[OFFICIAL ENGLISH TRANSLATION]
Date: 20011204
Docket: 2001-564(IT)I
BETWEEN:
BERMOND LAVOIE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Lamarre, J.T.C.C.
[1] This is an appeal under the
informal procedure from an assessment made by the Minister of
National Revenue ("Minister") under the Income Tax
Act ("Act") for the appellant's 1999
taxation year.
[2] By that assessment, the Minister
disallowed an equivalent-to-spouse tax credit of
$972.06 that the appellant had claimed under paragraph
118(1)(b) of the Act.
[3] The respondent is relying on
subsections 56.1(4) and 118(5) of the Act to deny the
appellant that credit. Those legislative provisions read as
follows:
456.1(4)3
(4) Definitions. The definitions in this subsection apply
in this section and section 56.
"support amount"-"support amount"
means an amount payable or receivable as an allowance on a
periodic basis for the maintenance of the recipient, children of
the recipient or both the recipient and children of the
recipient, if the recipient has discretion as to the use of the
amount, and
(a) the
recipient is the spouse or common-law partner or former
spouse or common-law partner of the payer, the recipient
and payer are living separate and apart because of the breakdown
of their marriage or common-law partnership and the amount
is receivable under an order of a competent tribunal or under a
written agreement; or
(b) the
payer is a natural parent of a child of the recipient and the
amount is receivable under an order made by a competent tribunal
in accordance with the laws of a province.
4118(1)(b)3
(b) Wholly dependent person - in the case of an
individual who does not claim a deduction for the year because of
paragraph (a) and who, at any time in the year,
(i) is
(A) a person who is unmarried and who does not live in a
common-law partnership, or
(B) a person who is married or in a common-law
partnership, who neither supported nor lived with their spouse or
common-law partner and who is not supported by that spouse
or common-law partner, and
(ii) whether alone or jointly with one or more other persons,
maintains a self-contained domestic establishment (in which
the individual lives) and actually supports in that establishment
a person who, at that time, is
(A) except in the case of a child of the individual, resident
in Canada,
(B) wholly dependent for support on the individual, or the
individual and the other person or persons, as the case may
be,
(C) related to the individual, and
(D) except in the case of a parent or grandparent of the
individual, either under 18 years of age or so dependent by
reason of mental or physical infirmity,
an amount equal to the total of
(iii) $7,131, and
(iv) the amount determined by the formula
$6,055 - (D - $606)
where
D is the greater of $606 and the dependent
person's income for the year,
4118(5)3
(5) Support. 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.
[4] The facts are not in dispute. A
judgment divorcing the appellant and his former spouse, Diane
Boyer, was rendered by the Superior Court of Quebec (Family
Division) on November 21, 1996.
[5] By that divorce judgment, legal
custody of the two children, Maïa (born on October 1, 1982)
and Jonathan (born on July 1, 1987), was awarded to
Diane Boyer. At the same time, Ms. Boyer waived any support for
herself, and the appellant was also exempt from paying child
support because he was an income security recipient at the time
of the divorce.
[6] On April 29, 1998, the Superior
Court of Quebec ratified a written consent entered into by Diane
Boyer and the appellant by which the appellant undertook to pay
his former spouse a support amount of $5,660 a year in respect of
his two minor children, who were still in their mother's
legal custody.
[7] In June 1998, Maïa went to
live with her father. The appellant then met with his lawyer in
August 1998 to instruct him to take the necessary steps to put an
end to the support payments he was making in respect of his
daughter Maïa. As a result, a consent to judgment by the
appellant and Diane Boyer was ratified by the Superior Court of
Quebec (Family Division) on March 4, 1999, pursuant to the motion
to vary corollary relief made on the appellant's behalf.
Thus, as of that date, the support amount of $5,660 a year
payable by the appellant to Diane Boyer in respect of the
two children was cancelled and the appellant undertook to pay his
former spouse $2,829.84 a year in support solely in respect of
the minor child Jonathan.
[8] The respondent is denying the
appellant an equivalent-to-spouse tax credit for his
daughter Maïa for 1999 on the basis that he was required to
pay a support amount (within the meaning assigned by
subsection 56.1(4)) to his former spouse (Diane Boyer)
in respect of his daughter Maïa during that taxation year
(that is, from January 1 to March 4, 1999, the date of the
judgment varying the corollary relief) and that he lived separate
and apart from his former spouse throughout 1999 because of the
breakdown of their marriage, as set out in subsection 118(5)
of the Act.
[9] Through his agent, the appellant
argued that, as of March 4, 1999, he was no longer required to
pay a support amount to his former spouse for his daughter
Maïa. In this case, he does not see why he would be barred
from claiming the equivalent-to-spouse tax credit
under subsection 118(5), since, in his opinion, that provision
does not prevent an individual who is required to pay a support
amount for only part of the year from claiming such a credit.
[10] This question has already been
addressed by Judge Lamarre Proulx of this Court in Sherrer v.
The Queen, [1998] T.C.J. No. 62. In reliance on a principle
established by the Federal Court of Appeal in The Queen v.
Marshall et al., 96 DTC 6292, it was held in that case
that subsection 118(5) of the Act did not provide for the
possibility of taking the credit for a year according to a
proportion based on the months when a support amount was payable
to the former spouse for the dependent child. Subsection 118(5)
states that no amount may be deducted under subsection 118(1) in
computing an individual's tax payable "for a taxation
year" in respect of a person where the individual is
required to pay a support amount to his or her former spouse in
respect of that person. Where that is the case, the individual
does not meet the first condition for being entitled to the
credit. Thus, where a taxpayer must pay his or her former spouse
a support amount for the children during a taxation year, the
taxpayer loses the right to the equivalent-to-spouse
tax credit for the children even if the support amount was
payable for only part of the year.
[11] That is the case here. Since the
appellant was required to pay a support amount in respect of his
daughter Maïa during the first two months of 1999, he cannot
be entitled to the credit for the rest of 1999 because of the
first condition set out in subsection 118(5).
[12] Subsection 118(5) also sets out a
second condition for denying entitlement to the credit. Where the
individual lived separate and apart from his or her former spouse
throughout the year because of the breakdown of their marriage or
claimed a deduction for the year because of section 60 of the
Act in respect of a support amount paid to his or her
former spouse, the individual loses the right to the credits
provided for in subsection 118(1) of the Act (including
the equivalent-to-spouse tax credit provided for in
paragraph 118(1)(b)).
[13] As a result of the amendments made to
the Act after April 1997, it is clear here that the
appellant was not entitled to any deduction because of section 60
in respect of the support amount he paid for his children.
[14] It is also clear, however, that the
appellant lived separate and apart from his former spouse
throughout 1999 because of the breakdown of their marriage.
[15] The wording of the Act, the
explanatory notes accompanying the introduction of
subsection 118(5), quoted above, and certain court decisions
(see Spirig v. The Queen, [2001] T.C.J. No. 270) indicate
that, for 1997 and all subsequent years, an individual who is
required under a written agreement or an order of a competent
tribunal to pay a support amount to his or her former spouse
during a year for the maintenance of the children can no longer
claim a credit for the children under subsection 118(1) for that
year. The logic behind this is that the parent who has legal
custody of the child and who receives the support is allowed to
claim the credit him or herself. Thus, even though the parent who
pays the support amount for his or her children is no longer able
to deduct that amount from his or her income under section 60 (as
of May 1997), that parent is also unable to claim a credit under
subsection 118(1) for the children if he or she lives separate
and apart from his or her former spouse throughout the year
because of the breakdown of their marriage.[1]
[16] This is clear from resolution 5 of the
Notice of Ways and Means Motion to Amend the Income Tax
Act accompanying the federal budget of March 6, 1996, which
concerns the equivalent-to-married tax credit, and
from CCH's editorial comment on this matter. They are set out
as follows in the Special Report published by CCH Canadian
Limited at page 76, paragraph 25:
[ ¶ 25] Resolution 5: Equivalent-to-married credit
(5) That, for the 1997 and subsequent taxation years, where an
individual is required under the terms of a written agreement or
court order to make payments in the year in respect of the
support of a child, the individual not be entitled to claim any
tax credit under section 118 of the Act in respect of the
child.
CCH Editorial Comment: Section 118 of the Act
provides for certain tax credits in respect of persons supported
by the taxpayer, including his or her children. Resolution 5
proposes that for 1997 and subsequent taxation years, any person
required to pay in the year an amount for support of a child is
not entitled to any tax credit available under section 118. This
proposal is related to the revisions to the taxation of child
support payment in Resolution 3, in that by prohibiting a person
paying child support from taking the section 118 credit, the
credit then becomes available to the custodial parent. Under
subsection 118(5), the child of any person who paid child support
(and who was entitled to a deduction under paragraphs 60(1)(b),
(c) or (c.1)) was deemed not to be the child of the person for
purposes of section 118. Thus the person could not claim both the
deduction for child support and the child tax credit. Under the
new rules for the taxation of child support, the payer will not
be entitled to a deduction. However, Resolution 5 proposes that
the credit will nonetheless be denied to the payer of child
support and the present treatment, permitting the recipient of
child support to claim the credit, will continue.
[17] Accordingly, I must conclude that
subsection 118(5) is applicable here and that the appellant
cannot be entitled to the equivalent-to-spouse tax
credit for 1999.
[18] The appeal is therefore dismissed.
Signed at Ottawa, Canada, this 4th day of December 2001.
J.T.C.C.
Translation certified true
on this 10 thday of March 2003.
Sophie Debbané, Revisor
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