REASONS
FOR JUDGMENT
Favreau J.
[1]
This is an appeal under the informal procedure
from a reassessment dated October 24, 2013 concerning
the 2012 taxation year and from an assessment dated July 10, 2014 concerning
the 2013 taxation year, both made by the Minister of National Revenue (the
“Minister”) pursuant to the Income Tax Act, R.S.C. 1985, c. 1 (5th
Supp.) as amended (the “Act ”).
[2]
By way of the reassessment dated October 24,
2013, the Minister disallowed the following amounts claimed by the appellant in
computing his non-refundable tax credits for the 2012 taxation year:
-
$10,822 for an eligible dependant (the “Eligible
Dependant Amount 2012”);
-
$6,382 for children born in 1995 or later (the
“Children Amount 2012”);
-
$11,948 for disability amount transferred from a
dependant (the “Disability Amount 2012”).
[3]
By way of the assessment dated July 10, 2014,
the Minister disallowed the following amounts claimed by the appellant in
computing his non-refundable tax credits for the 2013 taxation year:
-
$11,038 for an eligible dependant (the “Eligible
Dependant Amount 2013”);
-
$2,234 for children born in 1996 or later (the
“Children Amount 2013”);
-
$12,187 for disability amount transferred from a
dependant (the “Disability Amount 2013”).
[4]
In determining the appellant’s tax liability for
the 2012 and 2013 taxation years, the Minister made the following assumptions
of fact:
a)
the facts as stated and
admitted above;
b)
Ms. Janet Luschtinetz
was Appellant’s former spouse (the « Ex-Spouse »);
c)
The Appellant and the
Ex-Spouse separated in 2011;
d)
the Appellant and the
Ex-Spouse lived separately during the 2012 and 2013 taxation years;
e)
The Appellant and the
Ex-Spouse have two children, J. L. born in 2002 and T. L. born in 2004 (the
“Children”);
f)
T. L. was eligible for
the Disability Tax Credit (DTC) since 2004;
Non-Refundable Tax Credits
g)
When Appellant
submitted his 2012 T1 return, he claimed:
i) the Eligible Dependant Amount 2012 as a
non-refundable tax credit for one of the Children;
ii) the Children Amount 2012 as a non-refundable
tax credit for the Children in the total amount of $6,382; and
iii) the Disability Amount 2012 transferred from a
dependant as a non-refundable tax credit for T.L.;
h)
When Appellant
submitted his 2013 T1 return, he claimed:
i) the Eligible
Dependant Amount 2013 as a non-refundable tax credit for T.L.;
ii) the Children Amount 2013 as a non-refundable
tax credit for the one of the Children; and
iii) the Disability Amount 2013 transferred from a
dependant as a non-refundable tax credit for T.L.;
Court Order
i)
the Supreme Court of
British Columbia issued an Order on June 7, 2012 (the “Order”);
j)
the Order required the
Appellant to pay the Ex-Spouse $1,092 per month for child support for the
Children commencing February 1, 2012;
k)
the Order required the
Appellant to pay the Ex-Spouse $900 for spousal support for the Ex-Spouse
commencing February 1, 2012.
Support Paid
l)
during 2012 and 2013
taxation years, the Appellant paid the Ex-Spouse a minimum of $1,092 per month
for support for the Children;
m)
the Appellant claimed
total support payment deductions of $20,232 and $24,822 for the 2012 and 2013
taxation years, respectively; and
Other Material Facts
n)
the Supreme Court of
British Columbia issued an Order dated November 16, 2011 that the Appellant and
the Ex-Spouse would have joint custody of the Children.
[5]
The Appellant admitted all the assumptions of
fact on which the Minister relied upon. The only issue is to determine whether
the Minister properly disallowed the amounts claimed by the Appellant.
[6]
The Minister disallowed the Eligible Dependant
Amount 2012, the Eligible Dependant Amount 2013, the Children Amount 2012 and
the Children Amount 2013, under subsection 118(5) of the Act, because
the Appellant paid a child support amount on behalf of the Children during the
2012 and 2013 taxation years.
[7]
The Minister disallowed the Disability Amount
2012 and the Disability Amount 2013, under subsection 118(5) of the Act,
because the Appellant paid a child support amount on behalf of T. L. during the
2012 and 2013 taxation years.
[8]
Paragraph 118(1)(b) of the Act
permits an individual taxpayer, who does not claim the spouse or common-law
partner amount under paragraph 18(1)(a), to claim a non-refundable
eligible dependant credit for a dependant if certain conditions are met. This
credit is also called the “Eligible Dependant Credit”.
[9]
Paragraph 118(1)(b.1) of the Act
permits an individual taxpayer to claim a non-refundable credit for each child
under the age of 18. This credit is also called the “Child Tax Credit”. This
credit can be claimed by either parent when the child lives with both parents
throughout the year. If the child does not live with both parents, the credit
may be claimed by the parent who is entitled to claim the Eligible Dependant
Credit or who would be entitled to claim it if the child was the parent’s only
child.
[10]
Subsection 118.3(2) of the Act provides
for the transfer to a taxpayer of a dependant’s disability tax credit. The
disability tax credit may be transferred from a person for whom the taxpayer
has claimed the Eligible Dependant Credit under paragraph 118(1)(b), the
caregiver credit under paragraph 118(1)(c.1) or the infirm dependant
credit under paragraph 118(1)(d).
[11]
For the 1997 and subsequent taxation years, subsection
118(5) of the Act provides that a taxpayer may not claim a credit for a
spouse, common-law partner or a child under subsection 118(1) if the taxpayer
is required to pay a support amount, as defined in subsection 56.1(4), for the
spouse, common-law partner or child and the taxpayer either:
(a)
lives separate and apart from the spouse or
common-law partner, or former spouse or common-law partner throughout the year
due to the breakdown of the marriage or common-law partnership; or
(b)
claims a deduction for the support payments.
[12]
Subsection 118(5) reads as follows:
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.
[13]
The meaning of “support amount” in subsection
56.1(4) is as follows:
“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 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.
[14]
This means that if a taxpayer lives apart from
his or her spouse or common-law partner or former spouse or common-law partner
and is required to make support payments for a dependant, the taxpayer is not
entitled to claim a personal credit for the dependant under subsection 118(1)
even if the taxpayer does not pay the support amounts or pays them but does not
deduct them.
[15]
Pursuant to the Order of the Supreme Court of
British Columbia issued on June 7, 2012, the appellant was required to pay his
former spouse:
-
$1,092 per month for child support for the
children of the marriage commencing February 1, 2012; and
-
$900 per month for spousal support commencing
February 1, 2012.
[16]
The appellant was then required to pay support
amounts, as contemplated by subsection 56.1(4) of the Act, and as a
result of the application of subsection 118(5), he was not entitled to the
tax credits in respect of the Eligible Dependant Amount 2012, the Eligible
Dependant Amount 2013, the Children Amount 2012 and the Children Amount 2013.
[17]
The appellant was not entitled to the tax
credits in respect of the Disability Amount 2012 and the Disability Amount 2013
transferred from T.L. because the appellant was not entitled to claim the
Eligible Dependant Credit under paragraph 118(1)(b) in respect of
T. L.
[18]
For these reasons, the appeal is dismissed.
Signed at Ottawa,
Canada, this 10th day of December 2015.
“Réal Favreau”
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