Dianne Wilson v. Minister of National Revenue, [1981] CTC 2146, 81 DTC 95

D E Taylor:—This is an appeal heard in Toronto, Ontario, on December 12, 1980, against the confirmation of an income tax assessment for the year 1978, in which confirmation the Minister of National Revenue would not allow the deduction of an amount of $3,319 for legal fees paid by the appellant in connection with a divorce action. In assessing the appellant, the respsondent relied, inter alia, upon section 3 and paragraphs 18(1)(a) and

(h) of the Income Tax Act, SC 1970-71-72, chapter 63 as amended.

Contentions

For the appellant:

— Legal fees paid in respect of negotiating alimony and maintenance are deductible.

— Since the payment of alimony and maintenance are taxable, any and all costs incurred by the taxpayer in an attempt to secure and collect taxable income are deductible.

For the respondent:

— The outlay or expense in the amount of $3,319 was a personal or living expense.

— It was not made or incurred by the taxpayer for the purpose of gaining or producing income from a business or property.

Evidence and Argument

Certain factual material was presented by the appellant and the appellant’s chartered accountant, Mr Bryon Sievert, to support the mathematical basis of the claim. That aspect of the matter was not directly challenged by the Minister, and counsel for the appellant relied upon the recent Board decision of Dr Beverly A Burgess v MNR, [1979] CTC 2374; 79 DTC 347 as the jurisprudence in support of this appeal.

Counsel for the respondent took the position that the instant case, from a factual viewpoint, was similar to Burgess (supra) but challenged the basic principle enunciated in Burgess, to be found at pages 2375 and 349 respectively of that decision:

It does not appear to me that it would be proper or accurate to describe the appellant’s action in invoking the exercise of the jurisdiction of the Court under section 11 of the Divorce Act as an action taken with a view to brining into existence a capital asset. In this case, as in the Evans case (60 DTC 1047), the appellant took action to enforce an existing right. It is true that the court exercised, under section 11 of the Divorce Act, a discretion. That discretion is, however, exercised on the basis of established principles and the resultant order is one which should be regarded as reflecting rather than creating a right of the person who is the payee of the maintenance.

Counsel further noted the cases of Zacks v Zacks (35 DLR (3d) 420) and Todd v Todd (5 DLR (3d) 92), and made reference to certain Statutes of the Province of Ontario — The Divorce Act and The Family Law Reform Act.

Findings

The Board notes that Burgess (supra), allowed by the Board, has been appealed by the Minister of National Revenue to the Federal Court of Canada. I would agree that in principle it is indistinguishable from the facts in the present case. I also note that this case is similar to another recent decision — Rita Corbeil-Labelle v MNR, [1978] CTC 3226; 78 DTC 1982 — in which the Board upheld the position of the Minister that the legal costs incurred by the appellant had been made for the purpose of obtaining or establishing a right, not for the purpose of obtaining revenue therefrom. The earlier case of Dr Samuel Solomon v MNR, [1978] CTC 3039; 78 DTC 1760 supports that view. Neither Solomon nor Corbeil-Labelle has been appealed to the Federal Court of Canada. It is my view that whatever may be the right of a spouse to maintenance or support accorded by virtue of the marriage contract, that is not the same right as one obtained by virtue of a “decree, order or judgment of a competent tribunal, or pursuant to a written agreement”, or “pursuant to an order of a competent tribunal” (as provided for in paragraphs 60(b) and (c) of the Act. The legal fees at issue in this appeal were incurred in “negotiating alimony and maintenance” (notice of appeal), and as such were paid to establish such a right. The right to maintenance obtained by this appellant as a result of the expenditure of the legal fees in question was a right to funds in her own name, totally outside of any further discretion or direction by her ex-husband. In my view that is considerably different than the right to maintenance and support flowing from the marriage contract alone.

Decision

The appeal is dismissed.

Appeal dismissed.