[OFFICIAL ENGLISH TRANSLATION]
Date: 20020822
Docket: 2001-2756(IT)I
BETWEEN:
MARIO LOAYZA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
(Delivered orally from the bench at
Montréal, Quebec, on May 29, 2002,
and edited at Ottawa, Ontario, on August 22,
2002)
Lamarre Proulx, J.T.C.C.
[1] This is an appeal under the
informal procedure for the 1999 taxation year.
[2] At issue is whether, in computing
his income, the appellant is entitled to deduct the support
amounts paid to his former spouse for their four minor
children.
[3] In making the assessment, the
Minister of National Revenue ("the Minister") relied on
the following assumptions of fact set out in paragraph 7 of
the Reply to the Notice of Appeal ("the Reply"):
[TRANSLATION]
(a) the appellant
and Claudette Tanguay (hereinafter "the former spouse")
have been divorced since August 4, 1999;
(b) four children
were born of the union between the appellant and his former
spouse;
(c) on
October 19, 1999, the Quebec Superior Court (Family
Division), district of Longueuil, confirmed a "consent to
judgment on motion to vary corollary relief" (hereinafter
"the consent"), which the appellant and his former
spouse signed;
(d) according to
clause 5 of the said consent, the appellant is to pay to his
former spouse [TRANSLATION] "support amounts of $500 per
month for their four minor children, beginning in
September 1999";
(e) according to
clause 6 of the consent, [TRANSLATION] "since the applicant
receives support amounts of $400 per month from the Minister of
Revenue, beginning in September 1999, the respondent shall pay
directly to the applicant an additional amount of $100 per month,
until the Minister of Revenue intervenes in this case";
(f) according
to clause 8 of the consent, the appellant agrees to clothe
his four minor children in accordance with their needs;
(g) the
appellant's employer confirmed in writing that the appellant
had paid support amounts of $6,151.16 for the period from
January 1 to December 31, 1999;
(h) except for the
consent and the letter from the appellant's employer referred
to in subparagraph 6(g) [sic], the appellant provided the
Minister with no other documents about the terms and conditions
of his divorce or about the previous agreements concerning the
support amounts that he was to pay to his former spouse for their
four children.
[4] The Notice of Appeal reads in part
as follows:
[TRANSLATION]
... I disagree with the dismissal of the objection on the
grounds of paragraph 60(b) of section 60 of the
Income Tax Act because, under the Canadian Charter of
Rights, every Canadian has the right to equal treatment
concerning income taxes. I therefore request that the
deduction for support amounts paid be accepted on the same
grounds as it is for other Canadians, not taking the date of such
a judgment into account.
[5] The appellant testified. He
admitted the truth of each statement set out in paragraph 7
of the Reply.
[6] The appellant stated that the
separation took place in the summer of 1996. He adduced as
Exhibit A-1 an April 1, 1997, motion for interim
relief. Although this motion was served on the appellant,
it is not a document issued by a court. The only court
document the appellant adduced that was referred to in the Reply
was the consent to judgment on motion to vary corollary
relief. This consent, referred to in subparagraph 7(c)
of the Reply, was confirmed by the Quebec Superior Court and
adduced as Exhibit I-1.
[7] The appellant argued that he paid
support amounts to his former spouse. Those support amounts
would have been paid on the basis of oral agreements. Under
cross-examination, the appellant confirmed that the
August 4, 1999, divorce judgment and the judgment consented
to in the motion to vary corollary relief were the first
judgments to be made in their matrimonial affairs.
[8] I shall quote the third
"Whereas" clause as well as clauses 5 and
6 of the consent (Exhibit I-1):
[TRANSLATION]
...
WHEREAS on August 4, 1999, the Honourable
Judge Jocelyn Verrier pronounced a divorce judgment between
the parties;
...
5. The respondent shall pay to the applicant support amounts
of $500 per month for their four minor children, beginning
in September 1999;
6. Since the applicant receives support amounts of $400 per
month from the Minister of Revenue, beginning in September 1999,
the respondent shall pay directly to the applicant an additional
amount of $100 per month, until the Minister of Revenue
intervenes in this case;
...
[9] Counsel for the respondent
referred to the decision of Bowman J. of this Court in Kovarik
v. Canada, [2001] T.C.J. No. 181 (Q.L.), at
paragraphs 8 and 9:
8 Under
what I may describe as the old régime (pre May 1997)
spouses making payments to separated or ex spouses for the
support of children could deduct those payments and the recipient
had to include them in income. Following the decision of the
Supreme Court of Canada in Thibaudeau v. Canada, [1995]
2 S.C.R. 627, the legislation changed. So long as a pre May
1997 agreement remained unchanged the deduction/inclusion system
under the old régime prevailed.
9 If a
new agreement were entered into, or an old agreement was changed
in a particular way, the deduction/inclusion régime ceased
and only payments made up to the "commencement day", as
defined, were deductible by the payor and includible by the
payee.
[10] Counsel for the respondent also
referred to the decision of Rip J. of this Court in
O'Neill v. Canada, [2001] T.C.J. No. 429 (Q.L.),
at paragraph 11:
11 The definition of
"commencement day" in subsection 56.1(4) applies
to the facts at bar: when after April 1997, a written agreement
made before May 1997 is varied 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 becomes the
commencement day. The original written agreement was made on
September 1, 1995, that is, before May 1997. However, it was
finally varied on January 1, 1998 to change the child support
amounts payable to the recipient, beginning on January 1, 1998.
Whether the appellant and his former spouse intended to modify
the tax treatment of the support amounts when they varied their
agreement is not relevant. As stated by Bowman A.C.J. in Kovarik,
supra, at paragraph 15, "[the] definition of commencement
day in subsection 56.1(4) is not difficult to understand... . I
do not see how the plain words of the definition can be avoided,
however sophisticated the rules of statutory interpretation one
may choose to use may be". The child support amounts paid in
1998 were therefore paid on or after the agreement's
commencement day in respect of a period that began on or after
its commencement day. It would follow that these amounts are not
deductible from the appellant's income.
Conclusion
[11] Paragraph 60(b), subsection
60.1(4), and the definitions of "support amount",
"child support amount" and "commencement day"
in subsection 56.1(4) read as follows:
60. Other
deductions - There may be deducted in computing a
taxpayer's income for a taxation year such of the following
amounts as are applicable:
..
(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 the 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;
60.1(4) Definitions - The definitions in subsection
56.1(4) apply in this section and section 60.
56.1(4) "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 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 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.
"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 common law partner or former spouse
or common law partner of the payer or who is a parent of a child
of whom the payer is a natural parent.
[12] According to those legislative
provisions, child support amounts paid under a
post-April 1997 judgment may not be deducted in computing
the payer's income. Correspondingly, those support
amounts need not be included in computing the recipient's
income.
[13] In the present case, the only written
documents under which support amounts were paid in 1999 are
judgments dated 1999. The nature of the amounts collected
by the Quebec Minister of Revenue was not explained at the
hearing. Those amounts collected are referred to in clause
6 of the consent. However, according to that consent, those
amounts were collected beginning in September 1999, that is,
later than the August 4, 1999, divorce judgment between the
parties. The appellant did not adduce that divorce
judgment. The support amounts paid for the children to
their mother are therefore not amounts that may be deducted in
computing the appellant's income.
[14] In his Notice of Appeal, the appellant
claimed that it is discriminatory that child support amounts paid
under a post-April 1997 judgment may not be deducted.
In Thibaudeau v. Canada, [1995] 2 S.C.R. 627,
(referred to in the decision cited in paragraph 9 of these
Reasons), the appellant challenged the constitutionality of the
provision requiring that support amounts for children be included
in income because non-separated women did not have to include in
their income the support amounts paid by the fathers of their
children. The Supreme Court of Canada ruled that this
provision was not discriminatory because, in setting support
amounts, the judges took into account the tax impact of the
inclusion and deduction system. The reasoning must be the
same in the reverse situation. The judges of the civil
courts now take into account the absence of tax impact in the
case of support amounts paid under post-April 1997
judgments. Prior to that date, the tax impact of including
and deducting those amounts was taken into account; that has no
longer been the case since that date.
[15] The appeal must be dismissed.
Signed at Ottawa, Canada, this 22nd day of August 2002.
J.T.C.C.
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