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Citation: 2003TCC180
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Date: 20030331
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Docket: 2002-2203(IT)I
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BETWEEN:
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DEBORAH ANDERSON,
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Appellant,
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and
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HER MAJESTY THE QUEEN,
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Respondent.
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REASONS FOR JUDGMENT
Little, J.
A. FACTS:
[1] The Appellant was divorced from
William Aldridge ("Former Spouse").
[2] The Appellant and the Former
Spouse have three children of the marriage, Jodi, Robert and
Neil.
[3] Pursuant to an Order of the Court
dated December 21, 1982 the Former Spouse was ordered to pay the
Appellant the sum of $100.00 per month per child for a total of
$300.00 per month or $3,600.00 per year commencing on the
1st day of January 1983.
[4] In 1983 the Former Spouse made
support payments to the Appellant of $3,450.00. The Former Spouse
made no other support payments to the Appellant from 1983 to
1999.
[5] The mother of the Former Spouse,
Dorys Aldridge, died in 1998-1999. The Former Spouse received an
inheritance from his mother.
[6] The Appellant commenced garnishee
proceedings in the Queen's Bench Division of Alberta against
the Estate of Dorys Aldridge to recover support payments that
were owing to her by her Former Spouse for the 1983 and
subsequent years.
[7] In 1999 the Appellant received the
sum of $51,500.00 from the Estate of Dorys Aldridge covering the
past support payments owed to the Appellant by the Former Spouse
from 1983 to 1999 plus interest. The amount of $51,500.00 is
broken down as follows:
Support payments due and
owing
$48,050.00
Interest
2,401.00
Plus related writs plus probable
costs
1,000.00
Total
$51,451.00
(Rounded off
to
$51,500.00)
[8] When the Appellant filed her T1
general income tax return for the 2000 taxation year she
advised officials of the Canada Customs and Revenue Agency (the
"CCRA") that she had received a lump sum covering
support payments owing to her. The Appellant requested that
Revenue Canada (the former name of the CCRA) re-evaluate her
taxes from 1993 to 1999 as per a breakdown attached showing the
support payments received by her for each year rather than
subjecting the full amount of $51,451.00 to tax in the 2000
taxation year.
[9] By memorandum from the CCRA dated
July 23, 2001 the Minister of National Revenue (the
"Minister") explained that with respect to Qualified
Retroactive Lump-Sum Payment ("QRLSP") the CCRA reduces
taxable income for the year by the part of the payment that
relates to eligible tax years for which income tax returns were
filed. The memorandum from the Minister stated that if this
special tax calculation benefits a taxpayer it will be
used. The memorandum contains the following statement:
The attached chart provides the details of our calculation.
Since the amount of basic federal tax under the regular
calculation (line B) is less than the amount computed using
the special tax calculation (line A), the special tax calculation
for the QRLSP does not benefit you. As a result, we have assessed
your return in the usual manner.
The Federal Tax determined under the regular method was
$11,344.83. The Federal Tax determined under the special method
for QRLSP was $15,557.30.
B. ISSUE
[10] The issue is whether the Minister has
correctly determined the tax applicable to the Lump-Sum Payment
received by the Appellant.
C. ANALYSIS
[11] Sections 110.2 and 120.31 of the
Income Tax Act (the "Act") were enacted
to enable an individual such as the Appellant who received a
qualifying Retroactive Lump-Sum Payment to benefit from a special
tax calculation.
[12] In this situation the Minister applied
the provisions of sections 110.2 and 120.31 and determined that
applying those sections would result in greater tax owing by the
Appellant than the tax applicable where the principal is included
in income for the 2000 taxation year.
[13] The Appellant argued that she was being
penalized since the CCRA imposed a "deemed" tax in its
calculations.
[14] Pursuant to section 110.2 the principal
amount may be deducted from the Appellant's income for the
2000 taxation year. Section 120.31 of the Act provides for
an addition to tax payable equal to an amount, if any, that the
deemed or notional tax payable exceeds tax payable under Part 1.
The deemed or notional tax payable equals the total of two
items:
1. additional tax that could
have been triggered from each relevant preceding year, if a
specified portion was added to taxable income (NOTE - In this
situation, the amount of $3,600.00 (i.e. 12 x $300.00 per month =
$3,600.00) was added to the Appellant's income for each year
commencing in 1984 and ending in 1998 less a reduction for the
children who had reached 18 years of age).
PLUS
2. the interest to reflect the
tax that was not paid by the Appellant in the relevant years.
[15] The tax calculated using the
"special calculation" was $15,440.45. The tax
calculated using the regular tax calculation was $11,344.83.
[16] I have reviewed this situation in
detail and I am unable to detect an error in the calculations
made by officials of the CCRA. In other words the "special
calculation" provided by sections 110.2 and 120.31 of the
Act does not provide the Appellant with any relief or
saving.
[17] It is my responsibility to interpret
the law. I do not have the authority to amend the law. The
Appellant was honest and forthright in advising the CCRA of the
Lump-Sum Payment that she received. She is to be commended for
doing so. However, I cannot say that she is being punished
for being honest. She was simply doing what the law requires,
i.e. reporting income of this nature. If she had failed to report
this income she might have been penalized for her failure to
report.
[18] By letter dated September 19, 2001, the
Appellant was advised by Mona Berry of the CCRA that the
Income Tax Act allows for a deduction of legal fees
incurred in obtaining this settlement. I cannot ascertain from
the Court record whether the Appellant has been allowed to deduct
the legal fees incurred by her in obtaining the settlement.
[19] The appeal is dismissed, without
costs.
Signed at Vancouver, British Columbia, this 31st day of March
2003
J.T.C.C.
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