Date:
20021211
Docket:
2002-45-IT-I
BETWEEN:
FREDERICK J.
ARTES,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent,
and
LEONILA
ARTES
Added
Party.
Reasons
for Judgment
Beaubier,
J.T.C.C.
[1]
This appeal pursuant to the Informal Procedure was heard at
Toronto, Ontario on November 20, 2002. The Appellant and his
former wife, Leonila both testified.
[2]
Leonila was joined in this appeal pursuant to an application by
the Respondent under section 174 of the Income Tax Act
("Act") for the determination of a question. The
following are the particulars thereof:
A.
TAXPAYERS TO BE BOUND BY THIS REFERENCE:
1.
It is intended that the following taxpayers shall be bound by the
determination of the questions herein:
(a)
Frederick J. Artes
Address:
1049 Blueheron Boulevard
Mississauga, Ontario, L5V 2J8
(b)
Leonila Artes
Address:
5472 Whitehorn Avenue
Mississauga, Ontario, L5V 1V5
B.
THE ASSESSMENTS OR PROPOSED ASSESSMENTS IN RESPECT OF WHICH A
DETERMINATION IS SOUGHT:
2.
Determination of the question herein is sought in relation
to:
(a)
A Notice of Assessment dated September 5, 2000 in respect of the
1999 taxation year of Mr. Artes;
(b)
A proposed reassessment in respect of the 1998 taxation year
of Mr. Artes [should the answers to 3(a) and (b) be answered in
the negative];
(c)
A proposed reassessment in respect of the 1999 taxation year
of Ms. Artes [should the answers to 3(a) and (c) be answered in
the affirmative];
(d)
A proposed reassessment in respect of the 1998 taxation year
of Ms. Artes [should the answers to 3(a) and (c) be answered in
the affirmative].
C.
THE QUESTIONS IN RESPECT OF WHICH THE MINISTER OF NATIONAL
REVENUE REQUESTS A DETERMINATION:
3.
The questions in respect of which a determination is sought
are:
(a)
Whether amounts paid by Mr. Artes to Ms. Artes in the 1998 and
1999 taxation years were paid pursuant to a written
agreement;
(b)
Whether amounts paid by Mr. Artes to Ms. Artes in the 1998 and
1999 taxation years are deductible in computing Mr. Artes'
income pursuant to paragraph 60(b) of the Act;
and
(c)
Whether amounts paid by Mr. Artes to Ms. Artes in the 1998 and
1999 taxation years are includable in computing
Ms. Artes' income pursuant to paragraph 56(1)(b) of the
Act.
[3]
For brevity's sake, paragraph D of the Application is quoted
by item, so that the subject of the dispute can be dealt with
more succinctly based upon the evidence.
D.
THE FACTS AND REASONS ON WHICH THE MINISTER RELIES AND HAS BASED
OR INTENDS TO BASE ASSESSMENTS OF TAX PAYABLE BY EACH OF THE
TAXPAYERS NAMED IN THE APPLICATION:
4.
In issuing the Notice of Assessment dated
September 5, 2000, with respect to the
1999 taxation year of Mr. Artes, and in regards to the
proposed reassessment of Ms. Artes with respect to the 1999
taxation year, the Minister relied or intends to rely upon the
following facts, reasons, or assumptions of fact made by the
Minister:
(a)
There are four children of the marriage. They are named Sheila
Artes, Suzy Artes, Sarah Artes and Stephanie Artes;
There are four
children of the marriage. Their names are not in evidence. Two
are now in university, one in college and one in high
school.
(b)
Mr. Arties is married to Ms. Artes;
True.
(c)
At all material times since September of 1990, Mr. Artes has
lived separate and apart from Ms. Artes due to a breakdown
of the marriage;
True.
(d)
Mr. Artes and Ms. Artes made or had a mutual oral agreement
(herein referred to as "The oral agreement") in 1990
with regards to support payments to be paid to Ms. Artes for
spousal and child support;
(e)
Pursuant to the oral agreement, Mr. Artes was to pay $1,000 per
month in cash or cheque to Ms. Artes to support her and the
four children;
Both are
true.
[4]
It is here that the problem arises. The Artes had an oral
agreement in 1990 between themselves. The Court accepts their
testimony that on May 15, 1992 they signed a written agreement
that Mr. Artes would pay the support. It is Exhibit A-1 which
reads:
MUTUAL
AGREEMENT
WE, Frederick J. Artes and Leonila C Artes, both of legal age,
Canadian citizen, and presently separated and living apart as
husband and wife has this mutual agreement signed this 15th of
May 1992.
That I, Frederick J. Artes agree to give a monthly support
payment of $1,000.00 a month for her and our four (4) children,
Sheila, Suzy, Sarah and Stephanie all surnamed Artes.
That I, Leonila C Artes will accept the monthly support payment
of $1,000.00 every 15th day of the month, for whatever purposes
or expenditures I may deem necessary.
That WE, Frederick J. Artes and Leonila C Artes had this mutual
agreement not to bring this matter to court as long as I,
Frederick J. Artes will fulfill the above mentioned agreement and
my duties and obligations to our four (4) children, Sheila, Suzy,
Sarah and Stephanie.
Signed By: ...
[5]
Mr. Artes testified that he misplaced it and that Ms. Artes could
not find it. She stated that he asked her for it, and that she
was receiving cancer treatments and taking drugs for pain and
depression. As a result she did not do anything about it at
first. Then in about 2001 she searched for it and found it in
some boxes where it had been packed during at least one move. She
is believed, as is Mr. Artes.
[6]
To carry on with D. 5. (f), etc.:
(f)
Mr. Artes, in computing his income for the 1999 taxation
year, deducted the amount of $15,500.00 as support payments made
in the year;
Mr. Artes
could only afford to pay $9,000 in 1998. In 1999 he paid $15,500
to make up the arrears. As a result, the arrears he paid Ms.
Artes in 1999 was $3,000, the current payments were $12,000 and
$500 was over-claimed by Mr. Artes because it was more than
the correct amount.
(g)
In regards to the payments received by Ms. Artes in the 1999
taxation year, no amount was included in her income as a support
amount received in the year;
Is correct.
Ms. Artes stated that she believes that the $1,000 is the
children's and not hers. Therefore she is of the opinion that
she need not report it. She insisted on this when she was advised
to the contrary in cross-examination. The Court believes that she
is honest and sincere in this mistaken belief.
(h)
The deduction taken by Mr. Artes in the 1999 taxation year
was a deduction for payments not made in the year under a decree,
order or judgment of a competent tribunal or under a written
agreement; and
(i)
Mr. Artes' payments to Ms. Artes made in the
1999 taxation year were paid pursuant to the oral agreement,
and receivable by Ms. Artes under the oral agreement.
Subject to
the foregoing restriction respecting the $500, on the basis of
the foregoing findings, the Court finds these assumptions of fact
to be false.
[7]
Therefore, in response to the questions posed in paragraph C. 3.,
the Court determines:
(a)
The amounts paid by Mr. Artes to Ms. Artes in 1998 were pursuant
to a written agreement; $15,000 paid by Mr. Artes to Ms. Artes in
1999 was pursuant to a written agreement.
(b)
$9,000 paid in 1998 and $15,000 paid in 1999 is deductible to Mr.
Artes.
(c)
The $15,000 is includable in computing Ms. Artes' income
pursuant to paragraph 56(l)(b) of the Act, for
1999, based on her income tax return filed for 1999. The sum of
$9,000 paid by Mr. Artes to Ms. Artes in 1998 is includable in
computing Ms. Artes' income pursuant to
paragraph 56(1)(b) of the Act.
Signed at Vancouver, British
Columbia, this 11th day of December, 2002.
J.T.C.C.COURT
FILE
NO.:
2002-45(IT)I
STYLE OF
CAUSE:
Frederick J. Artes v. The Queen
v. Leonila
Artes
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
November 20, 2002
REASONS FOR
JUDGMENT BY: The Honourable Judge D. W.
Beaubier
DATE OF
JUDGMENT:
December 11, 2002
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for
the
Respondent:
Nimanthika Kaniera
For the
Added
Party:
The Added Party herself
COUNSEL OF
RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-45(IT)I
BETWEEN:
FREDERICK J.
ARTES,
Appellant,
and
HER MAJESTY
THE QUEEN,
Respondent,
and
LEONILA
ARTES
Added
Party.
Determination of question heard on November 20, 2002 at
Toronto, Ontario, by
the
Honourable Judge D. W. Beaubier
Appearances
For the
Appellant:
The Appellant himself
Counsel for
the
Respondent:
Nimanthika Kaneira
For the
Added
Party:
The Added Party herself
JUDGMENT
The Court makes the
determination posed by the questions described in the attached
Reasons for Judgment.
Signed at Vancouver, British Columbia, this 11th day of December,
2002.
J.T.C.C.
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