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Date: 20030130
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Docket: 2001-3929(IT)I
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BETWEEN:
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CHARLES G. TRUMAN,
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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 and
his ex-spouse Fadiah Truman ("Fadiah") were married in
Toronto in 1977.
[2] Three children
were born of the marriage, namely:
- Charles
David Truman - December 28, 1983
- Kevin
Daniel Truman - July 05, 1986
- Brian
Michael Truman - April 20, 1989
[3] In 1993 Fadiah
commenced a divorce action against the Appellant.
[4] In June 1996 the
Appellant and Fadiah signed Minutes of Settlement to settle the
divorce action.
[5] By Judgment dated
the 15th day of July 1996 the Court of Queen's Bench of the
Province of Saskatchewan ordered the Appellant to pay the sum of
$180.00 per month per child for the support of the three children
commencing on the 1st day of July 1996. (The Order of the Court
is hereinafter referred to as the "Court Order").
[6] The Appellant
testified that when he entered into the Minutes of Settlement
with his ex-spouse he was advised by his lawyer (Gavin Gordon)
that if his income increases in the future, he might increase the
amount of the child support payments to his three children. The
Appellant testified that he accepted the advice of his lawyer and
agreed with Fadiah to increase the child support payments if his
income increased in the future. The Appellant filed a chart with
the Court which contains numbers showing how child support
payments might be increased as the Appellant's income
increased. The Appellant also said that his lawyer had died and
was therefore unable to testify on the agreement that the
Appellant had made.
[7] The Appellant
stated that in the 1998 taxation year he was obliged by the Court
Order to pay Fadiah child support payments of $6,480.00 ($180.00
x 3 = $540.00 x 12 = $6,480.00). However, the Appellant said that
because he felt obliged pursuant to the agreement with Fadiah, he
actually paid Fadiah $8,056.00 rather than $6,300.00 in the 1998
taxation year. The Appellant stated that when he filed his income
tax return for the 1998 taxation year he deducted the amount of
$8,056.00 as child support payments and the Minister of National
Revenue (the "Minister") accepted the Appellant's
tax return as filed.
[8] The Appellant
said that in the 1999 taxation year he paid Fadiah the sum of
$8,568.00 as child support payments rather than the sum of
$6,480.00 as outlined in the Court Order. The Appellant stated
that he made this additional payment to Fadiah for the benefit of
his three children because of the agreement that he had made with
Fadiah.
[9] When the
Appellant filed his income tax return for the 1999 taxation year
he deducted the amount of $8,568.00 as child support
payments.
[10] By Notice of
Reassessment dated the 4th day of January 2001 the Minister
reassessed the Appellant's 1999 taxation year. In the said
Reassessment the Minister allowed the Appellant to deduct child
support payments of $6,480.00 and disallowed the amount of
$2,088.00. (Note: The Appellant paid Fadiah $8,568.00 - $8,568.00
minus $6,480.00 = $2,088.00.)
[11] During the hearing of
the appeal the Appellant stated that Fadiah included in her
income for the 1999 taxation year the amount of $8,568.00 that
the Appellant paid her as child support payments. The Appellant
also filed with the Court a signed copy of a letter from Fadiah
to the Canada Customs and Revenue Agency dated October 15, 2000.
In the letter Fadiah said as follows:
I, Fadiah Truman received the amount of
$8,568.00 (eight thousand, five hundred, sixty-eight dollars)
from Charles Truman 617-260-310 in the taxation year 1999.
B.
ISSUE
[12] Is the Appellant
entitled to deduct the amount of $8,568.00 as child support
payments in determining his income for the 1999 taxation
year?
C.
ANALYSIS
[13] It will be noted from
the above comments that in the 1998 taxation year the Appellant
paid Fadiah the sum of $8,056.00 rather than the sum of $6,480.00
as outlined in the Court Order. It will also be noted that in the
1999 taxation year the Appellant paid Fadiah the sum of $8,568.00
rather than the sum of $6,480.00 as stipulated in the Court
Order. Furthermore, Fadiah acknowledged by letter having received
the sum of $8,560.00 in the 1999 taxation year and the Appellant
stated that Fadiah included the amount of $8,568.00 in her income
for the 1999 taxation year.
[14] I am satisfied by the
testimony of the Appellant and the evidence before the Court that
the Appellant did agree with Fadiah and his lawyer that he would
increase the child support payments to his children if his income
increased. I am also satisfied that the schedule filed by the
Appellant with the Court provides for increased child support
payments.
[15] Under what has been
sometimes described as the old tax régime
(pre-May 1997) spouses making payments to separated or
ex-spouses for the support of the children were allowed to deduct
those payments and the recipient was required to include the
amount of the payments in their income. Following the decision of
the Supreme Court of Canada in Thibaudeau v. Canada,
[1995] 2 S.C.R. 627, the Income Tax Act (the
"Act") was amended and new provisions were
introduced to deal with child support payments.
[16] The amended Act
provided that if a pre-May 1997 agreement remained unchanged the
deduction/inclusion system as provided by the old tax
régime prevailed. However, if a new agreement were entered
into by the parties or if a new court order was issued, or if an
old agreement was changed in a particular way the
deduction/inclusion régime did not apply and only payments
made up to the commencement day, as defined, were deductible from
income by the payor and included in income by the payee.
[17] Since I have found
that the Appellant had agreed with Fadiah in 1996 to increase his
child support payments if his income increased it follows that
there is no commencement date after April 1997 in this situation
and therefore the old tax régime applies.
[18] The Appellant is
entitled to deduct the sum of $8,568.00 as child support payments
in determining his income for the 1999 taxation year.
[19] The appeal is allowed,
without costs.
Signed at Vancouver, British Columbia, this
30th day of January 2003.
J.T.C.C.
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