REASONS
FOR JUDGMENT
V.A. Miller J.
[1]
The issue in this appeal is whether the
Appellant is entitled to claim the tax credits for a wholly dependent person
and child amount (the “Tax Credits”) in respect of his daughter in his 2013
taxation year.
[2]
The Appellant was the only witness at the
hearing. There was no real disagreement about the facts in this case.
Facts
[3]
The Appellant and his former spouse divorced in
2010 and they have been living separate and apart since at least 2010. They
have joint custody of their two minor children – a son and a daughter. After
the marriage breakdown, the children resided with each of the Appellant and his
former spouse on a week on/week off basis until May 2013 when the daughter
moved in with the Appellant on a permanent basis. The son continued to reside
with both parents. In his income tax return, the Appellant claimed the Tax
Credits for his daughter for the 2013 taxation year.
[4]
Four court orders from the Court of Queen’s
Bench of Alberta (the “Court”) were submitted as exhibits at the hearing. The
first order was a Consent Order which was made on January 24, 2013. In it the
Court ordered that the Appellant had to pay his former spouse $860 monthly
commencing the 1st day of January, 2013. This order also stipulated that there
was no retroactive credit/child support credit given by one party to the other
as at December 31, 2012.
[5]
The second order was an ‘Interim “Without
Prejudice” Consent Order’ (the “Interim Order”) made on December 18, 2013. The
Court ordered that the daughter’s primary residence was with the Appellant
until there was a further agreement between the parties. It also ordered that
there was to be a net payment from the Appellant to his former spouse of $306
monthly commencing December 1, 2013. The order also contained the
following paragraph:
The balance of
the issues as outlined in the Defendant Father’s application including
retroactive child support credit owing by the Plaintiff Mother to the Defendant
Father, shall be adjourned to Special Family Law Chambers on March 19, 2014.
[6]
The third order was made on March 19, 2014. The
Court ordered that the Appellant was to pay his former spouse the sum of $391
per month commencing April 1, 2014; that the Appellant could earn up to an
additional $13,000 over and above his salary of $108,000 before the child
support payable by him would be recalculated; and there was no retroactive
child support/arrears payable by one party to the other as at March 19, 2014.
In this order, the Court stated that starting the 2013 tax year, the Appellant
could claim the “Child Tax Benefit, G.S.T., equivalent
to spouse deduction and such other tax benefits as may be available”
with respect to the daughter and his former spouse could claim the tax credits
with respect to the son.
[7]
The fourth order, pronounced on March 3, 2015,
amended the third order to give specifics with respect to the calculation of
the child support.
[8]
It was the Appellant’s position that he should
be eligible to claim the Tax Credits because his daughter lived with him for
most of the year in 2013. As well, the second court order reduced the amount he
had to pay to his former spouse from $868 to $306 because his former spouse had
to pay him $562. In support of his argument, he submitted the “Summary of Child
Support Guideline Calculations” which showed that the amount of child support
payable by the Appellant was $868 and the amount payable by his former spouse
was $562.
Law
[9]
For the purposes of the Tax Credits, a wholly
dependent person and a child amount are defined in subsection 118(1) of the Income
Tax Act (“ITA”) as follows:
118. (1) For the
purpose of computing the tax payable under this Part by an individual for a
taxation year,
Wholly dependent person
(b) in the
case of an individual who does not claim a deduction for the year because of
paragraph 118(1)(a) and who, at any time in the year,
(i)
is
•
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
•
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
Child amount
(b.1) if
(i) a child, who is under the age of 18 years at the
end of the taxation year, of the individual ordinarily resides throughout the
taxation year with the individual together with another parent of the child,
the total of
•
(A) $2,131 for each such child, and
•
(B) $2,000 for each such child who, by reason of
mental or physical infirmity, is likely to be, for a long and continuous period
of indefinite duration, dependent on others for significantly more assistance
in attending to the child’s personal needs and care, when compared to children
of the same age, or
(ii) except where subparagraph (i) applies, the individual may
deduct an amount under paragraph (b) in respect of the individual’s child who
is under the age of 18 years at the end of the taxation year, or could deduct
such an amount in respect of that child if paragraph (4)(a) and the reference
in paragraph (4)(b) to “or the same domestic establishment” did not apply to
the individual for the taxation year and if the child had no income for the
year, the total of
(4) For the
purposes of subsection 118(1), the following rules apply:
b) not more than one individual is entitled to a deduction under
subsection (1) because of paragraph (b) of the description of B in that
subsection for a taxation year in respect of the same person or the same
domestic establishment and where two or more individuals otherwise entitled to
such a deduction fail to agree as to the individual by whom the deduction may
be made, no such deduction for the year shall be allowed to either or any of
them;
(b.1) not more than one individual is entitled to a deduction under
subsection (1) because of paragraph (b.1) of the description of B in that
subsection for a taxation year in respect of the same child and where two or
more individuals otherwise entitled to such a deduction fail to agree as to the
individual by whom the deduction may be made, no such deduction for the year
shall be allowed to either or any of them;
(5) 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 (emphasis
added)
[10]
A support amount is defined in subsection
56.1(4) as follows:
56.1
(4) 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
o
(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
o
(b) the payer is a legal 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. (pension
alimentaire)
Analysis
[11]
It is clear from subsection 118(5) that an
individual who is required to pay a support amount is not eligible to claim a
tax credit for a “wholly dependent person” or a “child amount”. It is also
readily apparent from the Consent Order made on January 24, 2013 and the
Interim Order made on December 18, 2013 that only the Appellant was required to
pay a support amount (child support) in 2013. In the Consent Order the relevant
paragraph read:
There shall be a
payment of base child support from the Defendant Father to the Plaintiff Mother
in the sum of $860 per month commencing the 1st day of January of 2013 with a
like payment due and payable on the 1st day of each and every month thereafter.
The relevant paragraph
in the Interim Order read:
There shall be a
net payment of s. 3 base child support from the Defendant Father to the
Plaintiff Mother in the sum of $306.00 per month commencing the 1st day of
December, 2013 with a like payment due and payable on the 1st day of each and
every month thereafter until further agreement between the parties or Court
Order.
The other Orders are not relevant with
respect to who was required to pay child support in 2013.
[12]
As a consequence of the Orders and subsection
118(5) of the ITA, the Appellant is not entitled to claim the Tax
Credits in 2013.
[13]
I agree with the Appellant that the support
amount which he was required to pay in December 2013 was the net amount of the
amount payable by him ($868) and the amount payable by his former spouse
($562). Nevertheless, the Interim Order did not require his former spouse to
pay a support amount to him. It required the Appellant to pay the net of the
two amounts to his former spouse.
[14]
Both parents’ income was considered in
calculating the support amount because both parents have an obligation to
support their children in accordance with their ability to contribute: Contino
v Leonelli-Contino, 2005 SCC 63 at paragraph 32. However, in this case,
only the Appellant, who had the higher income, was actually required to pay a
support amount each month in 2013.
[15]
The issue raised in the case of Verones v The
Queen, 2013 FCA 69 was identical to that in the present appeal. In that
case, Trudel J.A. stated:
Once each
parent's obligation vis-à-vis the children is determined, the higher income
parent may be obligated to make child support payments to the lower income
parent as part of his or her performance of said obligation. However, in the
end, the set-off concept does not translate the parents' respective obligation
to contribute to child rearing into a “support payment” as defined in the Act.
[16]
I noted that in her Order made on March 3, 2015,
Madame Justice Pentelechuk wrote that the Appellant was “at liberty” to claim the various tax credits. With respect,
the Court of Queen’s Bench of Alberta does not have jurisdiction with respect
to the entitlement to tax credits. That jurisdiction lies with the Tax Court of
Canada.
[17]
The appeal is dismissed.
Signed at Ottawa, Canada, this 22nd day of February 2016.
“V.A. Miller”
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