André Cholette v. Her Majesty the Queen (Informal Procedure), [1994] 1 CTC 2804

Couture, C.J.T.C.C.:—This appeal concerns the appellant’s 1990 taxation year. He acted for himself and asked to proceed under the informal procedure.

The facts giving rise to the Minister’s assessment of February 13, 1993 are relatively straightforward.

Since mid-June 1989 he and his ex-wife have lived apart. The appellant owns a three-apartment house and his ex-wife lives in one of these apartments with two of their children, occupying about 50 per cent of the house's floor space. The other half is leased.

In 1989 the appellant’s ex-wife admitted in a document duly dated and signed, a copy of which was filed, that she received $13,271.91 as alimony from the appellant in the 1989 taxation year. This sum represented weekly payments and the portion of expenses relating to upkeep of the apartment occupied by her and her children. This amount was deducted by the appellant in calculating his income for the 1989 taxation year and was allowed by the Minister.

For the 1990 taxation year the appellant deducted $14,608 in calculating his income. This amount was eventually changed following a notice of objection and set at $13,000, but this was also disallowed by the Minister as a deduction. This deduction was disallowed on the ground that the alimony was not paid in accordance with the provisions of subsection 60.1(2) of the Income Tax Act, R.S.C. 1952, c. 148 (am. S.C. 1970-71-72, c. 63) (the "Act").

On September 5, 1989, the appellant and his ex-wife signed a "consent regarding interim relief", and this consent was approved in a judgment by Bernard Gratton, J. of the Supreme Court, confirming the agreement between the parties.

Unfortunately no reference was made in that judgment to the provisions of the Act regarding the treatment of the alimony by the parties for the purposes of the Act.

For reasons which were not disclosed by the evidence, the appellant’s ex-wife refused to recognize and admit that the amount the appellant actually spent for her in 1990, as in 1989, was on account of alimony. It should be noted that the document signed by the parties in September 1989 clearly stipulated that the sum of $13,271.91 had been received by the appellant’s ex-wife as alimony between June and December 1989.

The provisions of the Act allowing the deduction of alimony in calculating a taxpayer's income are contained in paragraph 60(b). Additionally, when money paid as alimony is paid to a third party for the benefit of the person designated, the deduction is subject to the provisions of 60.1(2), which reads:

60.1(2) Agreement.—For the purposes of paragraph 60(b), (c) and (c.1), the amount, if any, by which

(a) the aggregate of all amounts each of which is an amount (other than an amount to which paragraph 60(b), (c) or (c.1) otherwise applies) paid by a taxpayer in a taxation year, pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written agreement, in respect of an expense (other than an expenditure in respect of a self-contained domestic establishment in which the taxpayer resides or an expenditure for the acquisition of tangible property that is not an expenditure on account of a medical or educational expense or in respect of the acquisition, improvement or maintenance of a self-contained domestic establishment in which the person described in subparagraph (i) or (ii) resides) incurred in the year or in the immediately preceding taxation year for maintenance of a person who is

(i) the taxpayer’s spouse or former spouse, or

(ii) where the amount is paid pursuant to an order made by a competent tribunal after February 10, 1988 in accordance with the laws of a province, an individual of the opposite sex who

(A) before the date of the order cohabited with the taxpayer in a conjugal relationship, or

(B) is the natural parent of a child of the taxpayer,

or for the maintenance of children in the person's custody or both the person and those children if, at the time of the expense was incurred and throughout the remainder of the year, the taxpayer was living apart from that person exceeds

(b) the amount, if any, by which

(i) the aggregate of all amounts each of which is an amount included in the aggregate determined under paragraph (a) in respect of the acquisition or improvement of a self-contained domestic establishment in which that person resides, including any payment of principal or interest in respect of a loan made or indebtedness incurred to finance, in any manner whatever, such acquisition or improvement

exceeds

(ii) the aggregate of all amounts each of which is an amount equal to '/s of the original principal amount of a loan or indebtedness described in subparagraph (i) shall, where the decree, order, judgment or written agreement, as the case may be, provides that this subsection and subsection 56.1(2) shall apply to any payment made pursuant thereto, be deemed to be an amount paid by the taxpayer and received by that person as an allowance payable on a periodic basis.

Unfortunately for the appellant, as the judgment confirming the "consent regarding interim relief" does not provide that subsections 60.1(2) and 56.1(2) will apply to any payment made pursuant to that judgment, and further, as the appellant’s ex-wife refused to recognize that these payments were made as alimony for the 1990 taxation year, I have no choice but to affirm the assessment made by the Minister.

The reason that the Act requires reference to be made to subsections 60.1(2) and 56.1(2) in a judgment or document providing for the payment of alimony is precisely in order to avoid any possible discussion between the parties as to the nature of the payment for the purposes of the Act.

For these reasons, the appeal is dismissed.

Appeal dismissed.