Ken Lamb v. Her Majesty the Queen (Informal Procedure), [1995] 1 CTC 2580, 96 DTC 1336

Hamlyn J.T.C.C.:—This is an appeal with respect to the 1991 taxation year, under the informal procedure.

In computing income for the 1991 taxation year, the appellant deducted the amount of $11,400 (the ’’amount”) as alimony or maintenance payments.

The original notice of assessment in respect of the 1991 taxation year was dated and mailed on June 3, 1992.

In reassessing the appellant for the 1991 taxation year, the Minister of National Revenue (the "Minister”) disallowed the deduction.

Facts

Pursuant to a decree nisi dated February 29, 1984, the appellant was required, in paragraphs 3 and 4, inter alia, to pay maintenance in the amounts of $500 per month for his former spouse and $300 per month for each child.

The decree nisi was amended by agreement as follows:

August 3, 1987 Calgary, Alberta

RE: DECREE NISI FOR DIVORCE

MAXINE MARIE LAMB & KENNETH GEORGE LAMB

February 13, 1984

This agreement is further to the above noted decree nisi and minutes of settlement thereunder. This agreement amends page 2, items 3 and 4 of the decree nisi as follows:

In lieu of payment of $300 per month per child and $500 per month maintenance, Maxine Marie Lamb agrees to the rental of 83 Chelsea Street N.W. at no cost to her. This is deemed to be a $950 monthly benefit to Marie Lamb. In addition Kenneth George Lamb agrees to pay all home insurance premiums and all city taxes.

All other portions of the decree nisi and minutes of settlement remain the same. This agreement shall remain in effect until it is amended and agreed to by both parties.

The amount claimed is in respect of mortgage payments and property taxes that were allegedly paid in lieu of the maintenance payments referred to above.

The Minister concedes that the moneys claimed by the appellant as payments were in fact paid.

The decree nisi did not provide that subsection 56.1(2) or 60.1(2) of the Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1 (the ’’Act") was to apply to any payments made pursuant to the decree nisi to deem these payments to be an amount paid by the appellant and received by the former spouse as an allowance payable on a periodic basis.

The minutes of settlement dated January 27, 1984, and the amending agreement (Exhibit A-l) did not provide that subsection 56.1(2) or 60.1(2) of the Act was to apply to any payments made pursuant to the minutes of settlement. However, the amending agreement did deem these payments to be an amount paid by the appellant and received by the former spouse as a benefit payable on a periodic basis.

Issue

The issue to be decided by the Court is whether the amount is deductible in computing the appellant’s income in the 1991 taxation year.

Analysis

The appellant is entitled to a deduction for maintenance payments. The appellant comes within subsection 60.1(1) as follows:

—payments were made pursuant to a written agreement varying a decree nisi made by a competent tribunal;

-the payments were periodic (monthly);

-the payments were made by the taxpayer; and

-the payments were for the benefit of the taxpayer’s former spouse and children.

Therefore, the amount paid is deemed to have been paid to and received by the appellant’s former spouse.

The appellant, in this case, comes within the wording of paragraph 60(c) because the payments are also an allowance. This conclusion follows from the reasoning of Sobier J. of this Court in Crewe v. The Queen (unreported).

In addition, this Court concludes that the appellant’s former spouse had discretion as to the use of the maintenance payments in this case 1.e., the initial order required the appellant to pay the maintenance to his former spouse but the appellant and his former spouse agreed in writing that the rental of 83 Chelsea Street N.W. would be a $950 monthly benefit to the former spouse.

Accordingly, the $11,400 payments are deductible under paragraph 60(c) in conjunction with subsection 60.1(1) of the Act.

Decision

The appeal is allowed and referred back to the Minister of National Revenue for reconsideration and reassessment on the basis that the moneys paid by the appellant ($11,400) are deductible under paragraph 60(c) in conjunction with subsection 60.1(1).

Appeal allowed.