[OFFICIAL ENGLISH TRANSLATION]
Date: 20000425
Docket: 1999-3855(IT)I
BETWEEN:
BERNARD MAYOR,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
Tardif, J.T.C.C.
[1] This is an appeal for the 1997
taxation year.
[2] The point at issue is whether, for
the 1997 taxation year, the Minister correctly revised to $11,853
the amount claimed by the appellant as support or other periodic
payment.
[3] The appellant was the only person
to testify in support of his appeal. His testimony consisted in
reading the content of a letter dated February 23, 1999,
addressed to the Head of the Appeal Division.
[4] I think the content of that letter
is worth reproducing (Exhibit A-1):
[TRANSLATION]
. . .
I hereby wish to dispute strongly the manner in which I have
been taxed with respect to the support I am paying to my
separated spouse.
It was agreed, by "written agreement" made by a CLSC
conciliator (government employee) whom I consulted, that I would
pay Violette Mayor-Perrin half of my C.A.R.R.A.
pension in the form of support. To summarize, I pay income tax at
source on the total amount of the pension, then, in my income tax
return, I report the total amount paid as support (signed
receipts in your possession). THIS IS CLEAR AND CONCISE, and this
concerns you.
Following this first point of the "agreement",
reference is made to the way in which S.S.Q. insurance premiums,
which are withheld by C.A.R.R.A. for all retirees before the net
amount of the pension is paid, are paid and shared. These
subsequent agreements have no bearing in your estimation and need
not influence the income tax and deductions. By what right
do you interpret a separation agreement, regardless of
whether it has been well or poorly drafted . . .
while you are at it, why not deduct the rent and the grocery
bill?
I find the manner in which I have been treated by the federal
tax authorities utterly unfair and arbitrary, and I ask you to
revise this way of doing things.
Briefly stated, I received $33,068.04 less income tax deducted
at source by C.A.R.R.A. I paid a total of $13,187.28 in support,
plus an amount of $3,169.93, which was a refund of the income tax
I had withheld from the 1996 support (see letter from
Yvon Lavoie dated September 2, 1997).
All the supporting documents are in your possession.
Furthermore, last December 30, you prepared a notice of
reassessment in the amount of $716.38, stating that, if I paid
the amount owed within 20 days following the date of the
notice, no additional interest would be charged to me as of that
date. To this day, February 23, 1999, I have not paid
because I am contesting that notice. Today, I have received a
statement dated February 9, thus 40 days later, in the
amount of $838.39. At these usurious rates, this is worse than a
finance company. Please explain.
In any case, I will never be able to pay you this amount. I am
just getting by with what I have left of my pension, and, at the
age of 70, I will definitely not be going to work to pay an
unfair and incomprehensible tax. All my life, I paid what I owed,
including all income tax; that may be why I have no other
prospect than my retirement pension, which I share honestly,
honouring my signature.
Hoping that logic will prevail over every other consideration,
I thank you in advance for your attention to my objection.
Yours sincerely,
B. Mayor
[5] The terms and conditions of the
support at issue in this case were established by an agreement
dated January 1, 1996, (Exhibit I-1) under the
heading:
[TRANSLATION]
FINANCIAL RESPONSIBILITIES
. . .
8. The joint
applicant Mayor shall continue to pay the joint applicant
Mayor-Perrin, for her benefit, the sum of $140.00 a week
for as long as she has no housing, telephone or food
expenses;
9. The joint
applicant Mayor shall pay the joint applicant Mayor-Perrin
the sum of $350 a week from the moment she begins to reside in
her dwelling and until she has begun to receive half of the
pension funds available to the joint applicant Mayor. As soon as
he has retired, the joint applicant Mayor shall pay the joint
applicant Mayor-Perrin, as monthly support, her half of
each payment made to him by CARRA from his pension fund, less the
monthly life and health insurance policy premiums and taxes;
. . .
[6] The appellant explained that, at
his former spouse's request and for greater consistency, he
had entrusted matters to the same accountant since each of them
was receiving income from a single source, that is to say, a
retirement pension paid by the Commission administrative des
régimes de la retraite et d'assurances (C.A.R.R.A.).
The appellant stated that, at the request of his new accountant,
he had refunded an amount of $3,169.93 to his former spouse,
which amount he had deducted from his income as support for his
1997 taxation year.
[7] Believing that it was a tax refund
to which the appellant's former spouse was entitled, the
Court tried to determine the reason for this payment that the
appellant made to his former spouse at the request of the joint
accountant.
[8] The evidence on this issue was
very confusing and did not clarify the matter. As to the other
amounts, that is the payments for life insurance and health
insurance premiums and applicable taxes, the whole totalling
$111.19 a month, for an annual total, according to
Exhibit I-3, of $1,223.09 (11 months), I believe
the agreement is clear on this point. It provides as follows
(Exhibit I-1):
[TRANSLATION]
9. . . .
the joint applicant Mayor shall pay the joint applicant
Mayor-Perrin, as monthly support, her half of each payment
made to him by CARRA from his pension fund, less the monthly life
and health insurance policy premiums and
taxes . . .
[9] The appellant strongly deplored
the rigidity of the tax provisions under which the Minister
questions the nature of certain payments.
[10] On this point, I must recall that the
respondent's mission is to ensure compliance with all the
provisions of the Income Tax Act (the
"Act").
[11] Over the years, the courts have
defined, clarified and explained the various requirements and
conditions respecting the taxation or deduction of support
payments made or received.
[12] Consequently, the parties to a support
agreement have all the appropriate and relevant information
enabling them to know the financial and tax consequences at the
time the agreement is signed.
[13] Thus it is easier to state in an
agreement the intention of the parties as to the tax effects of
that agreement. Should the effects not be consistent with the
parties' intentions, the interested parties may always
correct or amend the first agreement and may even make provision
for the unforeseen adjustments of a Revenue Canada decision
resulting from the first agreement.
[14] In the instant case, the appellant
argued that the respondent should have allowed the deduction
claimed simply because he had paid the amount to his former
spouse. As for the amounts paid for insurance, he contended that
they were amounts that benefited his former spouse as much as
they did him, concluding that they were a component of the
support.
[15] Subscribing to the interpretation put
forward by the appellant would result in making it extremely
difficult to administer the provisions of the Act relating
to support. Inconsistency and arbitrariness would soon be
ubiquitous.
[16] Parliament has enacted provisions,
which have subsequently been clarified by case law, that enable
taxpayers and the courts to foresee the tax consequences of
amounts paid as a result of the break-up of a
relationship.
[17] Where the terms of an agreement or
judgment appear not to meet the expectations or intentions of the
parties concerned by the agreement or judgment, those parties may
always take the necessary steps to submit an agreement consistent
with their intentions to the Minister of National Revenue or to
return to Court to have the ruling obtained revised.
[18] In the instant case, the amounts the
appellant would like to deduct as support were not defined as
such in the support agreement.
[19] As to the amount of $3,169.93, the
evidence was incomplete. The Court understood that the appellant
had in a way provided the appellant Mayor-Perrin with, as
it were, an early refund of an income tax overpayment. If that
were the case, the appellant could not deduct that amount from
his income since it was not an amount paid as support.
[20] Furthermore, assuming that it was an
early tax refund, the appellant should normally have been
reimbursed by his former spouse. I think it is important to
remind the appellant that amounts paid as support are generally
deductible for the payer; however, those payments are taxable in
the hands of the recipient.
[21] In light of the evidence adduced by the
appellant, the Court cannot allow his appeal, which is therefore
dismissed.
Signed at Ottawa, Canada this 25th day of April 2000.
J.T.C.C.
Translation certified true
on this 25th day of September 2003.
Sophie Debbané, Revisor
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