and

EDOUARD ELKAIM,

Third Party.

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Application under section 174 of the Income Tax Act heard on May 5, 2003, and

decision rendered orally on May 6, 2003, at Montréal, Québec,

____________________________________________________________________

ORDER

Upon the application of Her Majesty the Queen (notice of which is dated January 24, 2003) for an Order pursuant to paragraph 174(3)(b) of the Income Tax Act joining Edouard Elkaim as a party to the appeals of Claudine Levy (Court file no. 2002-1863(IT)I) from assessments of tax made under that Act for the 1997, 1998 and 1999 taxation years;

And upon the application making it appear that a determination of the questions set forth in the application will affect the assessments issued to Claudine Levy with respect to the 1997, 1998 and 1998 taxation years;

And upon reading the pleadings and the application, filed;

And upon hearing counsel for the parties;

It is ordered that:

1.        Edouard Elkaim is joined as a party to the appeals of Claudine Levy (Court file no. 2002-1863(IT)I) from the assessments of tax made under the Act for the 1997, 1998 and 1999 taxation years;

2.        The Deputy Attorney General of Canada shall forthwith serve on Edouard Elkaim a copy of the Notice of Appeal and Reply thereto in the appeals of Claudine Levy;

3.        Subsection 18.33 of the Tax Court of Canada Act shall forthwith apply to the determination of the questions in the application; and

4.        The hearing of the appeals by Claudine Levy is scheduled to commence at 9:30 a.m., on Wednesday, July 9, 2003, at the Tax Court of Canada, 500 Place d'Armes, 18th floor, Montréal, Québec.

Signed at Ottawa, Canada, this 29th day of May, 2003.

J.T.C.C.

REASONS FOR ORDER

(Delivered orally from the Bench at

Montréal, Québec, on May 6, 2003)

McArthur J.

[1]      This is an application by the Minister of National Revenue under section 174 of the Income Tax Act for a reference of common questions to this Court. The effect of an order would render Mr. Elkaim party to the present appeals of his former spouse, the Appellant, Ms. Levy. The application was ably opposed by Emmanuelle Billion-Porte on behalf of Mr. Elkaim.

[2]      The Minister's position is as follows. The Appellant was assessed for the most part because the inclusions in her income by virtue of the alimony or support payments do not correspond to the deductions claimed by Mr. Elkaim in any given taxation year. The reason for this has a great deal to do with the terms of the separation agreement in that it contains clauses which place responsibility on Mr. Elkaim to pay amounts directly to third parties, for example, to schools (probably private schools) for the children. These amounts were deducted by Mr. Elkaim but were not included in the income of Ms. Levy. Moreover, since these payments were periodic in nature, the problem repeated itself annually.

[3]      There is ample case law with respect to a section 174 application in matters dealing with alimony payments. I refer to two cases, Privitera v. M.N.R., 92 DTC 1122 and Rosenburg v. The Queen, [1992] T.C.J. 269, which are of assistance to this application. In general, provided that the Minister has complied with the provisions of section 174 and brought the matter to the Court legitimately, it is common practice for this Court to join former spouses given the interconnected nature of the taxpayers with respect to tax situations. The rationale is that the issues before the Court may be best resolved in a single comprehensive action without a duplication of hearings and possible contradictory decisions.

[4]      The position of Mr. Elkaim is that he has already gone to great trouble, time and expense to formally settle the issue of the deductibility of the amounts in question with Canada Customs and Revenue Agency (CCRA). He believes that his position is identical to that of the Minister and, therefore, his presence with respect to Ms. Levy's appeals is totally superfluous and would only serve to increase his legal and accounting expenses.

[5]      Counsel for the Appellant indicated to the Court that any matter which transpired between the Minister and Mr. Elkaim with respect to his tax situation is unknown to the Appellant as she was not privy to the negotiations between the two parties. Counsel also mentioned that in a similar situation, Judge Archambault, in Serbey v. The Queen, [2001] T.C.J. No. 131, stated:

            Finally, it is unfortunate that the appeals of both Ms. Serbey and her ex-husband were not heard together by this Court. Had this been the case, only one hearing would have been required and only one of these two taxpayers would have won his or her appeal. As it is, they have both won and it is the Canadian taxpayers who have lost.

I apply that reasoning to the present situation.

[6]      Mr. Elkaim's position is that he came to an agreement with the Minister with respect to the deductibility of payments. Counsel for Mr. Elkaim presented an impressive bundle of documents which, I believe, were premature. The purpose of this hearing is not to decide whether the evidence presented by Mr. Elkaim has merit or whether it is more plausible than the evidence of his former wife.

[7]      Finally, joining Mr. Elkaim to his appeal does not, in any way, prejudice the Court with respect to his evidence. This order simply allows the parties to have the issues dealt with at one hearing logically and efficiently. Mr. Elkaim's evidence, including any agreement that he had with the Minister, will speak for itself at trial. I will leave the question of costs to be determined by the trial judge.

[8]      For these reasons, the application is allowed.

Signed at Ottawa, Canada, this 29th day of May, 2003.

J.T.C.C.