Date: 20020208
Docket: 2001-3471-IT-I
BETWEEN:
EVA SAMYCIA,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Bowman, A.C.J.
[1] This is an appeal from an
assessment for the appellant's 1999 taxation year. By that
assessment the Minister of National Revenue included the amount
of $10,671 received by the appellant from her former spouse. The
amount was the total received by her as periodic support payments
for the three children of the marriage of the appellant and her
former spouse Jean-Marc Samycia.
[2] The facts are not in dispute. The
appellant and her former spouse married in 1976. They separated a
number of times but the final separation was in 1992 or 1993.
They had four children, born in 1977, 1980, 1982 and 1987
respectively.
[3] Exhibit A-2 contains a number
of interim orders. On January 5, 1994 Master Bolton of the
Supreme Court of British Columbia ordered Jean-Marc Samycia the
husband to pay interim maintenance of $450 per month for each of
the four children commencing on January 1, 1994 and
continuing on the first day of each and every month until further
court order.
[4] The order read:
THIS COURT ORDERS that the Defendant shall pay to the Plaintiff
for the interim maintenance of the four children of the marriage,
namely:
QUINCY JAMES SAMYCIA, born July 1st, 1987;
SOPHIE-AIMEE SAMYCIA, born July 4th, 1982;
JACQUELINE-AIMEE SAMYCIA, born March 10th, 1980;
VIVIANNE-AIMEE SAMYCIA, born January 16th, 1977;
the sum of $450.00 per month per child commencing on the first
day of January, 1994 and continuing on the first day of each and
every month thereafter until further Court Order.
[5] The order of Master Bolton was
appealed to Mr. Justice Meiklem of the Supreme Court of
British Columbia. Mr. Justice Meiklem on August 2, 1994
allowed the appeal in the following terms.
THIS COURT ORDERS that the Appeal of the Defendant, JEAN-MARC
SAMYCIA, aka Jean Marc SAMYCIA is allowed only to the extent of
reducing the maintenance from $450.00 per month per child to
$400.00 per month per child.
[6] The point that should be noted is
that while Mr. Justice Meiklem reduced the monthly payment
for each child to $400 the order still covered all four
children.
[7] Finally, on September 26,
1997 a consent order between the appellant as plaintiff and her
husband as defendant was issued by the Supreme Court of British
Columbia and entered on September 29, 1997. The portions of
the consent order that are relevant to this appeal read:
THIS COURT ORDERS that the Plaintiff shall have sole custody of
the children of the marriage, namely: JACQUELINE-AIMEE SAMYCIA,
born March 10th, 1980, SOPHIE-AIMEE SAMYCIA born July 4th, 1982
and QUINCY JAMES SAMYCIA, born July 1st, 1987 (hereinafter called
the "Children of the Marriage").
...
AND THIS COURT FURTHER ORDERS that the Defendant shall pay to the
Plaintiff for the maintenance and support of each Child of the
Marriage the sum of $400.00 per month per Child, on the first day
of each month from March 1st, 1997; until that Child:
a. marries;
b. dies;
c. becomes
self-supporting; or
d. becomes 19
and is not attending a post secondary educational
institution;
whichever shall first occur. Provided that if a Child attends
a post-secondary educational institution as a full-time student,
the Defendant shall continue to pay maintenance as aforesaid for
that Child until that Child:
a. ceases to
attend a post-secondary educational institution as a full-time
student; or
b. achieves
his or her first post-secondary degree;
whichever shall first occur.
AND THIS COURT FURTHER ORDERS that the payments made pursuant to
the preceding paragraph hereof:
a. shall not
be included in the Plaintiff's taxable income for the
taxation years in which they are received; and
b. shall not
be deducted by the Defendant for taxation purposes from the
Defendant's income for those years.
[8] It is important to note that the
consent order of September 26, 1997 refers to only three
children and makes detailed provisions for the cessation of
payments in respect of each child and for their continuance where
the child attends a post-secondary educational institution. This
is a significant alteration in the total amount and duration of
the support amounts payment.
[9] The appellant included the amounts
received in 1997 in her income for 1997. She did not include them
in 1998 and she was not reassessed. I draw no inference from
either her inclusion in 1997 or the CCRA's non-inclusion in
1998. It was no doubt an oversight in both cases.
[10] There is one finding of fact that may
or may not be relevant but I will set it out in case there is an
appeal. In 1997 the parties or their lawyers realized that there
had been a change in the law that had hitherto prevailed with
respect to the deduction/inclusion of maintenance payments and
they intended to ensure by the consent order of
September 26, 1997 that they would not be deductible by
Mr. Samycia and not includible in income by
Mrs. Samycia. Whether they succeeded in achieving this
result is of course what this appeal is about.
[11] Paragraph 56(1)(b) of the
Income Tax Act reads
56(1) Without restricting the generality of
section 3, there shall be included in computing the income
of a taxpayer for a taxation year,
...
(b) 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 of which is a support amount received after 1996
and before the end of the year by the taxpayer from a particular
person where the taxpayer and the particular person were living
separate and apart at the time the amount was received,
B is the
total of all amounts each of which is a child support amount that
became receivable by the taxpayer from 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 received after
1996 by the taxpayer from the particular person and included in
the taxpayer's income for a preceding taxation year.
[12] In this formula A is the amount of
$10,671 received by the appellant in 1999. B is the amount
received after the commencement day. On the appellant's
interpretation the commencement day is September 26, 1997
and B should therefore be $10,671 so that the application of the
formula would yield nil. C is zero on the interpretation of both
parties. The respondent's position is that B is zero because
there is no commencement day and accordingly the "old
régime" as I described it in Kovarik v. R.,
[2001] 2 C.T.C. 2503, would continue to govern the tax
treatment of the support payments.
[13] "Commencement day" is defined
in subsection 56.1(4) as follows:
"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.
[14] As I mentioned above the
appellant's position is that "the agreement or
order" is that of September 26, 1997 and that since it
was made "after April, 1997" its commencement day is
the day it was made.
[15] The respondent's position is that
the "agreement or order" referred to in the definition
of "commencement day" is the order of Mr. Justice
Meiklem of August 2, 1994 and so since that day is not after
April 1997 the words "if any" in the opening portion of
paragraph (b) of the definition of commencement day
require that I conclude that there is no commencement day.
[16] Obviously the "agreement or
order" in the definition of commencement day must be the
agreement or order under which the child support payments became
receivable as contemplated by the component B in the formula in
paragraph 56(1)(b).
[17] Counsel for the respondent argues that
since the order of September 26, 1997 did not have the
effect of changing the total child support amounts payable under
the August 2, 1994 order, I cannot treat the
September 26, 1997 order as "the agreement or
order" because it did not change the provisions of the
earlier order. The appellant argues that the "agreement or
order" is that of August 2, 1994.
[18] The short answer is that it radically
changed them. It effected the final resolution of all of the
differences between the spouses. It entirely superseded the
August 2, 1994 order and most importantly it changed the
total child support payments payable to Mrs. Samycia by her
spouse.
[19] This should be sufficient to dispose of
the matter. However, out of deference to Mr. Caux'
argument I shall set out the reasoning that was advanced because
I am not persuaded that even if the September 26, 1997 order
had not changed the total child support amounts from those
payable under interim order of August 2, 1994 that a
different conclusion would have been justified.
[20] Paragraph (a) of the
definition by itself is perfectly clear:
(a) where the
agreement or order is made after April 1997, the day it is
made.
[21] These words are precisely applicable to
the September 26, 1997 order, which is the order under which
the payments were made. One need look no further.
[22] The respondent however argues that
subparagraph (b)(iii) constitutes a derogation from
(a) as follows: where there is an order or agreement made
after April 1997 and it is preceded by another order or agreement
made before May 1997 the "commencement day" is the
day of the later order or agreement if and only if it changes the
total of the child support amounts from those payable under the
earlier order or agreement.
[23] Broadly, what the legislation seems to
be seeking to achieve is this. If payments are being made under a
pre-May 1997 order or agreement the old régime applies
after April 1997 unless a new order or agreement is made after
April 1997 that varies the total child support amounts
payable.
[24] There may be some merit in this
position if "the agreement or order" under which the
payments are made is a pre-May 1997 agreement or order that
acquires a commencement day by reason of a post-April 1997
variation of amounts. Where no such variation or change of the
type contemplated by subparagraphs (b)(ii) or (iii) and
the payment is made under a post-April 1997 order or agreement
subparagraphs (b)(ii) and (iii) have no application and we
are left solely with paragraph (a) to determine the
commencement day.
[25] Either there was a variation or change
as contemplated by subparagraphs (b)(ii) or (iii) or there
was not, but on either hypothesis the commencement day is
September 26, 1997.
[26] Obviously where there is a
comprehensive order such as the September 26, 1997 order it
supersedes the August 2, 1994 order and the
September 26, 1997 order is the one under which the payments
in 1999 are made. It is the commencement day of that order that
is relevant and it is determined by paragraph (a) of
the definition. Although the September 26, 1997 agreement
has the effect of changing the total amounts payable under the
August 2, 1994 agreement, it does not refer to the earlier
order. It is a stand-alone order (cf. Kovarik,
supra).
[27] Some brief reference was made to
subparagraph (b)(i) and (iv) of the definition of
commencement day. No joint election was filed and so subparagraph
(i) does not apply. So far as subparagraph (iv) is concerned the
order of September 26, 1997 does not in so many words
specify a day, although it does purport to provide that the
amounts payable under it are not deductible by the husband and
not includible by the wife. One might argue that this implicitly
specifies the date of the order as the commencement day. However
in light of my conclusion above I need not consider this
argument.
[28] Counsel for the respondent also argues
that since the September 26, 1997 order purports to have
retroactive effect to March 1 of 1997 this makes the
provisions of subsection 56.1(3) applicable and therefore
the commencement day is moved back to March 1, 1997. I do
not think on the plain words of subsection 56.1(3) that that
subsection has any application nor do I think that the reference
in the agreement to March 1, 1997 moves the day on which the
order was made back to that day.
[29] The appeal is allowed and the
assessment is referred back to the Minister of National Revenue
for reconsideration and reassessment to delete from the
appellant's income for 1999 the support payments received by
her in the amount of $10,671.
[30] The appellant is entitled to her costs,
if any.
Signed at Toronto, Canada, this 8th day of February 2002.
A.C.J.
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