Loveridge v. R., [1998] 2 C.T.C. 2266

Bowie T.C.J.:

• 1) The Appellant has claimed a deduction in the taxation year 1992 for amounts paid by him between April and December 1991, and this has been disallowed;

• 2) He made a lump-sum payment of $10,700.00 to his former wife on March 21, 1992, of which he claims to be entitled to deduct $7,000.00. All of it was disallowed by the reassessments.

• 3) He made certain payments directly to his son and to his daughter.

2 The first issue was not seriously pursued by the Appellant at the trial. It is clear from the language of paragraphs 60(b) and (c)[FN1: <ul>60 There may be deducted in computing a taxpayer's income for a taxation year such of the following amounts as are applicable:<li><p>(<em>b</em>) 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;</p></li><li><p>(<em>c</em>) an amount paid by the taxpayer in the year, pursuant to an order of a competent tribunal, as an allowance payable on a periodic basis for the maintenance of the recipient thereof, children of the recipient, or both the recipient and children of the recipient if, at the time the payment was made and throughout the remainder of the year, he was living apart from his spouse to whom he was required to make the payment;</p></li></ul>] of the Income Tax Act (the Act) that what may be deducted in any given taxation year is “an amount paid by the taxpayer in the year ...”. Any amounts paid in 1991 are deductible only in computing the Appellant's income for the 1991 taxation year. The taxation year of an individual is defined by paragraph 249(1)(b) of the Act to be the calendar year. This is not affected by the fact that the Appellant, at that time, was permitted to compute the income from his medical practice on the basis of a fiscal period which did not coincide with the taxation year. The Appellant cannot succeed on this ground.

3 The Appellant and his former wife, Linda Loveridge (whom I shall call the wife), lived near Yarmouth, Nova Scotia. They entered into a written separation agreement on March 27, 1985. There were two children of the marriage; Jonathan, born June 2, 1971, and Sarah, born March 16, 1974. Under the terms of the agreement, the wife had custody of both children, and the Appellant agreed to pay to her $30,000 per year, $20,000 as maintenance for the wife, and $5,000 as support for each of the children. The amounts for support of the children were stated to be payable, in the case of each child, until the child ceased to live with the wife, reached the age of 21, married or died. The payments were to be made in bi-weekly instalments of $1,153.84. On April 23, 1987, these terms were embodied in a consent judgment of the Supreme Court of Nova Scotia (the judgment), as corollary relief in an action for divorce.

4 By the early part of 1992, the Appellant had fallen into arrears in making the payments. At the same time, the wife found herself in the position that the mortgage on her home was about to fall due, and she was not in a position to easily obtain a renewal of it. In May 1992, she wrote to the Appellant to propose an arrangement whereby he would make a lump-sum payment to her of $10,700, he would be relieved of the obligation to make any future payments of maintenance to her, and she would forgive the outstanding arrears. He agreed to this proposal, and in May, 1992 the judgment was amended accordingly, on the consent of both parties. The relevant part of the amending Order reads as follows:

IT IS ORDERED that a report be filed in the office of the Prothonotary of the Supreme Court at Yarmouth, Nova Scotia recommending that the Application to Vary the maintenance of the Respondent/Applicant be granted and that the arrears of Peter Leslie Loveridge be foregiven (sic) and that the maintenance for the Respondent/Applicant be discontinued and replaced with one lump sum payment in the amount of Ten Thousand, Seven Hundred ($10,700.00) Dollars;

5 The Appellant made the lump-sum payment on May 31, 1992, and he takes the position that of the amount he paid, $7,000.00 represents the arrears of the bi-monthly instalments which were outstanding at that time. The Respondent's position is that this amount is not arrears, but a payment made in order to be relieved of any future obligation in respect of maintenance for the wife. The wording of the Order (and it is consistent with the wording of Linda Loveridge's letter to the Appellant proposing the amendment) leaves no doubt that the entire lump sum was paid by the Appellant in lieu of the future payments under the judgment. It was not paid to settle the arrears, which by the clear words of the amending Order were forgiven. This ground of appeal is without merit.

6 At the opening of the trial, the Appellant stated that he was abandoning his appeal with respect to the payments made directly to his son, Jonathan Loveridge. The payments made directly to his daughter, Sarah, remain in issue. After the amendment of the judgment in May, 1992, the Appellant continued to make the bi-monthly payments for his daughter. Prior to her eighteen birthday, in March 1992, the cheques were made payable to Sarah Loveridge and Linda Loveridge jointly. The cheques dated March 19, 1992 and thereafter were made payable to Sarah Loveridge alone, at the direction of the wife.

7 In September 1992, Sarah entered King's College, in Halifax. She lived in residence until April, 1993, after which she lived in an apartment in Halifax, before beginning studies at Dalhousie University also in Halifax, in September of that year. She continued to live in Halifax during the summer of 1994, and for the remainder of that year, when she was again a student at Dalhousie. In this period she visited her mother in the Yarmouth area once every four to six weeks. In his evidence, the Appellant took the position that his daughter continued to live with her mother after she entered King's College in September, 1992, and that her absences were only temporary, while she was a student. It was clear from his evidence, however, that he had little contact with his daughter during this period, and knew little of her living arrangements.

8 I accept the evidence of Linda Loveridge that her daughter Sarah ceased to live with her at the beginning of September 1992, when she became a student at King's College. Any time she spent at her mother's house after that time was as a temporary visitor. It follows that payments made by the Appellant to his daughter after that date were not made pursuant to the Judgment, but were voluntary payments. The appeals therefore fail on this issue also.

9 The appeals for all three years are dismissed.