Date: 19980126
Docket: 97-1709(IT)I
BETWEEN:
PETER LOVERIDGE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Bowie J.T.C.C.
[1] These appeals are from
reassessments of the Appellant's liability for income tax for the
taxation years 1992, 1993 and 1994. The reassessments disallowed
deductions for alimony and maintenance claimed by the Appellant
in the amounts of $15,353.00, $5,623.00 and $5,292.00,
respectively, for those years. Three separate issues are
raised:
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 31, 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)[1] 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.
Signed at Ottawa, Canada, this 26th day of January, 1998.
J.T.C.C.
COURT FILE
NO.:
97-1709(IT)I
STYLE OF
CAUSE:
Peter Loveridge and
Her Majesty The Queen
PLACE OF
HEARING:
Halifax, Nova Scotia
DATE OF
HEARING:
December 8, 1997
REASONS FOR JUDGMENT BY: the Honourable
Judge E.A.Bowie
DATE OF
JUDGMENT:
January 26, 1998
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for the Respondent: Patrick
Vézina
COUNSEL OF RECORD:
For the
Appellant:
N/A
Name:
Firm:
For the
Respondent:
George Thomson
Deputy Attorney General of Canada
Ottawa, Canada
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