Lucien Cardin, Q.C.:
1 Pursuant to an order of the Tax Review Board, dated 7th August 1974, and after the appropriate notices of hearing had been served on the parties concerned, the board, on 15th October 1974 at the city of London, Ontario, heard the evidence of Mr. Gordon R. Beardmore and Mrs. Donna E. Beardmore in order to determine the question referred to it by the Minister of National Revenue in his application pursuant to s. 174(1) of the Income Tax Act, 1970–71–72 (Can.), c. 63, dated 31st July 1974.
2 The minister is of the opinion that a question of mixed fact and law arising out of one and the same series of transactions is common to the assessments in respect of the two above-mentioned taxpayers. One taxpayer has objected to his assessment but neither taxpayer has, as yet, appealed such assessments. The Minister of National Revenue, pursuant to s. 174(1), is seeking to have the following question determined—whether the whole or any part of the payment in the amount of $680 made in 1971 by Gordon R. Beardmore to Donna E. Beardmore was:
3 (a) By virtue of the Income Tax Act, R.S.C. 1952, c. 148, s. 11(1)(l) [re-en. 1956–57, c. 29, s. 4(2); now 1970–71–72 (Can.), c. 63, s. 60(b)], deductible by Gordon R. Beardmore in computing income for 1971; and
4 (b) By virtue of s. 6(d) [re-en. 1956–57, c. 29, s. 2(1); now s. 56(1)(b)] to be included in computing income for 1971 by Donna E. Beardmore.
5 It appears that what the aforementioned taxpayers have in common is the question as to whether or not an amount of $680 paid in 1971 by Gordon R. Beardmore to his spouse, Donna E. Beardmore, was “alimony” within the meaning of the Income Tax Act. The questions of deductibility and of taxability of the said amount are, strictly speaking, two different legal consequences of the said payments which the taxpayers have not in common. Confining myself to answering the question as it should be read within the terms of s. 174 of the Act, it appears that Gordon R. Beardmore and his spouse, Donna E. Beardmore, were separated on 12th July 1971 pursuant to a separation agreement of that date.
6 The wording of the agreement does not in any way specify the reasons or indicate the nature of the payments made by Gordon R. Beardmore to his spouse pursuant to the separation agreement. Nor is there anything in the facts which indicates clearly that the payment on a periodic basis of $20 a month by Gordon R. Beardmore to his spouse was for her maintenance pursuant to s. 11(1)(l) of the Income Tax Act.
7 The facts reveal that Gordon R. Beardmore and Donna E. Beardmore were married three years before their separation. Both parties worked during the marriage and the wife deposited her pay cheques into a joint bank account with her husband. There was no segregation of funds during the marriage.
8 The separation agreement was drawn up by Gordon R. Beardmore's attorney and Donna E. Beardmore does not recall having asked for alimony payments. The couple agreed to pay off the bank loan and all outstanding bills and that, when the bills were paid up, each spouse would go his or her separate way. Donna E. Beardmore, according to the separation agreement, was to continue depositing her pay cheque into the joint bank account until 31st December 1971. After the separation, the bank continued to debit the joint account for the payment of certain common debts.
9 According to Gordon R. Beardmore's testimony, which was not contradicted by his spouse, these debts had not been fully paid off by 31st December 1971, and he contributed further to the final payment of the debts.
10 Gordon R. Beardmore considers that the periodic payments of $20 a month made to his wife was for her maintenance. Donna E. Beardmore, on the other hand, claims that the amounts of $20 a month paid to her were not for her maintenance but were the reimbursement by her husband of advances made by her toward the payment of common debts and, as such, cannot be considered as income in her hands.
11 In attempting to determine the deductibility or otherwise of the $20 monthly payment made by Gordon R. Beardmore to his wife, the board, in the absence of any specific explanation in the separation agreement as to the nature of the said payment, must rely on the general wording and intent of the separation agreement as a whole.
12 It appears to me from the separation agreement that prior to 31st December 1971, at which time the division of the furnishings was to take place, considerable effort was made toward the payment of common debts and the whole of Donna E. Beardmore's pay cheque was deposited into a joint bank account and used for the payment of the said debts.
13 It was revealed that, during the marriage, Gordon R. Beardmore paid a similar amount to Donna E. Beardmore for her sundry expenses for transportation, lunches, etc. According to Gordon R. Beardmore, this was the type of payment that was continued until the date of division of the furnishings, i.e., 31st December 1971, and provided for in the separation agreement.
14 Since Donna E. Beardmore's entire pay cheque went toward the repayment of the common debts, it seems to me to be not only reasonable but necessary that she should receive some money for her maintenance. Since Donna E. Beardmore received such amounts from the husband during the marriage for her personal expenses, I am of the opinion that the payment of $20 a month made to her until 31st December 1971, as stipulated in the separation agreement, is more of a maintenance allowance and alimony rather than reimbursement for advances made to her in payment of debts of which the exact amount is not known.
15 I hold, therefore, that the periodic payments amounting to $680 made by Gordon R. Beardmore to his spouse were in the nature of alimony within the meaning of the Income Tax Act.
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