Bellman v. The Queen, docket 2002-600(IT)I (Informal Procedure)

Date: 20020913

Docket: 2002-600-IT-I

BETWEEN:

LAWRENCE R. BELLMAN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasons for Judgment

Little, J.

A.             FACTS

[1]            The Appellant and his wife Dianne were married in 1975.

[2]            There were three children born of the marriage:

                - Karycia D. Bellman - April 24, 1979;

                - Kalynka D. Bellman - August 25, 1981;

                - Kylaina D. Bellman - September 11, 1984.

[3]            The Appellant and his former spouse separated in 1992.

[4]            On the 19th day of April 1993 a Court Order was issued (the "First Order"). Under the terms of the First Order, the Appellant was required to pay Dianne child support payments of $350.00 per month per child for a total of $1,050.00 per month.

[5]            Under the terms of the First Order the Appellant was required to pay Dianne spousal support of $500.00 per month commencing on the 1st day of April, 1993.

[6]            On the 28th day of April 1999 a Court Order was issued (the "Second Order").

[7]            The Second Order specified as follows:

(i)             the Appellant was in arrears of child support in the sum of $4,200.00;

(ii)            the child support arrears were to be paid by the Appellant in addition to the varied child support payments;

(iii)           the Appellant was required to pay the child support arrears at the rate of $350.00 per month commencing on the 1st day of May, 1999, and continuing to and including the 1st day of April, 2000;

(iv)           the Appellant was required to pay Dianne spousal support of $250.00 per month commencing on the 1st day of May, 1999, and continuing to and including the 1st day of April, 2002; and

(v)            the Appellant was in arrears of spousal support in the sum of $4,500.00, and the arrears were to be paid at the rate of $250.00 per month commencing on the 1st day of May, 2000 and continuing on the 1st day of each month thereafter until fully paid;

(vi)           the child support arrears of $4,200.00 were accumulated from the period May 1, 1998 through April 1999; and

(vii)          in August or September of 1998, the Appellant ceased to pay Dianne spousal support as required under the First Order.

[8]            In 1998 and 1999 the Appellant made the following support payments:

                                1998                                                                         $450.00

                                1999                                                                         $14,200.00

[9]            When the Appellant filed his income tax return for the 1999 taxation year he claimed the amount of $17,782.75 as support payments.

[10]          On the 27th day of December 2001 the Minister of National Revenue (the "Minister") issued a Notice of Reassessment allowing a deduction of support payments in the amount of $9,000.00. The amount of $9,000.00 was determined by the Minister as follows:

                1.              Spousal Support

                                First Order                                                                                                            $ Nil

                                Second Order

                                $250.00 per month x 8 months

                for the period from May, 1999 to

                December, 1999                                                                                     $2,000.00

2.              Child Support

                                First Order                                                                                                            $4,200.00

                                $350.00 per month per child x 3

                                for the period from January, 1999

                                to April, 1999.

                Arrears of $4,400.00 were accumulated under the

First Order. The Second Order provided that the

arrears were accumulated from May, 1998 to April 1999.

Payment of arrears of $350.00 per month commenced

on May 1, 1999. In 1999, $2,800.00 of the arrears was

paid i.e. from May, 1999 to December 1999.                      $2,800.00

                                Second Order                                                                                        $ NIL

                                Total Support deductions allowed                                     ________

                                by the Minister in 1999                                        $                               $9,000.00

B.             ISSUE

[11]          The issue to be decided is whether the Minister properly calculated the Appellant's deductions for child support payments and spousal support payments for the 1999 taxation year.

C.             ANALYSIS

[12]          Under what has been sometimes described as the old régime (pre-May 1997) spouses making payments to separated or ex-spouses for the support of the children were allowed to deduct those payments and the recipient was required to include the amount of the payments in their income. Following the decision of the Supreme Court of Canada in Thibaudeau v. Canada [1995] 2. S.C.R. 627, the Income Tax Act (the "Act") was amended and new provisions were introduced to deal with child support payments.

[13]          The amended Act provided that if a pre-May 1997 agreement remained unchanged the deduction/inclusion system as provided by the old régime prevailed. However, if a new agreement were entered into by the parties or if a new Court Order was issued, or if an old agreement was changed in a particular way the deduction/inclusion régime did not apply and only payments made up to the commencement day, as defined, were deductible from income by the payor and included in income by the payee.

[14]          Subsection 56.1(4) of the Act defines "child support amount", "commencement day" and "support amount". Subsection 56.1(4) reads as follows:

"child support amount" means any support amount that is not identified in the agreement or order under which it is receivable as being solely for the support of a recipient who is a spouse or former spouse of the payer or who is a parent of a child of whom the payer is a natural parent.

"commencement day" at any time of an agreement or order means

(a) where the agreement or order is made after April 1997, the day it is made; and

(b) where the agreement or order is made before May 1997, the day, if any, that is after April 1997 and is the earliest of

(i) the day specified as the commencement day of the agreement or order by the payer and recipient under the agreement or order in a joint election filed with the Minister in prescribed form and manner,

(ii) where the agreement or order is varied after April 1997 to change the child support amounts payable to the recipient, the day on which the first payment of the varied amount is required to be made,

(iii) where a subsequent agreement or order is made after April 1997, the effect of which is to change the total child support amounts payable to the recipient by the payer, the commencement day of the first such subsequent agreement or order, and

(iv) the day specified in the agreement or order, or any variation thereof, as the commencement day of the agreement or order for the purposes of this 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 former 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

(b) the payer is a natural 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.

[15]          Paragraph 60(b) of the Act reads as follows:

(b) Support -- the total of all amounts each of which is an amount determined by the formula

A - (B + C)

where

A is the total of all amounts each of which is a support amount paid after 1996 and before the end of the year by the taxpayer to a particular person, where the taxpayer and the particular person were living separate and apart at the time the amount was paid,

B is the total of all amounts each of which is a child support amount that became payable by the taxpayer to the particular person under an agreement or order on or after its commencement day and before the end of the year in respect of a period that began on or after its commencement day, and

C is the total of all amounts each of which is a support amount paid by the taxpayer to the particular person after 1996 and deductible in computing the taxpayer's income for a preceding taxation year;

[16]          In my opinion the Second Order dated April 28, 1999 triggered a commencement date as that term is defined in section 56.1(4) of the Act. It therefore follows that the Appellant is caught by the amended legislation in sections 56.1 and 60 of the Act and he is only allowed to deduct support payments of $9,000.00 in determining his income for the 1999 taxation year.

[17]          The appeal is dismissed.

Signed at Ottawa, Ontario, this 13th day of September 2002.

"L.M. Little"

J.T.C.C.

COURT FILE NO.:                                                 2002-600(IT)I

STYLE OF CAUSE:                                               Lawrence R. Bellman and

                                                                                                Her Majesty the Queen

PLACE OF HEARING:                                         Kelowna, British Columbia

DATE OF HEARING:                                           August 23, 2002

REASONS FOR JUDGMENT BY:      The Honourable Judge L.M. Little

DATE OF JUDGMENT:                                       September 13, 2002

APPEARANCES:

For the Appellant:                                                 The Appellant himself

Counsel for the Respondent:              Nadine Taylor

COUNSEL OF RECORD:

For the Appellant:                

Name:                               

Firm:                 

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

2002-600(IT)I

BETWEEN:

LAWRENCE R. BELLMAN,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on August 23, 2002 at Kelowna, British Columbia, by

the Honourable Judge L.M. Little

Appearances

For the Appellant:                                                 The Appellant himself

Counsel for the Respondent:              Nadine Taylor

JUDGMENT

The appeal from the assessment made under the Income Tax Act for the 1999 taxation year is dismissed in accordance with the attached Reasons for Judgment.

Signed at Ottawa, Ontario, this 13th day of September 2002.

"L.M. Little"

J.T.C.C.