Citation: 2013 TCC 279
Date: 20130925
Docket: 2012-3313(IT)I
BETWEEN:
GUYLAINE MAHEU,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent,
and
MARTIAL BEAUREGARD,
Added Party.
[OFFICIAL ENGLISH
TRANSLATION]
AMENDED REASONS FOR JUDGMENT
Favreau J.
[1]
These are appeals,
under the informal procedure, from the reassessments made by the Minister of
National Revenue (the Minister) under the Income Tax Act, R.S.C. (1985)
c. 1 (5th Supp.), as amended (the Act), in respect of the appellant's 2007,
2008, 2009 and 2010 taxation years.
[2]
Martial Beauregard was joined
to Guylaine Maheu's appeals following an order by the Tax Court of Canada under
paragraph 174(3)(b) of the Act dated March 15, 2013, for the 2007,
2008, 2009 and 2010 taxation years. The issues regarding which a decision was
requested by the respondent are as follows:
[Translation]
(a) Must Guylaine Maheu include in computing her
income for the 2007 to 2010 taxation years the following amounts received from
Martial Beauregard as support during each of these taxation years:
|
2007
|
2008
|
2009
|
2010
|
|
$16,000
|
$52,000
|
$52,000
|
$52,000
|
(b) Could Martial Beauregard deduct in computing his
income for the 2007 to 2010 taxation years the following amounts paid to
Guylaine Maheu as support during each of the these taxation years?
|
2007
|
2008
|
2009
|
2010
|
|
$16,000
|
$52,000
|
$52,000
|
$52,000
|
[3]
The facts relevant to this
case are as follows:
(a) Guylaine Maheu and
Martial Beauregard were married on August 25, 1984, under the partnership
of acquests regime and separated on December 30, 2006;
(b) On February 21, 2007,
Guylaine Maheu and Martial Beauregard signed a document entitled the [Translation] "agreement for
corollary relief" (the Agreement), which was ratified by the Quebec
Superior Court on February 28, 2007, in the judgement of divorce.
(c) The Agreement deals,
among other things, with (i) the custody of and access rights to the couple's
youngest child, (ii) the parent having as a dependant the couple's eldest child,
(iii) the lack of child support to take care of the needs of the couple's
children and (iv) the partition of the family patrimony, the matrimonial regime
and their financial interests, generally done equally.
(d) The Agreement also
contains a section entitled [Translation]
"support for the female petitioner", which includes the following two
paragraphs:
[Translation]
66. In consideration of the value of the companies
of which the male petitioner is a shareholder and which the parties admit
knowing exactly and having been informed of by their accountant, Bernard Gagné,
the parties agree that the male petitioner will pay to the female petitioner,
starting from the date of the judgment of divorce to be handed down and for the
four years following the date of the judgment of divorce, a net sum of
$1,000.00 per week, thus representing, over the four years, the amount of
$208,000.00.
67. On that date, each party will
irrevocably waive the right to claim from the other party any support for the
present, past or future;
(e) Martial Beauregard did
not initially claim a deduction for support in his tax returns for the 2007 to
2009 taxation years;
(f) Guylaine Maheu did
not include any amounts in her tax returns filed for the 2007 to 2009 taxation
years as support that she has or has allegedly received from Martial Beauregard
for her benefit during those taxation years;
(g) In his tax return for
the 2010 taxation year, Martial Beauregard claimed a deduction of $52,000 as
support that he has or has allegedly paid to Guylaine Maheu for her benefit
during that taxation year;
(h) On April 29, 2011,
Martial Beauregard requested an adjustment to his tax returns for each of the
taxation years from 2007 to 2009 in order to claim a deduction for support paid
to Guylaine Maheu for her benefit during those taxation years.
(i) On September 15,
2011, the Minister made reassessments in respect of Martial Beauregard for the
2007, 2008 and 2009 taxation years following up on the request to adjust his
tax returns and thus granting him the following deductions for support paid to
Guylaine Maheu for her benefit during these taxation years;
|
2007
|
2008
|
2009
|
|
$16,000
|
$52,000
|
$52,000
|
(j) On June 23, 2011, the
Minister issued an original assessment in respect of Martial Beauregard
for the 2010 taxation year, granting the deduction of $52,000 as a support
amount paid to Guylaine Maheu for her benefit during that taxation year.
[4]
For the 2007 taxation
year, the Minister determined that, when the appellant filed her tax return,
she had made a misrepresentation that was attributable to neglect, carelessness
or wilful default given that the appellant knew or ought to have known that the
amounts received as support were taxable, and the Minister issued a
reassessment outside of the normal reassessment period.
[5]
The appellant testified
at the hearing. She explained that she was an administrative technician and
that, since 1990, she had managed her former spouse's businesses including,
among others, the following businesses:
- 9129-3845 Québec Inc.;
- MBI Systèmes électroniques inc.;
- MBI Systèmes électroniques
résidentiels inc.;
- MBI Sécurité inc.;
- MBI Sécurité S.E.N.C.;
- MBI Solutions technologiques; and
- Gestion MBI S.E.N.C.
[6]
Her work duties
included keeping accounting books, preparing tax reports, interacting with
external accountants, making bank deposits, paying accounts and taking care of
investments. This work took about 80% of her time; the other 20% of her time
was spent on providing similar services to other clients.
[7]
The appellant also
explained that the partition of the family patrimony and the matrimonial regime
was done equally between the parties and that the amounts owed to the appellant
by her former spouse from the partition of the family patrimony and the
matrimonial regime were paid to the appellant in weekly instalments of $1,000
since the granting of divorce. The appellant filed as Exhibit A-1 a request for
the authorization to enter alone into an act for which the consent of the other
spouse would be required, which was filed with the Superior Court of Québec on
June 23, 2008, by the appellant's former spouse, article 12 of which reads
as follows:
[Translation]
12.
The amounts owed by the male petitioner to the female petitioner for the
partition of the family patrimony and the matrimonial regime are paid to the
female petitioner in weekly instalments of $1,000.00 since the granting of
divorce.
[8]
According to the
appellant, the net amount of $1,000 per week was established on the basis of a
summary assessment of the shares of the companies belonging to the former
spouse and on his ability to pay and not at all on her own needs. The appellant
was not a shareholder or director of her former spouse’s companies except for Gestion
MBI S.E.N.C. in which the appellant was an equal shares partner with her former
spouse.
[9]
In support of the value
of the shares of her former spouse’s companies, the appellant referred to the
fact that, in 2009, her former spouse sold the shares that he had held in
9129-3845 Québec Inc. to the appellant’s brother for $300,000. The appellant's
share in the sale price of only these shares was therefore $150,000.
[10]
The appellant also
stated that, as part of the negotiations surrounding the conclusion of the
Agreement, there was never a question of paying support and the tax
consequences of support were never discussed.
[11]
The appellant indicated
that the weekly amounts paid by her former spouse were not used for her
maintenance but were rather used to pay the taxes claimed by the Canada Revenue
Agency following reassessments. Finally, the appellant stated that she had not
provided services to her former spouse's businesses during the period from
March to August 2007 and that the amounts received during that period could not
be considered as a salary as her former spouse claimed at first.
[12]
Martial Beauregard
testified at the hearing and confirmed the duties performed by the appellant in
his businesses and the fact that the amount of $1,000 was determined based on
his ability to pay. According to him, the net amount of $1,000 per week
represented $1,000 after taxes.
[13]
Martial Beauregard also
acknowledged that the appellant did not provide services to his businesses from
March to August 2007 as she was taking a one-year sabbatical outside the
country, and that the appellant did not claim support as part of the negotiations
surrounding the conclusion of the Agreement.
[14]
Martial Beauregard
stated that he was not familiar with the tax treatment of support and that, it
was not until 2011, that is, after the end of payments to the appellant that he
learned that support payments could be tax deductible. It was for that reason
that he did not make his adjustment request until 2011.
Applicable Law
[15]
The term "support
amount" for the purposes of sections 56 and 56.1 of the Act is defined as
follows in subsection 56.1(4) of the Act:
“support
amount” means an amount payable or receivable as an allowance on a periodic
basis for the maintenance of the recipient, children of the recipient or both
the recipient and children of the recipient, if the recipient has discretion as
to the use of the amount, and
(a) the recipient is the spouse or common-law partner or
former spouse or common-law partner of the payer, the recipient and payer are
living separate and apart because of the breakdown of their marriage or
common-law partnership and the amount is receivable under an order of a competent
tribunal or under a written agreement; or
(b) the payer is a legal parent of a child of the recipient
and the amount is receivable under an order made by a competent tribunal in
accordance with the laws of a province.
Analysis and conclusion
[16]
The only issue to be
decided is whether the amounts paid to the appellant by her former spouse
during the 2007 to 2010 taxation years, totalling $173,000, should have been
included in computing the appellant's income and were deductible in computing
Martial Beauregard's income. Were the amounts in question paid as support or as
a compensatory allowance as part of the partition of the family patrimony and
the matrimonial regime (capital payment)?
[17]
A support amount is an
amount payable or receivable as an allowance on a periodic basis for the
maintenance of the recipient who must be able to use that amount at his or her
discretion.
[18]
Based on the evidence
filed, the parties to the Agreement were represented by the same counsel and
there are no allegations that the parties were ill-advised. The divorce was
settled amicably, and the family patrimony and matrimonial regime were divided
equally. There is some confusion as to the parties' intention at the time the
Agreement was signed because the heading above paragraphs 66 and 67 of the
Convention is [Translation]
"Support for the female petitioner".
[19]
In Sebag v. R.,
2005 TCC 699, Justice Lamarre Proulx specified at the end of paragraph 27
that "the terms of an agreement may be taken into consideration as showing
the intent of the parties thereto when executing the agreement".
[20]
In Gagné v. R.,
2001 FCA 310, the Federal Court of Appeal provided the following additional
explanations concerning what a judge may do when the parties' common intent in
an agreement is doubtful:
[10]
It is settled law, in Quebec civil law, that if the common intention of the
parties in an agreement is doubtful, the judge [TRANSLATION] "must try to
find what the parties truly intended by their agreement" (Jean-Louis
Baudouin, Les Obligations, 4th Ed., 1993, Les Éditions Yvon Blais, p.
255). The judge must [TRANSLATION] "place greater
weight on the real intention of the contracting parties than on the apparent
intention, objectively manifested by the formal expression" (p. 255), and
he must ascertain the effect that the parties intended the contract to have (p.
256). To do so, the judge must have a overall picture of the parties'
intention, which calls for an analysis of all of the clauses in the contract in
relation to one another (p. 258). If there is any remaining doubt as to the
parties' real intention, the judge may [TRANSLATION] "examine the manner
in which the parties conducted themselves in relation to the contract, in their
negotiations, and most importantly their attitude after entering into the
contract, that is, the manner in which the parties have interpreted it in the
past..." (pp. 258-259).
[21]
Based on the evidence,
the needs and the standard of living of the appellant were not discussed as
part of negotiating the Agreement, and no support amount was requested by the
appellant. In addition, no child support was determined for the appellant's
former spouse to maintain their children.
[22]
Regarding the parties’
conduct following the conclusion of the Agreement, I note that Martial
Beauregard, an experienced businessman, waited four years before claiming the
deduction of the amounts paid to the appellant and that, in the request filed
with the Superior Court by the added party on June 23, 2008, it was clearly
specified that the weekly payments of $1,000 were made for the partition of the
family patrimony and the matrimonial regime. In other words, Martial Beauregard
clearly acknowledged that the sharing of the value of the companies was done as
part of the partition of the family patrimony and the matrimonial regime.
[23]
Counsel for the
respondent stated that paragraph 12 of said request was badly written and was
absolutely false because the adjustments flowing from the partition of the family
patrimony and the matrimonial regime were clearly specified at paragraphs 60 to
65 of the Agreement. Under paragraph 62, the added party had to pay the
appellant as compensation the amount of $88,044.49 and, under paragraph 64,
the appellant obtained the right to take out a hypothec on the immovable
located at 21 St-Jude Street in Granby to guarantee the payment of her debt.
[24]
I cannot determine with
certainty whether paragraph 12 of the request was badly written or not, but it
appears to be quite clear that the sharing of the value of the companies in
which Martial Beauregard was a shareholder was not done as part of the payment
of support and that said sharing was rather done as consideration for each
party's waiver of the right to claim support from the other party as specified
at paragraph 67.
[25]
The title [Translation] "support for the
female petitioner" is discordant with the content of paragraphs 66 and 67
of the Agreement because paragraph 66 does not even refer to any support and
paragraph 67 applies to both parties, not just the appellant.
[26]
For these reasons, the
appeals are allowed and the reassessments made in respect of the appellant are
vacated.
[27]
Accordingly, the reassessments
made in respect of Martial Beauregard for the 2007, 2008 and 2009 taxation
years and the original assessment for the 2010 taxation year are referred back
to the Minister for reconsideration and reassessment in order to disallow the
deduction of the amounts he paid to the appellant as support during these
taxation years.
Signed at Ottawa, Canada, this 25th day of September
2013.
"Réal Favreau"
Translation certified true
on this 23rd day of October 2013
Margarita Gorbounova, Translator
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