Date: 20010223
Docket: 2000-1921-IT-I
BETWEEN:
DAN GRENIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Hamlyn, J.T.C.C.
[1]
These are appeals with respect to the 1996, 1997 and 1998
taxation years.
[2]
In computing income for the 1996, 1997 and 1998 taxation years,
the Appellant sought to deduct the amounts of $4,284.00,
$6,607.68 and $6,607.68 respectively as child support payments
made.
[3]
The Minister of National Revenue (the Minister) assessed the
Appellant for the 1996, 1997 and 1998 taxation years by Notices
of Assessment dated September 8, 1997, September 4, 1998 and
August 10, 1999 respectively, disallowing the claimed child
support payments.
[4]
The Appellant served Notices of Objection on August 23, 1999 for
the subject taxation years.
[5]
The Appellant did not object to the 1996 assessment within the
time prescribed by subsection 165(1) of the Income Tax Act
(the Act) and therefore the appeal is dismissed for the
1996 taxation year.
[6]
On December 3, 1999 the Minister issued a Notification of
Confirmation with respect to the 1997 and 1998 taxation years,
confirming the assessments.
[7]
In assessing the Appellant, the Minister made the following
assumptions of fact:
(a)
the payments do not qualify as an allowance as required, as they
were not paid for the maintenance of a child of the marriage;[1]
(b)
in the 1997 and 1998 taxation years, in accordance with the terms
of the Appellant's written Separation Agreement dated
November 8, 1996, the agreement setting out the payments to be
made to third parties has made no reference to
subsections 60.1(2) and 56.1(2) of the Act as
required.
[8]
The issue is whether the purported child support payments are
deductible in computing the Appellant's income for the 1997
and 1998 taxation years.
[9]
The separation occurred as a result of considerable financial
difficulties within the marriage.
[10] The
Appellant's case is founded on two documents: a Separation
Agreement dated November 8, 1996 and an Ontario Court
(Provincial Division) Order dated January 26, 1999.
[11] The
Separation Agreement was prepared by the Appellant's
ex-spouse and signed and accepted by the Appellant. Neither party
had the benefit of legal counsel in the preparation or execution
of the Agreement.
[12] At the
time of the matrimonial breakdown, both parties were liable for
significant matrimonial debts. The support clause from the
Separation Agreement in question reads as follows:
4.
CHILD SUPPORT
Daniel (the Appellant) has agreed to cover outstanding debts to
the credit union in monthly payments of $550.64. Also a debt of
$9,000.00 to 794880 Ontario Inc. (Rudy Florio) and a debt to Leon
Grenier in the amount of $5,000.00.
[13] The
Appellant deducted the purported monthly child support payments
of $550.64.
[14] The Court
Order of January 26, 1999 recognizes the monthly payments in the
Separation Agreement as being a factor in the calculation of
child support. It reads:
(a)
Daniel shall pay support to Michelle (the ex-spouse) for Mallory
(the child), in the amount of $125.00 monthly commencing on
December 15, 1998 and on the 15th day of each month
thereafter up to and including November 15, 1999. The parties
acknowledge that this payment is set at an amount which is less
than the Uniform Federal and Provincial Guidelines Act, 1997
Table amount for Ontario and reflects the fact that payments are
being made by Daniel on behalf of Michelle, as child support.
[15] Neither
the Agreement nor the Judgment indicated that
subsections 60.1(2) and 56.1(2) of the Act would
apply to third party payments.
[16] The key
question remains did the payments as structured qualify as a
support amount within the meaning of the Act? Subsection
56.1(4) defines the terms "child support amount" and
"support amount" as follows:
"child support amount" means any support amount that
is not identified in the agreement or order under which it is
receivable as being solely for the support of a recipient who is
a spouse or former spouse of the payer or who is a parent of a
child of whom the payer is a natural parent.
"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 former spouse of the payer, the
recipient and payer are living separate and apart because of the
breakdown of their marriage 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. (emphasis added)
Thus, the key questions are: (1) whether the Appellant had the
discretion to use the funds as she saw fit, and (2) was the
amount described as support for the maintenance of the child of
the recipient?
[17] The
Appellant believed that his ex-spouse had waived the discretion
to use the funds by signing the Agreement. He relied on
Marquette v. The Queen[2] in support of this view.
[18] It is
significant that the third party payments were not directed to
matters normally found in cases of this nature, i.e. rent, school
fees, mortgage payments, taxes, insurance, heating, electricity
or other utilities. In this case the payment went towards
retiring the joint matrimonial debt and not to provide
support directly for the use of the child. It is further
significant that the payment was not expressed as an alternative
to a specified support payment to the ex-spouse. The payment,
while called "child support", was designed to retire
the matrimonial debt and not to provide for maintenance of the
child of the recipient. Moreover, when the matrimonial debt was
to be retired, there was no contemplation within the Agreement of
"support" payment continuing to the ex-spouse for the
benefit of the child.
[19] The
further conclusion is that the ex-spouse, after the signing of
the Separation Agreement, did not have the discretion to use the
amounts as she saw fit.
[20] The
Appellant is not entitled to deduct the payments in the 1997 and
1998 taxation years.
[21] The
appeals are dismissed.
Signed at Ottawa, Canada, this 23rd day of February 2001.
"D. Hamlyn"
J.T.C.C.
COURT FILE
NO.:
2000-1921(IT)I
STYLE OF
CAUSE:
Dan Grenier and
Her Majesty the Queen
PLACE OF
HEARING:
Toronto, Ontario
DATE OF
HEARING:
February 15, 2001
REASONS FOR JUDGMENT
BY:
The Honourable Judge D. Hamlyn
DATE OF
JUDGMENT:
February 23, 2001
APPEARANCES:
For the
Appellant:
The Appellant himself
Counsel for the
Respondent:
Scott Simser
COUNSEL OF RECORD:
For the
Appellant:
Name:
Firm:
For the
Respondent:
Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2000-1921(IT)I
BETWEEN:
DAN GRENIER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on February 15, 2001 at Toronto,
Ontario, by
the Honourable Judge D. Hamlyn
Appearances
For the
Appellant:
The Appellant himself
Counsel for the Respondent: Scott
Simser
JUDGMENT
The
appeals from the assessments made under the Income Tax Act
for the 1996, 1997 and 1998 taxation years are dismissed.
Signed at Ottawa, Canada, this 23rd day of February 2001.
J.T.C.C
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