Christie A.C.J.T.C.:
1 These appeals are governed by the informal procedure provided for under section 18 and following sections of the Tax Court of Canada Act. The years under review in respect of Barry Sponagle (“Barry”) are 1991, 1992, 1993 and in respect of Diane Sponagle (“Diane”) they are 1991 and 1992. The Notice of Appeal in Barry's reads:
The facts are as follows:Pursuant to a court order dated October 12, 1984 (copy attached) custody of the children of our marriage was granted to my former spouse. The court order also provided that I pay my former spouse $200 per week for maintenance of the children such payment to be made to my former spouse in care of the Family Court in New Glasgow.
Pursuant to a court order dated January 13, 1988 approved by the Supreme Court of N.S. on February 23, 1988 (copy attached) the payments were adjusted to $125 per week ($75 in respect of Shane and $50 in respect of Shannon) effective January 15, 1988. Payment to continue to be made through the Family Court in New Glasgow to my former spouse.
By verbal request in April 1988, my former spouse directed the Family Court to pay amounts received in respect of Shannon directly to the child.
By correspondence dated January 18, 1989 (copy attached), my former spouse directed the Family Court to pay amounts received in respect of Shane directly to him.
I have been advised by officials of Family Court that I had no control over where they disbursed the funds once I paid them into the Court. My former spouse, for whom they were receiving the payments, was the only person who could direct the Court to make payments to any person other than herself.
All payments as required by the above-noted court orders were paid and deducted for income tax purposes as follows: $5,000 in 1991, $3,900 in 1992 and $1,650 in 1993.
The reason for appealing is as follows:
Paragraphs 1 to 7 of the Reply to the Notice of Appeal read:1. He admits the facts stated in the first, second, third, fourth, fifth and sixth paragraphs of the Notice of Appeal.
2. He denies the allegations of fact stated in the seventh paragraph of the Notice of Appeal.
3. By Notices of Assessment dated June 16, 1992 for the 1991 taxation year, May 14, 1993 for the 1992 taxation year and May 24, 1994 for the 1993 taxation year, the Minister of National Revenue (the ‘Minister’) advised the Appellant that his income tax liability for the aforementioned taxation years had been assessed as filed, which included allowing the maintenance payments of $5,000, $3,900 and $1,650, respectively.
4. By Notices of Reassessment dated April 24, 1995 the Minister advised the Appellant that his income tax liability for the 1991, 1992 and 1993 taxation years had been assessed by disallowing maintenance payments in the amounts of $5,000, $3,900 and $1,650, respectively.
5. The Appellant filed a valid Notice of Objection dated June 20, 1995 wherein he objected to the disallowance of the maintenance payments noted in paragraph 3 above. A Notice of Confirmation dated June 24, 1996 was sent to the Appellant.
6. In so reassessing the Appellant for the 1991, 1992 and 1993 taxation years, the Minister made the following assumptions of fact:(a) the facts hereinbefore admitted;
(b) the Appellant's two children were both over the age of nineteen in the 1991, 1992 and 1993 taxation years;
(c) the payments noted in paragraph 3 were paid directly to the Appellant's children by the Family Court at the direction of their mother;
(d) the children were no longer in the custody of the Appellant's former spouse.
B. Issue to be Decided
7. The issue to be decided is whether the amounts paid and claimed by the Appellant as alimony or maintenance payments are deductible from income as alimony or other allowance payable on a periodic basis for the maintenance of the recipient within the meaning of paragraphs 60(b), 60(c), 60(c.1) or subsection 60.1(1) of the Income Tax Act (the ‘ Act’).
2 The Notice of Appeal in the case of Diane reads:
The facts are as follows:The reason for appealing is as follows:If my spouse is successful in his appeal I will be entitled to larger child tax credit claims in 1991 and 1992 since the reduction by 5% of the amount by which our combined net incomes exceed $25,215 and $25,921 in 1992 will be less.
Paragraphs 1 to 7 of the Reply to that Notice of Appeal read:1. He admits the relevant facts stated in the Notice of Appeal.
2. By Notices of Assessment dated June 16, 1992 for the 1991 taxation year and April 30, 1993 for the 1992 taxation year, the Minister of National Revenue (the ‘Minister’) advised the Appellant that her income tax liability for the aforementioned taxation years had been assessed as filed by her.
3. By Notices of Reassessment dated April 24, 1995 the Appellant was advised by the Minister that her income tax liability for the 1991 and 1992 taxation years had been reassessed by disallowing the Child Tax Credit in the amount of $249.99 in 1991 and $93.10 in 1992.
4. The Appellant filed a valid Notice of Objection dated June 6, 1995 and it was confirmed by Notice of Confirmation dated June 24, 1996.
5. In so reassessing the Appellant the Respondent made the following assumptions of fact:(a) the facts hereinbefore stated and admitted;
(b) at all material times the appellant's spouse was Barry Sponagle;
(c) in 1991 and 1992 the Appellant received a Child Tax Credit in the amount of $834.09 and $1,415, respectively;
(d) by Notice of Reassessment dated April 24, 1995, Barry Sponagle was advised that the Minister had reassessed his income tax liability for the 1991 and 1992 taxation years by disallowing alimony payments of $5,000 and $3,900, respectively;
(e) as a result of the said reassessment of Barry Sponagle, the net income of the Appellant's spouse was increased and the Appellant's entitlement to the Child Tax Credit was reduced to $584.10 in 1991 and $1,321.90 in 1992.
B. Issue To Be Decided
6. The issue to be decided is whether the Minister properly determined that the Appellant was not entitled to the Child Tax Credit in the amounts of $249.99 and $93.10 for the 1991 and 1992 taxation years, respectively.
3 At the commencement of the trial the Notice of Appeal in Barry's case was amended to substitute 60(b) for 60(c). The only witness at trial was Barry whose evidence I accept as being correct. It was agreed that the result in Diane's appeals would be governed by the disposition of the appeals by Barry.
4 The essential facts are that on October 12, 1984 Mr. Justice H.J. MacDonnell of the Supreme Court of Nova Scotia, Trial Division, issued a Decree Nisi for divorce pertaining to the appellants[FN1: <p>The Decree provided that Diane be divorced from Barry “unless sufficient cause be shown to this Court within three months from the date hereof why this decree should not be made absolute”. Barry remarried in 1985.</p>] . It included this Order:
IT IS FURTHER ORDERED, ADJUDGED AND DECREED that I am going to direct that the Respondent pay two hundred dollars ($200.00) weekly, each and every week on each and every Friday commencing on October 19, 1984, and on each Friday thereafter, to the Petitioner in care of the Family Court, Campbell's Lane, New Glasgow, for the maintenance of his children.
5 Application was made under Nova Scotia Civil Procedure Rule 57.30 to vary the foregoing Order. The Amending Order reads:
That the Respondent (Barry Sponagle) pay the sum of $75.00 per week, effective January 15, 1988, for the support and maintenance of the child of the marriage, Shane Earle Sponagle, and the sum of $50.00 per week, effective January 15, 1988, for the support and maintenance of the child of the marriage, Shannon Christine Sponagle, said maintenance to be payable to the Family Court at New Glasgow, Nova Scotia.
That as long as the children are attending a post-secondary institute or attending a vocational school in pursuit of a diploma or under-graduate degree, they will be considered to be children of the marriage.
6 Commencing January 15, 1988 Barry made payments in the amount of $125.00 in accordance with the Amended Order. Those amounts were received by Diane from January 15, 1988 until April 15, 1988 when a change occurred in this way: without Barry's consent or knowledge Diane had, sometime early in April, made a verbal request to the Family Court to pay the amount applicable to Shannon directly to her. Commencing with the April 22, 1988 payment, $75.00 went from the Court to Diane and $50.00 went directly to Shannon. Again without Barry's consent Diane, by letter dated January 18, 1989, made the same request to the Family Court regarding Shane. Commencing with the January 20, 1989 payment, $75.00 went from the Court to Shane.
7 In my opinion paragraph 60(b) of the Income Tax Act applies in respect of Barry's appeals. Included in that paragraph is this: there may be deducted in computing a taxpayer's income for a taxation year an amount paid by the taxpayer in the year, pursuant to a decree, order or judgment of a competent tribunal as an allowance payable on a periodic basis for the maintenance of the children of the marriage, if he was living apart from, and was separated pursuant to a divorce from his 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[FN2: <p>Paragraph 60(<em>b</em>) was amended by S.C. 1993, c. 24, ss. 20(1) and by S.C. 1994, c. 7, Sched. VIII, ss. 20(1). Both amendments are, however, applicable to amounts received under a decree, order or judgment of a competent tribunal with respect to a breakdown of a marriage occurring after 1992.</p>]
8 I emphasize that the Decree Nisi issued on October 12, 1984 by MacDonnell J. directed that the $200.00 be paid “to the Petitioner (Diane) in care of the Family Court, Campbell's Lane, New Glasgow for the maintenance of his (Barry's) children”. I do not think that the Amending Order was intended to do anything other than reduce the payment from $200.00 to $125.00 per week with the allocation of $75.00 per week for the support and maintenance of Shane and $50.00 per week for the support and maintenance of Shannon. In particular it is my view that as a matter of law making the $125.00 payments to the Family Court was payment to Diane. The fact that she chose to constitute the Court as her agent to redirect the money under the circumstances described to Shane and Shannon cannot result in depriving Barry of the benefit of the deductions provided for in paragraph 60(b).
9 It follows that both appellants are entitled to succeed. But as the result in Diane's appeals were entirely dependent on the determination of Barry's appeals only one set of party and party costs is allowed.
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