Taylor,
T.CJ.:—This
is
an
appeal
heard
in
Winnipeg,
Manitoba,
on
May
2,
1991,
against
an
income
tax
assessment
for
the
year
1984,
in
which
the
Minister
of
National
Revenue
("respondent")
reduced
the
net
spousal
deduction
claimed
from
$1,944.38
to
nil,
giving
the
following
explanation:
As
your
spouse
has
net
income
in
excess
of
$3,960
you
are
not
entitled
to
a
deduction
from
income
within
the
provisions
of
paragraph
109(1)(a)
nor
are
you
entitled
to
the
Federal
Tax
Deduction
transfer
from
your
spouse
under
subsection
120(3.1)
of
the
Act.
The
notice
of
appeal
read:
The
relevant
facts
are:
Mr.
Sinclair
claimed
his
spouse
as
a
dependant
and
claimed
the
related
Federal
Tax
Reduction.
The
Minister
disallowed
the
above
claims
stating
his
spouse
had
net
income
in
excess
of
$3,960.00
and
could
not
be
claimed
as
a
dependant.
The
Minister
assessed
to
his
spouse,
as
a
taxable
receipt,
a
pension
plan
payment
upon
her
withdrawal
from
the
plan.
The
reasons
for
appealing
are:
Mr.
Sinclair’s
spouse
has
no
net
income
as
the
pension
plan
payment
to
her
is
not
a
taxable
receipt.
The
payment
is
in
effect
"personal
property"
of
an
Indian
under
section
87
of
the
Indian
Act
and
accordingly
exempt
from
taxation.
Accordingly
Mr.
Sinclair
correctly
claimed
his
spouse
as
a
dependant
and
the
related
Federal
Tax
Reduction.
The
respondent
relied,
inter
alia
.
.
.
on
subsection
120(3.1)
and
paragraph
109(1)(a)
of
the
Income
Tax
Act,
R.S.C.
1952,
c.
148
as
amended
by
S.C.
1970-71-72,
c.
63,
s.
1
for
the
1984
taxation
year
and
section
87
of
the
Indian
Act,
R.S.C.,
c.
149
as
amended.
I
would
also
note
that
during
the
hearing
reference
was
made
to
section
87
of
the
Indian
Act,
and
to
section
4
of
the
Indian
Remission
Act.
The
basic
facts
are
that
Mrs.
Sinclair—the
wife
of
the
appellant—received
in
1984
a
substantial
amount
of
money
as
a
refund
of
her
own
superannuation
contributions,
together
with
the
contributions
to
the
fund
made
by
her
employer.
She
had
been
employed
previously
by
a
school
board
located
on
the
Indian
reserve,
where
she
resides
as
a
Status
Indian.
During
the
year
1984
Mrs.
Sinclair
also
had
some
other
income—to
be
exact
$2,015.62—which
both
parties
agreed
served
to
reduce
the
spousal
allowance
for
Mr.
Sinclair
to
$1,944.38
($3,960
less
$2,015.62).
Mr.
Sinclair
had
not
declared,
as
part
of
his
wife's
income
in
calculating
this
spousal
exemption,
any
of
the
amount
at
issue
in
this
appeal
received
from
Great
West
Life
Insurance
Co.
("Great
West
Life")
the
head
office
of
which
it
was
also
agreed
was
not
on
the
reserve.
The
question
in
this
matter
is
not
whether
the
amount
at
issue
is
taxable
income
to
Mrs.
Sinclair,
thereby
reducing
the
minimum
spousal
allowance
available
to
Mr.
Sinclair,
the
appellant,
in
filing
his
own
tax
return.
I
heard
no
evidence
or
argument
which
would
successfully
dispute
the
fact
that
the
"situs"
of
the
debtor,
that
is
the
school
board,
was
on
the
reserve.
Reference
was
made
by
the
respondent
that
the
head
office
of
Great
West
Life—the
holder
and
payer
of
the
amount—was
not
on
the
reserve.
In
my
view
that
is
not
sufficient
to
overturn
the
basic
premise
that
the
funds
arose
from
the
school
board—located
on
the
reserve—which
would
leave
the
income
to
Mrs.
Sinclair
as
exempt
from
income
tax—that
is
exempt
from
taxation
in
her
hands.
I
am
quite
satisfied
that
this
view
is
directly
related
to
and
consonant
with
the
rationale
in
a
somewhat
similar
case—
Valerie
Henry
v.
M.N.R.,
[1987]
2
C.T.C.
2013;
87
D.T.C.
338.
The
question
then
becomes
whether
the
characterization
of
the
income
as
"exempt"
to
Mrs.
Sinclair
permits
any
part
of
it
to
be
deleted
by
Mr.
Sinclair
in
calculating
the
spousal
allowance
available
to
him
in
his
own
tax
return.
In
my
view
it
does
not.
The
net
result
of
the
request
from
this
appellant
would
be
that
Mr.
Sinclair
would
avoid
taxation
on
a
portion
of
his
otherwise
taxable
income—$1,944.38—because
of
the
exempt
nature
to
her
of
his
wife's
income.
I
am
satisfied
that
the
amount
received
by
Mrs.
Sinclair
relevant
to
this
appeal
was
income
to
her.
Without
going
into
a
lengthy
review
of
the
subject,
this
appellant
wishes
exempt
income
to
be
equated
with
income,
and
they
are
not
the
same.
While
it
is
right
and
proper
that
income
tax
should
not
be
assessed
against
Mrs.
Sinclair
on
the
exempt
income,
by
virtue
of
current
case
law,
that
does
not
extend,
as
I
see
it,
to
permitting
another
taxpayer
to
use
a
portion
thereof
to
reduce
his
own
liability.
That
would
be
tantamount
to
declaring
a
part
of
Mr.
Sinclair's
income
non-taxable,
not
just
tax
exempt.
The
circumstances
of
this
appeal
as
I
understand
them
do
not
support
the
result
requested.
The
appeal
is
dismissed.
Appeal
dismissed.
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