[OFFICIAL ENGLISH
TRANSLATION]
Date:
20020911
Docket:
2001-3462(IT)I
BETWEEN:
BRIAN
LEBRETON,
Appellant,
and
HER
MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre,
J.T.C.C.
[1] These
are appeals under the informal procedure from assessments made by the Minister
of National Revenue ("Minister") under the Income Tax Act
("Act") for the 1996, 1997, 1998 and 1999 taxation years.
[2] From
the outset, the respondent disputed the validity of the appeals filed for the
1996, 1997 and 1998 taxation years on the ground that the appellant had
not first served on the Minister a notice of objection to the assessments made
for each of those years as required by subsection 165(1) of the Act.
Since the appellant has not shown that he filed such a notice of objection for
each of the three years, the appeals for those years are not valid under
subsection 169(1) of the Act and will accordingly be quashed.
[3] As
for the appeal from the assessment made for the 1999 taxation year, the
appellant was denied a deduction of $11,680 that he had claimed for that year
as alimony or other allowance payable on a periodic
basis.
[4] The
facts in evidence are as follows. Under a divorce judgment dated
April 1, 1993, the appellant was ordered to pay his former spouse,
Marie‑Paule Spieser, $200 a week in support for her maintenance and
the maintenance of the two children of the marriage beginning on
April 1, 1993, with indexation as of January 1, 1994
(Exhibit I‑3).
[5] The
appellant explained that he left his job with the Canadian Armed Forces on
August 15, 1996, and that, from then on, he could no longer afford to
pay the support provided for in the divorce judgment of
April 1, 1993. He therefore reached a verbal agreement with his
former spouse to reduce the amounts payable to her. He thus paid his children's
tuition fees and some other expenses, such as clothing and medication for the
children.
[6] The
appellant explained that, on April 13, 1999, he found himself forced
to sign a new written agreement concerning a motion for a variation order
("agreement"), which was ratified by the Superior Court of Quebec,
Family Division (Exhibit I‑1), so that he would no longer be held
liable for the support payments he had not made under the 1993 divorce
judgment.
[7] In
the agreement, the parties agreed as follows:
[TRANSLATION]
WHEREAS on April 1, 1993, the Honourable Robert
Legris, J.S.C., rendered a judgment granting the parties a divorce;
WHEREAS since that judgment was rendered, significant
and important changes have occurred in the parties' general and financial
circumstances;
WHEREAS the defendant has been retired since
August 15, 1996;
WHEREAS the defendant receives a pension, which this
year will give him an annual income of $13,547;
WHEREAS the applicant's income should amount to
$11,474 according to her balance sheet for 1999 and whereas she has not been an
income security recipient since December 1997;
WHEREAS new legislative provisions were established on
May 1, 1997, to determine the parental contribution owed in respect
of children;
WHEREAS the parties would like to settle the details
of the defendant's motion for a variation order by mutual agreement;
THE PARTIES, DULY ASSISTED BY THEIR RESPECTIVE
COUNSEL, AGREE AS FOLLOWS:
1. The preamble is an integral part hereof and
shall govern the interpretation of the clauses herein;
SUPPORT ARREARS OWED TO THE
APPLICANT
2. In full and final settlement of the support
arrears accumulated since August 15, 1996, the defendant shall pay
the applicant $6,800 no later than May 1, 1999, by cheque made out to
the applicant or by direct deposit in the bank account indicated by the
applicant;
3. The parties agree to cancel any payment of
support to the applicant for herself as of April 1, 1999;
4. The defendant and the applicant agree to
permanently and irrevocably settle the issue of an obligation of support for
themselves, waiving any support for himself whatever may happen;
PARENTAL CONTRIBUTION IN
RESPECT OF THE CHILDREN
5. As of April 1, 1999, the defendant
shall pay the applicant, solely for his two (2) children, Simon and
Anne‑Sophie, an annual parental contribution of $2,221.37, established on
the basis of Quebec's table for the determination of support payments, to be
payable in advance in two (2) equal consecutive bimonthly payments of $92.56 on
the 1st and 15th day of each month by renewable post‑dated cheques
or, on request, by direct deposit into the bank account indicated by the
applicant until automatic collection begins under the Act to facilitate the
payment of support;
INDEXATION
6. The said support payments shall be indexed
each year in accordance with Quebec's annual Pension Index
(art. 590 C.C.Q.) starting on the anniversary date of the signing of
this agreement;
SUPPORT ARREARS OWED TO THE
DEPARTMENT OF SOCIAL SOLIDARITY
7. In full and final settlement of the support
arrears accumulated from September 1996 to December 1997, the
defendant shall pay the Department of Social Solidarity $4,880 starting on
May 1, 1999, at the rate of $200 a month until the amount is paid in
full, by cheques made out to the Fonds des pensions alimentaires,
Department of Revenue, at 3800 Rue Marly, Sainte‑Foy,
G1X 4A5;
8. The said judgment to be rendered in respect
of this agreement shall be declared enforceable notwithstanding appeal and
without security;
9. Each party paying his or her own costs.
[8] It
is clear from this agreement that the appellant had to pay his former spouse
$6,800 in full and final settlement of the support arrears accumulated since
August 15, 1996, and that the parties thus put an end to any future
obligation for the appellant to pay his former spouse support.
[9] It
can also be seen from the agreement that the appellant had to pay an additional
$4,880 to the Department of Social Solidarity in full and final settlement of
the support arrears accumulated from September 1996 to December 1997.
It is the total of these two amounts¾$11,680¾that the appellant claimed as a support
deduction for 1999.
[10] The agreement also shows that the appellant's parental contribution
for his children was henceforth set at $92.56 every two weeks, for a total
annual parental contribution of $2,221.37. The appellant did not claim that
parental contribution he paid for his children as a support deduction.
[11] The amount deductible as support is set out in paragraph 60(b)
of the Act, which reads as follows:
SECTION 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 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;
[12] The expressions "commencement day" and "support
amount" are defined in subsections 60.1(4) and 56.1(4) as follows:
460.1(4)3
(4) Definitions. The definitions in
subsection 56.1(4) apply in this section and section 60.
456.1(4)3
(4) Definitions. The
definitions in this subsection apply in this section and section 56.
. . .
"commencement day" — "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" — "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.
[13] With respect to the payments made pursuant to the child support
obligation provided for in the 1999 agreement, that is, the total annual
contribution of $2,221.37, it is clear that those payments were varied after
April 1997 and are not deductible for the appellant under
paragraph 60(b) of the Act. Nor did the appellant claim them
as a deduction.
[14] As for the $11,680 paid by the appellant in final settlement of unpaid
support arrears under the 1993 divorce judgment, it is my view that the
payments were established and made under the 1999 agreement for the purpose, inter alia,
of releasing the appellant once and for all from the obligations that the 1993
divorce judgment imposed on him in relation to his former spouse. This is clear
from the 1999 agreement. Thus, the arrears payments were made not pursuant
to the 1993 divorce judgment but rather to release the appellant from the
obligation imposed on him by that judgment. This is closer to the situation in M.N.R.
v. Armstrong, [1956] S.C.R. 446, in which it was found that a lump sum paid
to obtain a release from a legal obligation imposed by a divorce decree was not
an amount payable pursuant to the decree. Such a payment did not qualify as an
allowance payable on a periodic basis pursuant to an order or judgment under
legislative provisions analogous to paragraph 60(b).
[15] Moreover, the amounts paid in this case were not paid to implement the
terms of the divorce judgment, as was the case in The Queen v. Sills, 85
DTC 5096 (F.C.A.), in which payments were made to carry out the terms of a
separation agreement. In Sills, the consequence and result of the
payments was not to release the appellant from any future obligation toward his
former spouse as is the case here. The payment by the appellant therefore no
longer constitutes a payment made to settle arrears of amounts payable on a
periodic basis under the divorce judgment. Rather, it is a final settlement,
through the payment of a lump sum, to put an end to any obligation created by
the 1993 judgment. The payment therefore cannot qualify as an allowance payable
on a periodic basis for the spouse's benefit as required by paragraph 60(b)
of the Act (see Groleau v. Canada, [2002] T.C.J. No. 103
(Q.L.)).
[16] Moreover, even though the same cannot be said with respect to the
children, since the purpose of the 1999 agreement was not to release the
appellant from his existing and future obligations to support them, the fact
remains that the lump sum paid for the support arrears was imposed under the
1999 judgment varying the 1993 judgment.
[17] Accordingly, the amount payable as child support arrears became
payable on the commencement day, that is, as of May 1, 1999.
[18] In my opinion, this includes the total arrears of $11,680, since
"child support amount" is defined as follows in
subsection 56.1(4) of the Act:
"child support
amount" — "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.
[19] Thus, since the support amount provided for in the 1993 divorce
judgment was not identified as being solely for the support of the appellant's
former spouse, it has qualified since 1997 as a child support amount within the
meaning of the Act. The new rules applicable after April 1997
therefore apply to the entire amount payable as child support arrears, that is,
the lump sum of $11,680 at issue.
[20] Any child support amount that becomes payable on a commencement day as
defined in subsection 56.1(4) of the Act (that is, after
April 1997) is no longer deductible as a support amount under
paragraph 60(b) of the Act. This is therefore another
argument for concluding that the appellant could not deduct the $11,680 as
alimony or other allowance payable on a periodic basis under the Act.
[21] For these reasons, I am obliged to dismiss the appellant's appeal for
the 1999 taxation year as well.
Signed at Ottawa, Canada, this 11th day of
September 2002.
J.T.C.C.
Translation
certified true
on this 15th day of December 2003.
Sophie Debbané,
Revisor
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