Burlton v. The Queen, docket 2001-403-IT-I (Informal Procedure)

Date: 20010927

Docket: 2001-403-IT-I

BETWEEN:

ANTOINETTE BURLTON,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Reasonsfor Judgment

Hamlyn, J.T.C.C.

[1]            This is an appeal from a reassessment made under the Income Tax Act (the "Act") in respect of the 1998 taxation year, in which the Minister of National Revenue (the "Minister") disallowed child care expenses which the Appellant had claimed.

[2]            In computing income for the 1998 tax year, the Appellant deducted $4,000.00 as child care expenses ("Expenses"). By Notice dated February 16, 2000 the Minister reassessed the Appellant to disallow the Expenses as claimed.

[3]            The Appellant's daughter, Stephanie Burlton ("Stephanie") was born April 1, 1984. In 1998 Stephanie was enrolled at the Delphi International Academy ("DIA").

[4]            The Appellant stated in her pleadings that the Expenses paid to DIA were for services provided at a boarding school or camp to enable Mrs. Burlton to perform the duties of a consultant.

[5]            The Minister, when reassessing the Appellant, relied in part on the following assumptions. The Minister states that Expenses paid by the Appellant to DIA with respect to Stephanie were for tuition not child care expenses.

[6]            The Minister states that DIA's sports development program (the "Program") is operated by Delphi Student Development Inc. ("DSDI"). The school hours at DIA were from 8:00 a.m. to 1:30 p.m. and the Program ran daily from 2:00 p.m. to 4:00 p.m.

[7]            All students of DIA were required to participate in the Program, i.e. attendance was not optional.

[8]            A student's sports performance evaluation in the Program comprised 45% of the student's Physical Education mark at DIA.

[9]            The Minister is of the view that the Program was not for the provision of child care services, a day care or camp service.

ISSUE

[10]          The issue to be determined is whether the Expenses paid by the Appellant to DIA fall within the definition of deductible child care expenses. Specifically, were the Expenses paid for services provided at a boarding school or camp to enable the Appellant to perform the duties of an office or employment?

STATUTORY FRAMEWORK

63. (3) In this section

"child care expense" means an expense incurred in a taxation year for the purpose of providing in Canada, for an eligible child of a taxpayer, child care services including baby sitting services, day nursery services or services provided at a boarding school or camp if the services were provided

(a) to enable the taxpayer, or the supporting person of the child for the year, who resided with the child at the time the expense was incurred,

               

(i) to perform the duties of an office or employment,

(ii) to carry on a business either alone or as a partner actively engaged in the business,

(iii) [Repealed]

(iv) to carry on research or any similar work in respect of which the taxpayer or supporting person received a grant, or [...]

except that

(c) any such expenses paid in the year for a child's attendance at a boarding school or camp to the extent that the total thereof exceeds the product obtained when: [...]

(ii) in all other cases, $90

is multiplied by the number of weeks in the year during which the child attended the school of camp, and

(d) for greater certainty, any expenses described in subsection 118.2(2) and any other expenses that are paid for medical or hospital care, clothing, transportation or education or for board and lodging, except as otherwise expressly provided in this definition,

are not child care expenses;

ANALYSIS

[11]          It is clear from the facts that the Expenses incurred by the Appellant were not in relation to a boarding school. Stephanie attended DIA during the day and returned home after the Program ended each evening. Thus, Stephanie was not boarding at DIA.

[12]          Additionally the facts suggest that DIA did not offer a "day" sports school, but rather a daily two hour sports program that was part of the academic education offered by DIA.

[13]          It does not appear on the evidence that the Program falls within the categories of day sports school or sports camp. Although as the Appellant points out, the Program ran on a daily basis for two hours, such an activity does not, I believe, fit the meaning of a camp. This is strengthened by the mandatory requirement that a student participate in the Program and that a student's performance in the Program is reflected in his/her academic grade for Physical Education at DIA.

[14]          The Appellant referred to Levine v. Canada, [1995] T.C.J. No. 1487, a case heard under the Informal Procedure at the Tax Court of Canada. In Levine, the Appellant was a flight attendant with a national airline. The Appellant claimed various child care expenses including a $500.00 finder's fee to the domestics' employment agency. The Tax Court held that the finder's fee was a legitimate child care expense as it was incurred for the purpose of providing child care services. Judge Archambault found that the fee expense was necessary and fell within the spirit of section 63 of the Act, which was to assist working parents in caring adequately for their children.

[15]          However, the Court in Levine took a different view with regard to the Appellant's claim for recreational expenses. Finding such expenses were not deductible under section 63, Judge Archambault states at paragraph 13:

I do not think that the recreational expenses disallowed by the Minister are child care expenses or "frais de garde d'enfants" within the meaning of paragraph 63(3)(a) of the Act. These expenses were not incurred for the purpose of watching over the children to protect them, and therefore to enable the parents to earn income from employment. They were incurred to develop the physical, social and artistic abilities of the children. These expenses would have been incurred whether or not the parents had been working.

Further in the Judgment at paragraph 14:

However, this person's primary role is not to watch over the children to protect them, but to teach ballet, swimming, skating, arts, etc. In my view, the children's being watched over is only an incidental benefit of the lessons. I do not believe that this type of expense was intended by the Canadian Parliament to be deductible.

[16]          It would appear from the comments of Judge Archambault that in order to be considered a deductible child care expense the primary purpose of the expense must be the caring for or watching over the child so that the parent can earn income from employment, business or other activity outlined in the Act.

[17]          Deputy Judge Rowe in Keefer v. Canada, [1999] T.C.J. No. 939, another Tax Court of Canada decision, followed the reasoning of Judge Archambault in Levine. In Keefer, Deputy Judge Rowe affirmed that in order for a child care expense to be deductible, what is required and desired by Parliament is that the expenses be expenses under carefully controlled terms, relating to the overwhelming component of guardianship, protection and child care.

[18]          The Appellant argues that one can distinguish the Levine case from the present appeal as the Appellant incurred the Expenses for services provided at a boarding school or camp to enable Mrs. Burlton to perform the duties of an office or employment.

[19]          Further the Appellant argues, unlike the Levine case, that the daily activities in which Stephanie participated were child care services as they were for a two hour period, outside the normal school hours. However, the mandatory participation in the Program by DIA students and the fact that a student's performance in the Program was reflected in the student's academic grade for physical education is a hurdle in finding that the Program was primarily child care services. Indeed, the Appellant admitted, even if she was not working, it is possible she would have put Stephanie in the Program.

[20]          I conclude the Appellant chose DIA because of its specific academic and sports program (hockey) and not because of child care services. The expenses paid by the Appellant to DIA do not fall within the definition of deductible child care expenses.

DECISION

[21]          The appeal is dismissed.

Signed at Ottawa, Canada, this 27th day of September 2001.

"D. Hamlyn"

J.T.C.C.

COURT FILE NO.:                                                 2001-403(IT)I

STYLE OF CAUSE:                                               Antoinette Burlton and

                                                                                                Her Majesty the Queen

PLACE OF HEARING:                                         Vancouver, British Columbia

DATE OF HEARING:                                           September 20, 2001

REASONS FOR JUDGMENT BY:      The Honourable Judge D. Hamlyn

DATE OF JUDGMENT:                                       September 27, 2001

APPEARANCES:

Agent for the Appellant:                     Robert J. Smarz

Counsel for the Respondent:              Victor Caux

COUNSEL OF RECORD:

For the Appellant:                

Name:                               

Firm:                 

For the Respondent:                             Morris Rosenberg

                                                                                Deputy Attorney General of Canada

                                                                                                Ottawa, Canada

2001-403(IT)I

BETWEEN:

ANTOINETTE BURLTON,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

Appeal heard on September 20, 2001, at Vancouver, British Columbia,

the Honourable Judge D. Hamlyn

Appearances

Agent for the Appellant:             Robert J. Smarz

Counsel for the Respondent:      Victor Caux

JUDGMENT

          The appeal from the assessment made under the Income Tax Act for the 1998 taxation year is dismissed.

Signed at Ottawa, Canada, this 27th day of September 2001.

"D. Hamlyn"

J.T.C.C.