Koranteng-Addo v. R., [1997] 2 CTC 3104

Somers DJ.T.C.:

This appeal was heard at Toronto, Ontario, on March 10, 1997, pursuant to the Informal Procedure of this Court.

In computing income for the 1992 and 1993 taxation years the Appellant deducted the amounts of $6,000 and $9,480 respectively as child care expenses, the amounts of $7,900 and $6,700 respectively as alimony or maintenance payments, and claimed the amounts of $5,380 and $5,380 respectively, as an equivalent to married amount in the calculation of non- refundable tax credits.

The Minister of National Revenue (the “Minister”) reassessed the Appellant for the 1992 and 1993 taxation years, allowing the amounts of $3,600 and $3,600 respectively for alimony and maintenance payments and disallowing the claims for the equivalent to married amount in the calculation of non-refundable tax credits. Subsequently, the Minister disallowed the claims for the child care expenses.

In so reassessing the Appellant, the Minister made the following assumptions of facts which were admitted or denied:

(a) in the 1992 and 1993 taxation years, in accordance with the terms of the Appellant’s written separation agreement (the “Agreement”), he was required to pay his former spouse an amount of $3,600 per year ($300.00 per month) as alimony or maintenance payments; (admitted)

(b) under the terms of the Agreement, the Appellant also made payments to his former spouse for furniture and a car loan (the “Excess Payments”); (admitted)

(c) the Excess Payments were not allowances payable on a periodic basis for the maintenance of the recipient, the children of the recipient , or both the recipient and the children; (denied)

(d) the Appellant’s spouse had custody of the children of the marriage in 1992 and 1993; (denied)

(e) the Appellant did not maintain a self-contained domestic establishment in which he lived and did not support therein a child who was wholly dependant for support on the Appellant; (denied)

(f) in 1992 and 1993, the Appellant was not entitled to receive a family allowance under the Family Allowances Act, 1973; (denied)

(g) the Appellant did not incur child care expenses in respect of an eligible child in the 1992 and 1993 taxation years, (denied)

The issues are whether the Appellant:

(a) is entitled to deduct the excess payments in computing income in the 1992 and 1993 taxation years;

(b) is entitled to claim expenses in the 1992 and 1993 taxation years;

and

(c) is entitled to deduct the equivalent to married amount in the 1992 and 1993 taxation years.

Three children were born from the marriage of the Appellant Louis Koranteng-Addo and Gifty Ansong. Under a separation agreement of December 1991, the Appellant undertook to support the three children, Louisa Koranteng-Addo, Raymond Derick Koranteng-Addo and Claudia Cheyenne Koranteng-Addo. The support came in the form as following: will pay a monthly amount of $300, for living-room and bedroom furniture, a monthly amount of $245 and for a car loan a monthly amount of $310.

The spouse was to have the custody of the three children. However, by virtue of an amended agreement, dated May 20, 1992, the Appellant was to have custody of the youngest child Claudia. Raymond was in the custody of the spouse. The third child Louisa, lived in Ghana at all times and never resided in Canada.

The Appellant did make payments for the furniture and car loan which he claimed as deductions for the 1992 and 1993 taxation years. The Minister disallowed these amounts by virtue of subsection 56(12) of the Income Tax Act (the “Act”) which provides as follows:

Definition of “allowance”. Subject to subsections 56.1(2) and 60.1(2), for the purposes of paragraphs (1)(b), (c) and (c.1) (hereinafter in this subsection referred to as the “former paragraphs”) and 60(b), (c) and (c.1) (hereinafter in this subsection referred to as the “latter paragraphs”), “allowance” does not include any amount that is received by a person, referred to in the former paragraphs as “the taxpayer” and in the latter paragraphs as “the recipient”, unless that person has discretion as to the use of the amount.

The Minister has allowed only the $300 alimony payments and not the monthly payments for the furniture and the car. Counsel, in support of the Minister’s decision, referred to the case of Jacques v. The Queen (December 19, 1994), no 93-2880(IT)I (T.C.C.) [now reported, Jacques c. R. (1994), [1995] 1 C.T.C. 2563 (T.C.C.)]. In this case, under an agreement approved by the Quebec Superior Court, the spouse had legal and physical custody of the four children. As alimony, Mr. Pierre Jacques paid the mortgage and the municipal, school and other taxes on the conjugal home and also paid the debt owing to the Bank of Nova Scotia. Judge Archambault, in analizing the case law, came to the conclusion that “the sums paid by the Appellant do not constitute alimony or other allowance for the purpose of paragraph 60(b) or (c) of the Act and cannot be deducted pursuant to these provisions.”

In the case of Armstrong v. R., (May 10, 1996), Doc. A-189-95 (Fed. C.A.) [now reported, Armstrong v. R. [1996] 2 C.T.C. 266 (Fed. C.A.)] the Court ruled in the same sense as Judge Archambault in the Pierre Jacques case. In the Armstrong case, the taxpayer was required to pay the monthly mortgage obligation and all municipal and arrear taxes with respect to the matrimonial home in which his former wife had continued to reside. The Court decided: “since the taxpayer’s former spouse in this case has no discretion as to the use of the money paid by him, they could not be deducted by him from his income.”

The facts are similar in the appeal before this Court. By virtue of subsection 56(12) of the Act, the recipient, “the spouse”, does not have discretion as to the use of the amounts. The amounts were paid directly to the third party creditors. The sums paid by the Appellant do not constitute alimony for the purposes of paragraph 60(b) or (c) of the Act. The Appellant is not entitled to deduct these excess payments in computing income in the 1992 and 1993 taxation years.

The Appellant deducted amounts in his 1992 and 1993 income tax returns for child care expenses. The Appellant deducted the sum of $6,000 for the 1992 taxation year. Due to an amended agreement, the Appellant had custody of Claudia as of May 1992, but did not have custody of the other two children. The Appellant has produced no receipts for child care expenses for the 1992 taxation year. Furthermore, he did not claim the child care expenses for Claudia for that year. The Appellant cannot succeed in his appeal for child care expenses for the 1992 taxation year.

The Appellant did supply the Court with receipts for child care expenses throughout the 1993 taxation year without specifying for which child the expenses were incurred. The signature of the baby-sitter appears on each receipt. The baby-sitter cared for Claudia at his spouse’s home. This is corroborated by the spouse who testified that she took care of their child Raymond while the baby-sitter attended to Claudia.

The Court is rather sceptical of this deduction. There are many inconsistencies in the evidence produced by the Appellant. He did not claim Claudia in his 1992 return, while claiming the other two children for which he did not have custody, particularly, Louisa who never lived in Canada. The Appellant failed to provide Revenue Canada with the proper identifiable receipts to justify the deductions for Claudia’s child care expenses. The Appellant was not very helpful in supplying Revenue Canada with all the necessary information concerning the deductions. However, the Court cannot disregard the receipts produced and the spouse’s corroboration as to the child care expenses pertaining to Claudia. The deduction for the child care expenses pertaining to Claudia claimed by the Appellant for the 1993 taxation year is allowed,.

The Appellant claimed the amounts of $5,380 and $5,380 respectively as an equivalent to married amount in the calculation of non-refundable tax credits. The Appellant did not claim a deduction for the 1992 taxation year in his return, therefore, this deduction is not allowable.

Evidence has shown that the Appellant did have custody of Claudia as indicated in the amended separation agreement. The Appellant meets the requirements in accordance to the provisions of paragraph 118(l)(b) of the Act, for the 1993 taxation year.

The appeal is allowed on the basis that the deduction as child care expenses incurred for Claudia for the 1993 taxation year and the deduction of the equivalent to married amount in the calculation of the non-refundable tax credits for the 1993 taxation year is in accordance with the provision of paragraph 118(1)(b) of the Act.

Appeal allowed in part.