Date: 20020516
Docket:
2001-2754-IT-I
BETWEEN:
VASSILIOS
KATSORAS,
Appellant,
and
HER MAJESTY THE
QUEEN,
Respondent.
Reasonsfor
Judgment
Bell,
J.T.C.C.
ISSUE:
[1]
The issue is whether
the amount of $15,929 ("Amount") paid by the Appellant
in his 1990 taxation year for the support of his children is
deductible in computing his taxable income for that
year.
FACTS:
[2]1.
Anne Katsoras ("Anne"), the then wife of the Appellant,
filed a Statement of Claim claiming from the Appellant, inter
alia, custody and support of the three children of the
marriage. The Statement of Claim was issued on September 22, 1995
by R.P. Zigler, solicitor for Anne.
2.
On October 10, 1995 the Ontario Court (General Division) gave
Anne, inter alia, interim custody of the children and
ordered interim support payment by the Appellant of $1,150 per
month. The parties executed Minutes of Settlement on December 11,
1996 providing, inter alia, for Anne having custody of,
and the Appellant having reasonable access to, the children and
for payment by the Appellant to Anne of child support in the sum
of $416.66 per month, to be increased in accordance with the
indexing formula set out in the Family Law Act.
3.
The Appellant filed a Petition for Divorce in the Ontario Court
(General Division) on March 7, 1996 seeking only a divorce
and costs.
4.
The Appellant produced to the Court a form of draft Judgment of
the Ontario Court (General Division) and a letter from R.P.
Zigler to Lorne Levine, Appellant's counsel, dated October 2,
1997, stating that he had attended on April 30, 1997 before Madam
Justice Benotto and obtained a Judgment, on consent, in
accordance with "the draft Judgment which you sent me on
April 29, 1997". Although the original Judgment had
been lost and no attempt had been made to obtain a copy or
information respecting it, counsel for the Department of Justice
acknowledged the existence of such Order for the purposes of this
case. That Order provided, inter alia, that Anne have
custody of the children, that the Appellant have reasonable
access, and that the Appellant pay child support in the sum of
$1,300 per month
5.
The letter indicates clearly that the Appellant and Anne intended
the continuation of deduction from, and inclusion in income under
the Income Tax provision applicable prior to May, 1997. It contained the
following:
... there is no
impediment to your proceeding with your divorce. You need not
include a copy of the Judgment in your divorce record. You can
simply indicate that the parties have agreed to settle the issue
of child support in the sum of $1,300.00 on the basis of the
pre-existing tax regime ...
The letter stated further that:
... it is still
possible to preserve tax deductibility by entering into an
agreement. I am forwarding to you three copies of a Separation
Agreement as executed by my client. You will note that the
Agreement simply sets out the terms of the Minutes of Settlement
which were signed by both parties.
Without discussing the legal accuracy of the statement, it
indicates further the intention of the Appellant and Anne as
expressed in the pre-May, 1997 documents.
6.
On October 2, 1997 Anne and the Appellant signed the Separation
Agreement referred to above, which, inter
alia:
(a)
gave custody of the children to Anne and reasonable access to the
Appellant, commencing December 1, 1996;
(b)
provided that such support paid by the Appellant be deducted by
him and included in Anne's calculation of income for tax
purposes, all pursuant to subsections 56.1(3) and 60.1(3) of the
Income Tax Act ("Act") and acknowledging that the
Appellant had made periodic payments of support to Anne from
December 1, 1996 to December 30, 1997 in the amount of $11,500,
being considered as having been made pursuant to the agreement
and deductible and includable as stated above.
7.
An Amended Support Deduction Notice from the Family
Responsibility Office, Ministry of the Attorney General, Ontario,
dated March 25, 1998 stated that the Appellant was required to
pay "Ongoing Family Support payments" of $1,300
monthly.
8.
Divorce Judgment dated August 24, 1998 provided that Anne and the
Appellant were divorced effective September 24, 1998. It repeated
provisions described above for custody of and reasonable access
to the children and the payment by the Appellant to Anne as
support for the children the sum of $1,300 per month.
ANALYSIS AND
CONCLUSION:
[3]
Respondent's
counsel said that the "commencement day" of the October
2, 1997 Separation Agreement and the August 24, 1998 Divorce
Judgment fell within the meaning of "commencement day".
It is found in subsection 56.1(4) as follows:
"commencement
day" at any time of an agreement or order means
where the agreement
or order is made after April 1997, the day it is made.
[4]
Counsel did not
present a detailed analysis of paragraph 60(b) of the
Act. It provides that:
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 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;
[5]
Counsel's implied
argument was that since the Amount sought to be deducted was
payable after the commencement day of either the October 2, 1997
Separation Agreement or the August 24, 1998 Divorce Judgment, it
would be included in B, and would be deducted from the amount in
A with the result that no deduction under paragraph 60(b)
would be available.
[6]
Obviously, Anne and
the Appellant agreed on the amount to be paid, before the
effective date of the revised system denying the deduction from,
and inclusion in, income, of support payments. The April 30, 1997
Order provides that:
... the
Defendant shall pay to the Plaintiff as support for the children,
the sum of $1,300.00 per month ...
[7]
As stated above, it
also provided that Anne have custody of the children and that the
Appellant have reasonable access. This was a Judgment obtained
from the Ontario Court (General Division), on consent. It is
clear from the evidence that the Appellant always had agreed to,
and but for a temporary insubstantial amount of arrears, had paid
support and had no intention of not paying same. It was very much
present to the minds of counsel for both Anne and the Appellant
that the payments of $1,300 per month were to continue to be
deductible by the Appellant and includable in Anne's
income.
[8]
The October 2, 1997
Separation Agreement contained a provision regarding payment of
the same amount. The August 24, 1998 Divorce Judgment, made for
the purpose of ordering and adjudging a divorce effective
September 24, 1998, incorporated provisions from the April 30,
1997 Judgment, including the payment by the Appellant to Anne of
the sum of $1,300 per month as support for the children. There
was no evidence supporting the need for inclusion of anything
other than the divorce order, it alone having been
sought.
[9]
Neither the
Separation Agreement nor the Divorce Judgment created the
already extant obligation of the Appellant to pay the said sum of
$1,300 per month to Anne, that obligation having been established
as agreed by the parties expressed in the April 30, 1997 consent
Order for the purpose of avoiding the application of the
post-April 30, 1997 revisions respecting income deduction and
inclusion. Rather, they continued the aforesaid existing
obligations.
[10]
The formula set out
above, contained in paragraph 60(b) applicable to the
post-April 30, 1997 period includes in B the words:
... amount that
became payable by the taxpayer ... under an agreement or
order on or after its commencement day ...
Such wording clearly implies that the
amount of $1,300 had not been payable prior either to the
Separation Agreement or the Divorce Judgment. That is not the
case. Accordingly, the Amount, consisting of monthly payments of
$1,300, is not included in B in the paragraph 60(b)
formula with the result that the sum is deductible by the
Appellant for his 1999 taxation year.
Signed at Ottawa, Canada this 16th day of May,
2002.
"R.D. Bell"
J.T.C.C.
COURT FILE
NO.:
2001-2745(IT)I
STYLE OF
CAUSE:
Vassilios Katsoras v. Her Majesty the Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
May 7, 2002
REASONS FOR JUDGMENT
BY: The Honourable Judge R.D.
Bell
DATE OF
JUDGMENT:
May 16, 2002
APPEARANCES:
Counsel for the Appellant: Lorne
Levine
Counsel for the
Respondent:
Eric Sherbert
COUNSEL OF RECORD:
For the
Appellant:
Name:
Lorne Levine
Firm:
Lorne Levine
Toronto, Ontario
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2001-2754(IT)I
BETWEEN:
VASSILIOS KATSORAS,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on May 7, 2002 at Toronto,
Ontario, by
the Honourable Judge R.D. Bell
Appearances
Counsel for the
Appellant:
Lorne Levine
Counsel for the
Respondent:
Eric Sherbert
JUDGMENT
The appeal from the reassessment made under the Income Tax
Act for the 1999 taxation year is allowed, and the
reassessment is referred back to the Minister of National Revenue
for reconsideration and reassessment in accordance with the
attached Reasons for Judgment.
Costs are awarded to the Appellant.
Signed at Ottawa, Canada
this 16th day of May, 2002.
J.T.C.C.
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