Citation: 2009TCC333
Date: 20090619
Docket: 2008-1631(IT)I
BETWEEN:
SHAWN T. G. WHITTY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
V.A. Miller, J.
[1]
The issue in this
appeal is whether subsection 118(5) of the Income Tax Act (the “Act”)
precludes the Appellant from claiming the equivalent-to-spouse credit for his
son Dylan in the 2006 taxation year.
[2]
The Appellant
represented himself at the hearing of this appeal.
[3]
The parties submitted a
Statement of Agreed Facts as follows:
1.
The Appellant and his former spouse, namely Christine Mair (the “Former
Spouse”) had two children, namely Curtis Alexander Whitty, born February 13,
1990 and Dylan John Whitty, born January 15, 1993 (the “Children”).
2.
The Appellant and his Former Spouse have been living separate and apart
since 1994.
3.
On March 9, 1995, Mr. Justice Millette of the Ontario Court (General
Division), ordered that the Appellant pay his Former Spouse, by way of interim
support for the two Children of the marriage, the sum of two hundred fifty
dollars ($250.00) per month per child, commencing May 1, 1994, and on the first
of each month thereafter, in advance.
4.
On February 15, 1996, Justice M. Métivier of the Ontario Court (General
Division) ordered that, as of June 1, 1996, the Appellant shall pay an
increased interim child support amount of seven hundred fifty dollars ($750.00)
per month for the two Children of the marriage.
5.
On February 21, 1997, Mr. Justice R.C. Desmarais of the Ontario Court of
Justice (General Division) granted a divorce judgment to the Appellant and his
Former Spouse.
6.
On February 21, 1997, Mr. Justice R.C. Desmarais of the Ontario Court of
Justice (General Division) stated at page 11 of his reasons that the Appellant
has never paid the child support payments of seven hundred fifty dollars
($750.00) per month ordered on February 15, 1996, by Justice M. Métivier.
7.
At the time the consent order of $500 a month was made, the petitioner
father was employed making some $38,000 a year. As of September 1996, he is no
longer employed and is receiving unemployment insurance which provides him with
a monthly income of $1,511.17, or some $18,000 for the year. This is confirmed
by his most recent financial statement, dated February the 10th,
1997.
8.
On February 21, 1997, Mr. Justice R.C. Demarais of the Ontario Court of
Justice (General Division) stated at p. 11 of his reasons that the Appellant
was in arrears of child support payments in the amount of $3,445.17 as of
February 1st, 1997.
9.
Mr. Justice R.C. Desmarais ordered on February 21, 1997, that arrears of
child support in the amount of $3,445.17 are not to be rescinded.
10.
On February 21, 1997, Mr. Justice R.C. Desmarais also ordered that the
Appellant pay by way of child support to his Former Spouse the sum of four
hundred dollars ($400.00) per month for the two Children of the marriage, such
support payments to commence on March 1, 1997.
11.
On January 26, 2006, Justice Linhares De Sousa of the Ontario Superior
Court of Justice, Family Court ordered that Curtis Alexander Whitty shall live
primarily with the Former Spouse and that Dylan John Whitty shall live
primarily with the Appellant.
12.
In paragraph 3 of the reasons for judgment given by Justice Linhares De
Sousa on January 26, 2006, it is stated that the Appellant’s ongoing child
support obligation with respect to the Children was terminated effective
January 26, 2006.
13.
In paragraph 4 of the reasons for judgment given by Justice Linhares De
Sousa on January 26, 2006, it is stated that the Appellant’s child support
arrears owed with respect to the two Children shall be fixed at $8,500.00,
effective January 26, 2006.
14.
In paragraph 4 of the reasons for judgment given by Justice Linhares De
Sousa on January 26, 2006, it is stated that the court costs payable by the
Appellant and associated with the previous order of Mr. Justice R.C. Desmarais
shall be fixed at $1,500.00.
15.
In paragraph 4 of the reasons for judgment given by Justice Linhares De
Sousa on January 26, 2006, it is stated that the court costs payable by the
Appellant and associated with the previous order of Mr. Justice R.C. Desmarais
shall be fixed at $1,500.00.
16.
On January 1, 2006, the Appellant paid child support in respect of his
son Dylan.
17.
In computing his income tax payable for the 2006 taxation year, the
Appellant claimed an amount for an eligible dependent of $7505.00 for one of
his children, Dylan John Whitty.
18.
By Notice of Assessment dated March 1, 2007, the Minister of National
Revenue (the “Minister”) initially assessed the tax liability for the 2006
taxation year as filed by the Appellant.
19. By Notice of Reassessment dated January 28, 2008, the
Minister disallowed the amount for an eligible dependant referred to in
paragraph 15 herein.
[4]
The Orders of the
Ontario Court (General Division) and the Ontario Superior Court of Justice,
Family Court, which are referred to in the Statement of Agreed Facts, were
submitted to this court in an Agreed Book of Documents.
[5]
The relevant statutory
provisions are subsections 56.1(4) and 118(5) and paragraph 118(1)(b) of
the Act.
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 legal 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.
118(b) wholly dependent person ["equivalent to
spouse" credit] -- in the
case of an individual who does not claim a deduction for the year because of
paragraph (a) and who, at any time in the year,
(i) is
(A) a person who is unmarried and
who does not live in a common-law partnership, or
(B) a person who is married or in
a common-law partnership, who neither supported nor lived with their spouse or
common-law partner and who is not supported by that spouse or common-law
partner, and
(ii) whether alone or jointly with
one or more other persons, maintains a self-contained domestic establishment
(in which the individual lives) and actually supports in that establishment a
person who, at that time, is
(A) except in the case of a child
of the individual, resident in Canada,
(B) wholly dependent for support
on the individual, or the individual and the other person or persons, as the
case may be,
(C) related
to the individual, and
(D) except in the case of a
parent or grandparent of the individual, either under 18 years of age or so
dependent by reason of mental or physical infirmity,
118(5) Support
-- No amount may be deducted under subsection (1) in computing an individual's
tax payable under this Part for a taxation year in respect of a person where
the individual is required to pay a support amount (within the meaning
assigned by subsection 56.1(4)) to the individual's spouse or common-law
partner or former spouse or common-law partner in respect of the person and the
individual
(a) lives separate and apart from
the spouse or common-law partner or former spouse or common-law partner
throughout the year because of the breakdown of their marriage or common-law
partnership; or
(b) claims a
deduction for the year because of section 60 in respect of a support amount
paid to the spouse or common-law partner or former spouse or common-law partner.
[6]
It is agreed by the
Respondent that the Appellant meets all the conditions in paragraph 118(1)(b)
of the Act. However, it is the Respondent’s position that, in 2006, the
Appellant was required to pay a support amount to his former spouse and
subsection 118(5) prohibits the Appellant from receiving the tax credit that is
allowed under paragraph 118(1)(b).
[7]
It is agreed in this
appeal that the Appellant paid child support on January 1, 2006.
[8]
The Appellant was in
arrears of his child support payments and by the Order of Justice De Sousa
which was dated January 26, 2006, these arrears were fixed at $8500. The court
costs were added to these arrears so that the total the Appellant had to pay
was $10,000. By this same Order, the Appellant was required to pay these
arrears in monthly instalments of $141.
[9]
The amount of child
support paid by the Appellant on January 1, 2006 is a “support amount” as that
term is defined in subsection 56.1(4).
[10]
The accumulated arrears
in the amount of $10,000 that the Appellant was required to pay also constitute
a “support amount”[1].
[11]
The fact that the
Appellant was required to pay the amount of arrears is sufficient to disentitle
the Appellant from claiming the credit provided for in paragraph 118(1)(b)
of the Act[2].
It is immaterial whether the Appellant in fact paid the amount of arrears.
[12]
The facts in this
appeal were very similar to those in the case of LeClair v. R, 2005 TCC
363. In that case, the only issue before Justice Bowie was whether subsection
118(5) operated to deprive the taxpayer of a tax credit under paragraph 118(1)(b).
Justice Bowie stated at paragraphs 4 and 5.
[4] The Appellant's position is that subsection
118(5) does not operate to disentitle him to the credit under paragraph 118(1)(b)
because he was not required to pay child support in respect of the year in
question. The support that he paid was arrears relating to an earlier year, and
therefore not within the purview of that provision.
[5]
Unfortunately for the Appellant, there is no room for doubt
that his situation is caught by the plain words of subsection 118(5) of the Act.
That provision operates where the taxpayer is required to pay a support amount
in respect of the dependant for whom he claims the personal credit if either of
two other conditions is met. Those are that the Appellant and the former spouse
are living apart, or that the Appellant claims a deduction for the child
support payments in the year. It is clear from the Appellant's own notice of
appeal and from his evidence that all three conditions are met in this case.
There is no doubt that the payment of arrears of child support ordered or
agreed to be paid in respect of an earlier year, but remaining unpaid until the
year in question, falls within the definition of a "support amount”.
[13]
Justice Bowie found that
subsection 118(5) applied and he dismissed the appeal.
[14]
In the present appeal, counsel for
the Respondent also submitted that the amendment made in 1998 to the Income
Tax Budget Amendments Act, 1996 did not assist the Appellant.
[15]
If that provision applied, the amount
of the arrears would not be included in the definition of support amount if
i) it
was received under a decree, order or judgment that does not have a
commencement day, and
ii) the amount, if paid
and received would, but for this Act, not be included in computing the income
of the recipient.
[16]
On the facts in this appeal there
is a commencement day and it is January 26, 2006. Unfortunately for the
Appellant, I must dismiss this appeal.
[17]
The Appellant raised the issue of
fairness and he did mention the word Charter. I do not take it that a Charter
issue has been raised merely by the Appellant using the word “Charter”. As
well, I must make my decision in accordance with the Act. The Tax Court does
not have jurisdiction to make a decision based on equity.
[18]
The appeal is dismissed.
Signed at
Ottawa, Canada, this 19th day of June 2009.
“V.A. Miller”
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