Docket: 2011-1147(IT)I
BETWEEN:
KEN HURST,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeals
heard on November 30, 2011, at Toronto, Ontario
Before: The Honourable
Justice G. A. Sheridan
Appearances:
|
For the Appellant:
|
The
Appellant himself
|
|
Counsel for the Respondent:
|
David Heti, Student-at-Law
|
____________________________________________________________________
JUDGMENT
In accordance with the attached Reasons for Judgment,
the appeal from the assessment by the Minister of National Revenue of the 2008
taxation year dated June 4, 2009 is quashed; the appeal from the assessment of
the 2009 taxation year dated May 6, 2010 is dismissed.
Signed at Ottawa, Canada, this 6th day of December 2011.
“G. A. Sheridan”
Citation: 2011TCC549
Date: 20111206
Docket: 2011-1147(IT)I
BETWEEN:
KEN HURST,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Sheridan J.
[1]
This matter concerns
the deductibility of certain amounts the Appellant, Ken Hurst, paid to his
spouse in 2008 and 2009 following their separation in July 2008.
The 2008 Appeal
[2]
Upon the Respondent’s
motion, the appeal from the 2008 assessment dated June 4, 2009 was quashed at
the hearing as Mr. Hurst had not filed a Notice of Objection in respect of it
and a subsequent reassessment was issued on August 31, 2011 (Affidavit of
Warren O’Dwyer sworn November 28, 2011).
The 2009 Appeal
[3]
The facts underlying
the appeal of the 2009 assessment are not in dispute. Mr. Hurst left the
Matrimonial Home in July 2008. About a year later, on June 10, 2009,
a Consent Order
(“June 2009 Order”) was issued requiring Mr. Hurst to pay his spouse the
following amounts:
1.
… $15,000 in full and final satisfaction of the underpayment of
spousal support up to and including June 30, 2009, payable on or before
July 13, 2009;
2.
… interim spousal support of $2,650 per month on the first day of each
and every month, commencing on July 1, 2009 … . [Emphasis added.]
[4]
From the time of his departure
from the Matrimonial Home in July 2008 to the June 2009 Order, there was no
court order or written agreement requiring Mr. Hurst to pay support to his
wife. Nevertheless, during that period, he paid property tax and hydro bills
for the Matrimonial Home directly to the appropriate agency and paid various amounts
to his wife for her use from time to time. The total paid prior to the June
2009 Order was $16,065.22
(“Miscellaneous Payments”).
[5]
Once the June 2009 Order had been
issued setting spousal support at $2,650 per month, the parties determined that
from July 2008 to July 2009, Mr. Hurst should have paid to his spouse a total
of $34,450. This was later reduced by $2,650 to reflect the
payment of interim spousal support due on July 1, 2009; the parties agreed that
the balance outstanding was $15,734.78. Further negotiations ensued and this amount was
rounded down to the $15,000 amount referred to in paragraph 1 of the June 2009
Order (“Lump Sum Payment”).
Issue
[6]
In his 2009 income tax return, Mr.
Hurst claimed a deduction for spousal support in respect of the amounts paid
from July 2008 to June 2009: the Miscellaneous Payments of $16,065.22 and the
Lump Sum Payment of $15,000.
[7]
The Minister rejected his claim on
the basis that these amounts did not fall within the definition of “support
amount” as defined in subsection 56.1(4) of the Income Tax Act, the
relevant potions of which read:
“support
amount” means an amount payable or receivable as an allowance on a periodic
basis for the maintenance of the recipient, … if the recipient has discretion
as to the use of the amount, and
(a) the recipient is the spouse … of the payer, the
recipient and payer are living separate and apart because of the breakdown of
their marriage … and the amount is receivable under an order of a competent
tribunal or under a written agreement; or
…
[Emphasis added.]
[8]
Mr. Hurst’s position was that until
a monthly spousal support amount had been established by the family law court,
he could not know how much he ought to be paying to his wife. Pending that
determination, he tried to do the “right thing” by continuing to look after
certain Matrimonial Home costs and helping his wife financially. He argued that
it could be inferred from the June 2009 Order and correspondence between the
parties that the Miscellaneous Payments and the Lump Sum Payment were intended
as spousal support during the pre-June 2009 Order period and accordingly, the
full amount ought to be deductible.
Analysis
[9]
From a practical perspective, Mr.
Hurst’s argument has a certain appeal. However, his entitlement to a spousal
support deduction hinges not on common sense but rather on his being able to
satisfy the technical criteria under the legislation. I regret to say this he
has been unable to do.
[10]
I agree with the submissions of
Mr. Heti, Student-at-Law, that the nature of the Miscellaneous Payments and the
Lump Sum Payment prevents them from falling within the definition of “support
amount” under the Act.
[11]
Turning first to the Miscellaneous
Payments, Mr. Hurst freely admitted that these were made on a voluntary basis
rather than pursuant to a Court order or written agreement as required under
subsection 56.1(4). A further weakness is that the taxes and hydro payments
were paid not to Mr. Hurst’s wife but directly to the agency in question, thus
depriving such amounts of the “discretionary” quality contemplated by the
statutory definition.
[12]
As for the Lump Sum Payment, while
in certain circumstances a lump sum payment may be characterized as a “support
amount”, it is not possible to do so in the present case. The Lump Sum Payment
falls outside the definition of that term because it was neither made on a
“periodic” basis nor linked to any pre-existing obligation
to pay spousal support on a periodic basis. Underscoring this difficulty is the
fact that the $15,000 Lump Sum Payment does not correspond directly to the
amount actually owing of $15,734.78; to Mr. Hurst’s intense regret, it represents
a settlement of arrears as negotiated between the parties. If it is any comfort
to him, even had the amount not been rounded off, it would not have changed the
legal character of the Lump Sum Payment. In these circumstances, the reference
in the June 2009 Order to “the underpayment of spousal support” is not
sufficient to convert the Lump Sum Payment into a “spousal amount” as
contemplated by the Act.
[13]
For the reasons set out above, the
appeal from the assessment of the 2008 taxation year is quashed and the appeal
from the assessment of the 2009 taxation year is dismissed.
Signed at Ottawa, Canada, this 6th day of December 2011.
“G. A. Sheridan”
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