—For
the
years
1969,
1970
and
1971,
when
he
was
computing
his
income,
the
appellant
made
two
deductions
with
which
the
Minister
of
National
Revenue
disagreed.
In
1972
he
made
one
deduction
resulting
in
a
similar
disagreement.
In
each
of
the
four
years
he
claimed
an
amount
as
maintenance
payments
to
his
wife
from
whom
he
was
separated,
but
only
a
reduced
amount
was
allowed.
In
the
first
three
years
he
stated
he
had
a
rental
loss
and
it
was
disallowed.
He
has
appealed
to
this
Board
from
the
assessments
relating
to
the
four
above-mentioned
years
which
disallowed
his
claims.
In
1969
the
appellant
was
a
married
man,
separated
from
his
wife.
By
document
dated
May
23,
1968
they
entered
into
a
separation
agreement.
The
parties
had
three
children,
at
that
time
all
under
21
years
of
age,
and
it
was
agreed
between
them
that
Mrs
Crosby
would
have
their
custody.
At
that
time,
namely,
May
1968,
both
the
appellant
and
his
wife
were
living
in
Kelowna,
British
Columbia.
They
owned
jointly
a
house
in
Richmond,
British
Columbia,
which
was
then
rented
to
a
stranger
for
$165
per
month.
The
relevant
portions
of
the
separation
agreement
read
as
follows:
13.
The
Wife
further
covenants
and
agrees
to
execute
and
deliver
to
the
Husband
concurrent
herewith,
a
registrable
Quit
Claim
Deed
covering
her
one-half
joint
interest
of
and
in
Lot
“A”
of
Lots
Thirty-one
(31)
and
Thirty-two
(32)
of
Block
Two
(2),
of
Section
Seventeen
(17),
Block
Four
(4)
North,
Range
Six
(6)
West,
Plan
No.
14485,
New
Westminster
District;
such
Quit
Claim
Deed
to
be
in
consideration
of
the
premises
and
a
third
mortgage
back
to
the
Wife
on
the
security
of
the
said
parcel
of
land
on
the
sum
of
$3,000.00,
payable
within
six
months
of
a
written
demand
therefor
given
by
the
Wife
to
the
Husband
at
any
time
after
three
years
from
the
date
hereof,
together
with
interest
payable
as
to
as
to
[sic]
1/12th
thereof
monthly
at
the
rate
of
ten
(10%)
per
centum
per
annum,
calculated
yearly,
not
in
advance,
and
with
a
prepayment
cluase
[sic];
which
said
third
mortgage
is
also
to
be
executed
and
delivered
concurrent
herewith.
The
said
third
mortgage
is
to
rank
behind
the
existing
N.H.A.
mortgage
loan
and
a
second
mortgage
loan
to
be
placed
on
the
security
of
the
said
parcel
of
land
by
the
Husband
in
a
sum
not
to
exceed
$6,000.00.
All
three
documents,
namely
the
Quit
Claim
Deed,
the
second
mortgage
and
the
third
mortgage
shall
be
registered
in
that
order—one
immediately
following
the
other.
If
the
Husband
does
not
arrange
the
proposed
second
mortgage
within
thirty
days
of
the
date
hereof
the
Quit
Claim
Deed
and
mortgage
back
to
the
Wife
of
$3,000.00
Shall
be
registered
and
in
that
event
the
Wife
covenants
and
agrees
at
any
time
upon
the
request
of
the
Husband
to
grant
a
postponement
of
her
mortgage
to
enable
the
Husband
to
register
another
mortgage
(not
to
exceed
$6,000.00)
as
a
second
mortgage.
14.
The
Husband
covenants
and
agrees
to
lease
to
the
Wife
for
eight
years
commencing
August
1st,
1968,
the
uppermost
floor
and
those
downstairs
rooms
presently
used
in
conjunction
therewith
all
of
which
are
situated
at
776
Moffat
Road,
Richmond,
British
Columbia,
under
terms
to
be
set
out
in
the
lease.
15.
(a)
The
Husband
further
covenants
and
agrees
to
pay
to
the
Wife
a
sum
of
One
Thousand
($1,000.00)
Dollars
forthwith
upon
the
execution
and
delivery
of
this
agreement
and
the
Deed,
Third
Mortgage
and
Lease
referred
to
therein.
16.
If
the
Wife
has
a
gross
monthly
income
of
$200.00
or
less
from
all
sources
(other
than
the
alimony
or
maintenance
payments
from
her
Husband
as
set
out
herein)
commencing
with
the
calendar
month
of
September,
1968,
the
Husband
shall
pay
to
the
Wife
for
the
maintenance
of
the
Wife
and
children
the
following
sums:
(a)
The
sum
of
$55.00
per
month
for
the
Wife
(b)
The
sum
of
$75.00
per
month
for
their
son
William
(c)
The
sum
of
$55.00
per
month
for
their
daughter
Mary
(d)
The
sum
of
$55.00
per
month
for
their
daughter
Margot
commencing
on
the
10th
day
of
September,
1968.
17.
If
the
Wife
has
a
gross
monthly
income
in
excess
of
the
sum
of
$200.00
from
all
sources
(other
than
the
alimony
or
maintenance
payments
from
her
Husband
as
set
out
here)
commencing
with
the
calendar
month
of
September,
1968,
the
Husband
shall
pay
to
the
Wife
for
the
maintenance
of
the
children
the
following
sums:
(a)
The
sum
of
$75.00
per
month
for
their
son
William
(b)
The
sum
of
$50.00
per
month
for
their
daughter
Mary
(c)
The
sum
of
$50.00
per
month
for
their
daughter
Margot
commencing
on
the
10th
day
of
September,
1968.
19.
The
Wife
covenants
and
agrees
that
any
over-payment
of
maintenance
may
be
automatically
deducted
from
the
overall
maintenance
payments
if
any.
The
Wife
further
covenants
and
agrees
to
provide
the
Husband
with
a
sworn
declaration
of
her
true
earnings
and
all
monies
received
from
all
sources
during
every
calendar
year.
Such
declaration
shall
be
made
and
delivered
to
the
Husband
by
the
1st
day
of
April
each
year,
covering
the
preceding
calendar
year
from
January
1st
to
December
31st.
As
can
be
seen
from
the
separation
agreement,
assuming
the
appellant’s
wife
does
not
earn
in
excess
of
$200,
the
appellant
is
obligated
to
pay
her,
on
behalf
of
herself
and
the
children,
the
sum
of
$240
a
month.
Should
she
earn
more
than
$200
a
month,
he
would
only
be
obligated
to
pay
her
the
payments
on
account
of
the
children.
Also,
should
a
child
no
longer
stay
with
the
mother,
he
would
not
have
to
pay
her
the
amount
allocated
to
that
child.
Shortly
after
signing
the
separation
agreement
there
was
a
house
lease
signed
by
the
parties
in
which
the
appellant
was
the
lessor
and
the
wife
the
lessee.
The
lease
pertained
to
the
Richmond
home
and
was
for
a
period
of
two
months
commencing
on
July
1,
1968.
The
rent
was
to
be
$141,
being
“$1.00
upon
the
signature
of
this
Indenture
(receipt
of
which
is
hereby
acknowledged)
and
One
Hundred
and
Forty
Dollars
($140.00)
on
the
1st
day
of
August
AD
1968’’.
The
lease
contained
the
usual
clauses
including
the
following:
PROVIDED
ALWAYS
and
it
is
hereby
agreed
by
and
between
the
parties
hereto
that
if
the
said
lessee
shall
hold
over
and
after
the
expiration
of
the
term
hereby
granted
and
the
lessor
shall
accept
rent,
the
new
tenancy
thereby
created
shall
be
a
tenancy
from
month
to
month
and
not
a
tenancy
from
year
to
year,
and
shall
be
subject
to
the
covenants
and
conditions
herein
contained
so
far
as
the
same
are
applicable
to
a
tenancy
from
month
to
month.
There
was
a
special
clause
which
was
inserted
which
reads
as
follows:
The
lessee
hereby
acknowledges
that
this
lease
is
entered
into
pursuant
to
the
terms
of
a
separation
agreement
between
the
parties
hereto,
dated
May
23rd,
1968,
and
in
particular
paragraph
14
thereof;
and
further
that
the
wife
waives
and
abandons
her
right
to
the
particular
lease
referred
to
in
the
said
paragraph
fourteen
(14).
In
due
course
Mrs
Crosby
and
the
three
children
moved
into
the
Richmond
home
and,
in
so
far
as
this
appeal
is
concerned,
remained
there
until
the
end
of
the
1972
taxation
year.
The
three
children
remained
with
Mrs
Crosby
until
September
1971,
when
the
elder
daughter
left
home.
The
other
two
children
remained
with
her
until
at
least
the
end
of
1972.
Mr
Crosby
claimed
as
maintenance
payments
$2,880
in
each
of
the
years
1969
and
1970,
the
sum
of
$1,960
in
1971,
and
the
sum
of
$1,680
in
1972.
In
point
of
fact,
of
the
amounts
claimed
above
Mr
Crosby
only
paid
in
cash
$1,200
in
each
of
the
years
1969
and
1970
and
$245
in
the
year
1971.
Nothing
was
paid
in
cash
in
1972.
The
Minister
only
allowed
the
amounts
paid
in
cash.
As
previously
mentioned,
there
was
a
rental
agreement
between
the
appellant
and
his
wife
concerning
the
Richmond
home.
The
appellant.
in
effect
in
his
own
mind,
stated
that
rather
than
pay
her
$240
a
month,
as
he
was
required
to
do
if
her
income
did
not
exceed
$200
and
if
all
the
children
remained
with
her,
he
would
deduct
from
that
sum
the
amount
of
rent
shown
in
that
rental
agreement
of
$140
and
remit
to
her
the
balance.
He
considered
that
what
he
retained
was
rent
paid
to
him
by
Mrs
Crosby.
The
amount
of
“rent
retained’’
is
the
amount
of
maintenance
payments
which
the
Minister
disallowed.
The
appellant
then
believed
he
had
an
income
proposition,
namely,
the
rental
of
a
house.
He
recorded
as
gross
rental
the
sum
of
$1,680
a
year
from
his
wife,
“the
rent
retained’’,
and
then
charged
against
that
amount
various
expenses
such
as
taxes,
insurance,
mortgage
interest,
utilities,
and
capital
cost
allowance.
The
result
was
that
in
the
years
1969
to
1971
there
were
losses.
For
the
years
1969
to
1971
inclusive
those
losses
were
$723.72,
$557.58
and
$458.94
respectively.
The
Minister
disallowed
these
claims.
It
should
be
mentioned
that
several
of
the
terms
of
the
separation
agreement
were
not
carried
out
completely.
It
would
appear
that
in
no
respect
were
paragraphs
13
or
14,
as
quoted
above,
complied
with.
Paragraph
15(a)
was
not
complied
with
as
paragraph
13
had
not
been
fulfilled
by
the
wife.
It
appears
from
the
evidence
adduced
that
virtually
immediately
following
the
separation
agreement
Mrs
Crosby
secured
part-time
employment
and,
from
that
time
until
the
middle
of
1972,
was
earning
in
excess
of
$200
per
month.
It
appears
that
paragraph
19
was
never
complied
with
as
she
never
advised
Mr
Crosby
of
that
fact.
In
early
1968
the
appellant
had
instituted
an
action
in
the
Supreme
Court
of
British
Columbia
against
his
wife
asking
for
a
partition
and
sale
and
equal
division
of
the
Richmond
property.
The
action
was
never
pro-
ceeded
with.
In
due
course,
Mrs
Crosby
instituted
proceedings
for
divorce
and
maintenance
in
the
Supreme
Court
of
British
Columbia.
Judgment
nisi
was
given
on
November
24,
1972
and
judgment
absolute
on
April
4,
1973.
No
counter
petition
was
made
by
the
appellant
for
partition
or
a
quit
claim
of
the
Richmond
property.
The
presiding
judge
in
the
divorce
action,
the
Honourable
Chief
Justice
Wilson,
recounts
a
considerable
number
of
the
facts
above-mentioned
and,
in
considering
what
he
should
award
the
wife,
he
made
the
following
observations:
He
[the
appellant]
has
actually
paid
a
total
of
$3,080.00
over
the
whole
period.
[June
1972]
This
is
calculated
without
taking
into
account
special
payments
made
by
him
for
medical
expenses,
education,
etc.
The
wife
paid
two
months’
rent,
for
September
and
October,
1968,
and
has
paid
none
since.
Therefore
she
owed
for
rent
to
June,
1972
the
sum
of
$6,160.00.
Adding
this
to
the
$3,080.00
she
has
received,
I
debit
her
with
a
total
of
$9,240.00.
Since
the
husband’s
total
obligation
to
June,
1972
was
$7,550.00,
he
has
overpaid
her
by
$1,690.00.
It
should
be
noted
that
the
judge
held
that
at
no
time
should
the
husband
have
been
paying
anything
for
Mrs
Crosby
and,
after
September
1971,
for
the
one
daughter
who
left
home
in
that
month.
He
then
stated:
The
obligation
of
the
husband
at
$175.00
per
month
from
September,
1968
to
September,
1971
was
$6,300.00.
His
obligation
from
September,
1971
to
June,
1972
when
I
tried
this
case
was,
at
$125.00
per
month,
$1,250.00.
The
total
of
these
two
sums
is
$7,550.00.
In
his
concluding
paragraph
the
judge
states:
“She
has
not
asked
me
to
make
an
order
for
her
maintenance.’’
I
conclude
from
this
that
she
did
not
claim
that
she
had
not
received
the
$140
per
month
which
the
appellant
applied
as
rent,
nor
did
the
Court
hold
that
the
appellant
had
not
paid
it.
Matters
between
the
parties
were
finally
resolved
in
1975
and
no
claim
was
made
by
Mrs
Crosby
for
the
amount
which
the
appellant
had
allocated
to
“rent’’.
A
few
months
ago
I
gave
a
decision
in
the
case
of
Thiessen
v
MNR,
[1977]
CTC
2079;
77
DTC
59,
wherein
the
issue
was
whether
or
not
the
former
husband
had
paid
maintenance
to
his
former
wife
when
actually
no
money
passed
between
the
parties.
In
that
case
the
parties
had
agreed
on
the
quantum
of
maintenance
which
the
former
husband
should
pay.
In
that
same
agreement
the
husband
agreed
to
sell
his
interest
in
the
former
matrimonial
home
to
his
former
wife
for
a
stated
sum
payable
at
a
given
rate
per
month.
The
former
husband
and
the
former
wife
agreed
to
offset
one
payment
against
the
other.
No
money
changed
hands,
yet
I
held
that
the
former
husband
had
paid
maintenance
and
so
was
allowed
deduction
in
accordance
with
the
relevant
section
of
the
Income
Tax
Act.
I
cannot
see
where
there
is
a
difference
in
this
case.
The
appellant
could
have
paid
$240
per
month
as
maintenance
and
then
demanded
$140
per
month
as
rent
according
to
the
lease.
In
the
result,
I
hold
that
he
should
have
been
allowed
the
maintenance
payments
he
claimed.
As
I
have
mentioned,
in
effect,
the
appellant
believed
that
he
was
receiving
income
from
property
or
was
in
the
business
of
renting
property.
I
continued
that
he
had
a
loss
and
that
he
believed
that
that
loss
was
deductible
from
his
other
income.
I
am
of
the
view
that
there
was
no
business
transaction
in
this
matter
or
a
rental
of
property.
Rather,
the
expenses
he
incurred
were
personal
or
living
expenses
and
he
has,
in
fact,
given
his
wife
free
use
of
the
home
for
the
years
in
question.
It
so
happened
that
the
costs
relative
thereto
exceeded
the
$140
a
month
which
he
estimated
would
cover
them.
The
separation
agreement
does
not
call
for
payments
higher
than
that
which
I
have
allowed.
The
result
is
that
this
phase
of
the
appeal
is
dismissed.
Consequently,
I
would
allow
the
appellant’s
appeal
to
the
extent
that
there
was
an
offset
of
$140
per
month
for
the
free
use
of
the
house.
The
result
is
that,
with
respect
to
this
aspect
of
the
case,
the
appeal
for
each
of
the
years
1969,
1970,
1971
and
1972
will
be
allowed
and
the
matter
referred
back
to
the
Minister
to
allow
a
further
deduction
in
each
of
the
years
of
$1,680.
Appeal
allowed
in
part.
Email this Content