Citation: 2006TCC549
Date: 20061012
Docket: 2006-1153(IT)I
BETWEEN:
LAURIE D. RANDALL,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Beaubier, J.
[1] This appeal
pursuant to the Informal Procedure was heard at Victoria, British Columbia, on October
3, 2006. The Appellant was the only witness.
[2] The particulars in
dispute are set out in paragraphs 6, and 10 to 15, inclusive, of the Amended
Reply to the Notice of Appeal. They read:
6. By Notice dated July 21, 2005 the Minister
reassessed the Appellant’s 2003 taxation year to include $9,000.00 of support
payments.
…
10. In reassessing tax for the Appellant’s 2003
taxation year, and in confirming the reassessment, the Minister assumed the
same facts, as follows:
a) the Appellant and James Broad (“Mr.
Broad”) cohabited from April 1, 1989 until July 1, 1990;
a) the Appellant is the former common-law
partner of James Broad (“Mr. Broad”);
b) during their relationship, the
Appellant and Mr. Broad had a child, Matthew James Broad, (“Matthew”), who was
born on October 1, 1989;
c)b) for the entire 2003 taxation year, the Appellant and Mr. Broad lived
separate and apart;
d) between January 1, 2003 and December
31, 2003, Mr. Broad was required to pay the Appellant $750.00 per month for the
maintenance of Matthew on the 1st day of each month in accordance with a
written agreement dated July 1, 1990;
c) between January 1, 2003 and December
31, 2003, Mr. Broad was required to pay the appellant $750.00 per month in
accordance with a written agreement dated February 15, 1995 (the “1995
Agreement”);
e)d) the Appellant received from Mr. Broad a total of $9,000.00 during
the 2003 taxation year calculated at $750.00 per month for twelve months;
f) the Minister determined that the
Appellant was required to include the support payments received from Mr. Broad
as a source of income on her 2003 T1 Tax Return; and
g) there were no other agreements dated
after the July 1, 1990 agreement under which support payments were required to
be made.
B. OTHER MATERIAL FACTS
11. a) the Appellant and Mr. Broad
cohabited from April 1, 1989 until July 1, 1990;
b) during their relationship, the
Appellant and Mr. Broad had a child, Matthew James Broad, (“Matthew”), who was
born on October 1, 1989;
c) the Appellant and Mr. Broad entered
into an agreement on July 1, 1990 (the “1990 Agreement”);
d) between January 1, 2003 and December
31, 2003, Mr. Broad was required to pay the Appellant $750.00 per month for the
maintenance of Matthew, on the 1st day of each month in accordance with the
1990 Agreement;
e) the 1995 Agreement did not specify
whether the payments were for the maintenance of the Appellant or for the
maintenance of Matthew; and
f) other than the 1995 Agreement, there
were no agreements dated after the 1990 Agreement under which support payments
were required to be made.
C. ISSUES
TO BE DECIDED
11.12. The issue is whether the Appellant is required to include $9,000.00
of support payments received from Mr. Broad as a source of income in the 2003
taxation year.
C.D. STATUTORY PROVISIONS RELIED ON
12.13. He relies on section 56.1 and paragraph 56(1)(b) of the Income
Tax Act, R.S.C. 1985, c. 1 (5th Supp.), as amended (the “Act”).
D.E. GROUNDS RELIED ON AND RELIEF SOUGHT
13.14. He respectfully submits that the Minister properly included the
support payments as income in the Appellant’s 2003 income in accordance with
paragraph 56(1)(b) of the Act.
15. He further submits that whether the
support payments were made in accordance with the 1990 Agreement or the 1995 Agreement
they constitute support amounts pursuant to subsection 56.1(4) of the Act.
14.16. He further submits that there were no other agreements dated after the 1995
Agreement July 1, 1990
agreement under which support payments were
required to be made, and as a result, there is no “commencement day” as defined
in subsection 56.1(4) of the Act.
15.17. He requests that the appeal be dismissed.
[3] Assumptions 10 (a),
(b), and (d) were not refuted. Assumption (c) is in dispute.
[4] The Appellant and
James Broad lived together in Vancouver from April 1, 1989 until July 1, 1990 and had a son,
Matthew, on October 1, 1989. After July 1, 1990 they signed a Separation
Agreement drawn by Mr. Broad, a lawyer, (Exhibit A-1, Tab 3) dated July 1,
1990. Paragraph 3 of that Agreement agreed that Mr. Broad would pay the
Appellant maintenance for Matthew of $750 per month from July 1, 1990 until
Matthew attained 19 years of age. Paragraph 1 stated that it would remain in
effect until both parties agreed in writing to terminate the Agreement. The
Appellant received and reported the $750 per month for income tax purposes.
[5] The couple resumed
cohabitation in Vancouver from August 1, 1993 until they separated in February, 1995, and Mr. Broad
ceased paying the $750 per month during that period. They did not sign any
terminating Agreement and the Appellant has not claimed $750 per month for that
18 months for Matthew.
[6] This Court finds
that this cohabitation terminated the Separation Agreement dated July 1, 1990.
[7] On February 15,
1995, Mr. Broad’s lawyer wrote the following letter (Exhibit A-1, Tab 4) to Ms.
Randall’s (then Laurie Bermingham) lawyer:
…
“February 15, 1995
File
No. 66166
Cohen Fraser
211 – 7313 – 120th Street
Delta, BC
V4C 6P5
Attention I. Greer
Gibson
Dear Sir:
Re: Bermingham v. Broad
Enclosed is a cheque in the amount of $750.
For tax purposes, this must be made pursuant to
a written agreement. I would propose the agreement simply provide that Mr.
Broad pay $750 on the 15th of each month, without prejudice to either parties
rights, and that the agreement can be cancelled by either party on 15 days
notice.
I would also ask that you sign this letter as
your client’s agent indicating your approval of this arrangement and that this
letter so endorsed will constitute the written agreement.
You advised me that there may need to be some
adjustment of the payment dates in the first 30 days due to moving expenses and
the like. If so, please provide the details and I will obtain instructions.
Yours very truly,
BAUMGARTEL GOULD
(signature)
FRED D. BANNING”
…
The Appellant received and cashed
the cheque. Adjacent to Mr. Banning’s signature there is a horizontal hand-made
line with a couple of vertical strokes; Ms. Randall had not seen that before
and did not authorize any signature to this letter. She did not agree to the
terms of this letter.
[8] A number of points
arise respecting this letter:
1. The purpose of the $750 is
not specified. It may not be for any support of anyone.
2. The scribble on the right
side of the letter was never identified as belonging to anyone. Ms. Randall did
not authorize her lawyer to sign that letter and never saw this scribble; it is
not on her copy of this letter.
3. No commencement or
termination date is set.
[9] In view of the
foregoing, this letter does not cause the $750 to constitute a “support amount”
as defined in subsection 56.1(4), which is “an amount … receivable on a
periodic basis for the maintenance of the recipient, children of the recipient
or both … and the amount is receivable under … a written agreement.”
[10] Mr. Broad paid that
$750 per month to Ms. Randall until June 18, 1999 when he sent Ms. Randall a
copy of his 1988 Income Tax Return (Exhibit A-2) and a copy of the Federal
Child Support Amounts (Exhibit A-3). He attached 2 “stickies” to the Income Tax
Return (Exhibit A-2) which read:
“Laurie
This is this year’s return which I filed on June
15th (i.e.) a few days ago. As I operate through a company I am able to defer
my income one year, So this represents my income from two years ago. JB”
“Laurie
chqs
June 18/99
July 1/99
Aug 1/99 @ $750.00
Can you please return the balance of
post-dated cheques that you have @ $750 to me by the end of the month.
JB”
[11] In Exhibit A-2, Mr.
Broad yellow penned $40,000 income, monthly award for 1 child $343, and from
July 1, 1999 until December 1, 1999 he sent Ms. Randall cheques for $343
per month, which she cashed. But on November 18, 1999, Mr. Broad’s
lawyer sent Ms. Randall his “trust cheque in the amount of $2,442 representing
catch-up in the arrears of maintenance for your son, Matthew including the
December, 1999 payment.” Appellant’s counsel calculated the $2,442 to represent
the following:
$ 750
- 343
$ 407
x 6 months (July 1 –
December 1)
$2,442
and suggested that this represented
Mr. Broad’s attempt to insert himself into deductibility under the Income
Tax Act.
[12] At about the same
time, Mr. Broad apparently began an action in Family Court for custody and
access to Matthew (see Exhibits R-2 and R-3 of January, 2000). Ms. Randall
counterclaimed for sole custody and child support. But apparently nothing came
of the support counterclaim.
[13] In view of the
foregoing, the Court finds:
1. The Agreement of July 1,
1990 (Exhibit A-1, Tab 3) terminated when the parties resumed cohabitation on August
1, 1993.
2. The letter of February 15,
1995 was never a written Agreement for the maintenance of the Appellant or
Matthew.
3. The various cheques and
stickies of 1999 did not constitute a written Agreement for the maintenance of
the Appellant or Matthew.
[14] Therefore this
matter is remitted to the Minister of National Revenue for reconsideration and
reassessment on the basis that the Minister did not properly include support
payments of $9,000 as income of the Appellant in 2003 in accordance with
paragraph 56(1)(b) of the Act.
[15] The Appellant is
awarded her party and party costs for the appeal.
Signed at Saskatoon, Saskatchewan, this 12th day of October, 2006.
"D.W. Beaubier"
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