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Citation: 2007TCC145
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Date: 20070313
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Dockets: 2006-2148(IT)I
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BETWEEN:
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LORNE HAMILTON,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
Respondent.
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REASONS FOR JUDGMENT
Bowman, C.J.
[1] This appeal is from a reassessment for the appellant's 2004 taxation year.
[2] In 2004, the appellant, pursuant to a written agreement, paid to his former spouse child support payments of $15,008 in respect of their two children as well as spousal support payments in respect of his former wife of $21,600.
[3] The child support payments were not deductible by him in computing his income. He did however deduct the spousal support payments.
[4] In filing his 2004 income tax return he claimed $6,803 with respect to his 12 years old daughter Victoria as a deduction under paragraph 118(1)(b) of the Income Tax Act. His reasoning is succinctly set out in his notice of appeal, as follows:
My girls, Monika and Victoria live with me 50% of the year. As such, I incur expenses of food clothing and keeping a home for them to live in. I also pay all of the additional expenses relating to sports, sports equipment, music lessons etc along with clothing items such as winter coats, winter boots and back to school clothing. The fact that I also pay spousal and child support to their mother in order that she can pay her rent and buy food for the children should not preclude me from claiming one of these children (in my case Victoria) as an eligible dependant. The amounts are paid to Ms. Hess (their mother) so that they may enjoy the same quality of life irrespective of where they live.
If the children did not live with me but rather just visited I would have no issue with your initial ruling. However based on the above mentioned facts I am appealing and asking for your consideration in this matter and to allow me to claim Victoria as an eligible dependant.
[5] I agree that there is an obvious unfairness where separated or divorced parents have joint custody of children. The parent paying the child support payments cannot deduct those payments but also has to bear the cost of supporting the child during the period when the child resides with that parent.
[6] Unfortunately the law is clear. Subsection 118(5) reads:
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.
[7] The case is on all fours with the decision of Justice Woods in Irwin v. The Queen, [2005] 1 CTC 2114. She said:
[1] The appellant, Judith Irwin, is a professor of physics and astronomy at Queen's University in Kingston, Ontario. She appeals an assessment for the 2002 taxation year that denied the dependent tax credit, sometimes known as the equivalent-to-spouse tax credit, in respect of her daughter. The Minister of National Revenue disallowed the credit pursuant to subsection 118(5) of the Income Tax Act on the ground that Professor Irwin was required to pay support payments in respect of the children.
[2] Professor Irwin separated from her husband in 2001 and they agreed to share custody of their two children. On the advice of a lawyer, child support payments were agreed to based on the relevant Ontario guidelines. Since each parent had partial custody and Professor Irwin had the larger income, she was required to pay her former husband a monthly amount determined as the difference between the payments that would be required by each spouse under the guidelines.
[3] In general, subsection 118(5) prohibits a person from claiming the equivalent-to-spouse tax credit in respect of children if the person pays support payments for the children. Professor Irwin does not deny that the subsection applies in her case but argues for relief on the grounds of fairness. Simply put, she suggests that the legislation does not properly deal with joint custody situations.
[4] Where the prohibition in subsection 118(5) clearly applies in a particular case, I have no alternative but to apply it. The Tax Court has no equitable jurisdiction and is required to apply the law as legislated by Parliament. Regrettably, I find that subsection 118(5) does apply in this case and the appeal must be dismissed.
[5] I commend Professor Irwin for trying to seek redress for what she clearly believes to be an unfair tax result. I regret that my decision cannot be more favourable.
[8] I share Justice Woods' regret at what seems to me to be an unjust and anomalous result. This is unfortunately a matter that can be remedied only by Parliament.
[9] The appeal is dismissed.
Signed at Ottawa, Canada this 13th day of March 2007.
Bowman, C.J.
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