Morneau v. R., [1998] 1 CTC 2792

Lamarre Proulx T.C.J.:

The appellant is instituting an appeal under the informal procedure for the 1992 taxation year.

The point at issue is whether amounts of money paid to the appellant’s former spouse were paid pursuant to a judgment or pursuant to a written agreement as alimony, and whether those amounts were paid during the taxation year.

Paragraph 60(b) and subsection 60.1(3) of the Income Tax Act (the “Act”) read as follows:

60. There may be deducted in computing a taxpayer’s income for a taxation year such of the following amounts as are applicable:

(b) Alimony payments. — an amount paid by the taxpayer, pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written agreement, as alimony or other allowance payable on a periodic basis for the maintenance of the recipient thereof, children of the marriage, or both the recipient and children of the marriage, if he was living apart from, and was separated pursuant to a divorce, judicial separation or written separation agreement from, his spouse or former spouse to whom he was required to make the payment at the time the payment was made and throughout the remainder of the year;

(The emphasis is mine.)

60.1 (3) For the purposes of this section and section 60, where a decree, order

or judgment of a competent tribunal or a written agreement made at any time in a taxation year provides that an amount paid before that time and in the year or the immediately preceding taxation year is to be considered as having been paid and received pursuant thereto, the following rules apply'.

(a) the amount shall be deemed to have been paid pursuant thereto; and

(b) the person who made the payment shall be deemed to have been separated pursuant to a divorce, judicial separation or written separation agreement from the person’s spouse or former spouse at the time the payment was made and throughout the remainder of the year.

(The emphasis is mine.)

During 1992, the appellant was separated from his spouse Johanne Thériault. The spouses have a daughter, Martine, born on November 15, 1974. The appellant filed as Exhibit A-1 an agreement signed by the appellant and Johanne Thériault on June 21, 1991, entitled “Agreement on Corollary Relief’. This agreement was confirmed by the divorce decree issued on October 30, 1991 (Exhibit A-3). Clauses 3, 4 and 5 of the agreement (Exhibit A-1) read as follows:

[TRANSLATION]

3. the parties shall have shared custody of their daughter, Martine, who, having regard to her age, will be free to live with either of the parties;

4. for the moment, Martine is living in the family residence with the applicant, who pays food expenses which he estimates at $50.00 a week;

5. the respondent, for his part, pays costs of $51.00 a week for his daughter:

pocket money:	$16.00
bus:	$ 6.00
hairdresser:	$ 5.00
school supplies:	$ 3.00
clothing:	$21.00

As may be seen in clause 4, the party applicant was the appellant and Martine’s food expenses were estimated at $50 a week. As Martine was living at her father’s home, no provision had been made for alimony payments. Starting on February 25, 1992, Martine lived only at her mother’s home and her mother asked the appellant to pay her the sum of $50 a week, the same amount as that stated in clause 3 of the agreement. The appellant apparently complied with this request without written amendment to the agreement signed by both parties.

The appellant filed as Exhibit A-2 a judgment by the Superior Court of Quebec dated March 2, 1993, and referred to a few passages, in particular at the start of the judgment:

[TRANSLATION]

In an application served on October 13, 1992, the respondent sought custody of her daughter Martine and payment of alimony of $150.00 per week for her, plus indexing. She also claimed payment of the sum of $200.00 in unpaid alimony and an amount of $80.00 in respect of family allowances withheld by the applicant.

The following appears at page 3 of the same judgment:

[TRANSLATION]

The parties complied with the agreement until the end of September 1992, even though the respondent indicated to the applicant on a number of occasions that the alimony of $50.00 per week that he paid was insufficient.

At page 6:

[TRANSLATION]

The tax incidence of the payment of alimony is particularly important here given the large incomes of the parties, that of the respondent being the greater.

We fix it at $100.00 per week starting on October 13, 1992. The applicant will not have to pay arrears or make any repayment. However, he shall remit to the respondent the sum of $80.00 which he received as family allowances.

Analysis

It is appropriate at this point to cite the appellant’s grounds for appeal as stated in his Notice of Appeal because this is the argument he put forward at the hearing:

[TRANSLATION]

I hereby wish to appeal from your decision. A judge of the Superior Court has interpreted the support payment of $50 a week as being alimony. It was paid periodically, but that same judge increased it to $100 a week. As it too arose from a judgment by the Superior Court, it was mandatory.

As I believe there cannot be any double standard in the decision by a judge and the interpretation by a tax official, I am therefore filing an appeal.

The Superior Court of Quebec correctly described as alimony payments the payments made by the appellant to his former spouse from March to September 1992. The nature of those payments is not in issue in the instant case, but rather the fact that they were not paid pursuant to a written agreement. The provisions of paragraph 60(b) of the Act cited above have always been strictly interpreted by our Court in view of the fact that the text of that paragraph is clear and requires either a written agreement or a Court order. It must be understood that deduction by one spouse means inclusion by the other. The parties must clearly express their agreement and Parliament requires that this expression be made by means of a private writing between the parties or by a Court order. There was no written agreement signed by the spouses respecting the payment of $50 per week, and there was no judgment or order to that effect. There was apparently an oral agreement, but that is not sufficient for paragraph 60(b) of the Act to apply. The appellant therefore may not deduct the payments made from March to September 1992.

As to the possible application of subsection 60.1(3) of the Act cited above, the Quebec Superior Court judgment dated March 2, 1993, although it mentions payments of $50 per week from March to September 1992, does not mention that those payments would be considered as paid and received in respect of that judgment.

Counsel for the respondent referred on this point to the judgment in Chabros v. R., dated March 29, 1995, by the Federal Court of Appeal [reported [1995] 1 C.T.C. 333 (Fed. C.A.)] which, per Hugessen J.A., discusses the application of subsection 60.1(3) of the Act as follows:

The only provision of the Income Tax Act which allows maintenance paid prior to a separation agreement to be treated as though it were paid pursuant thereto is subsection 60. 1 (3)...

We are all of the view that the plain meaning of this text requires that the agreement ... must provide that prior payments shall be considered as having been paid and received pursuant thereto. That is neither a strict nor a liberal interpretation of the Act: it is simply the only meaning the words can bear.

The appellant therefore may not deduct these payments under the said subsection.

The judgment of March 2, 1993 ordered alimony of $100 per week to be paid starting on October 13, 1992. As the judgment was rendered on March 2, 1993, the payment of those amounts in respect of alimony was a payment retroactive to 1992, but that payment was made in the 1993 taxation year. Paragraph 60(b) of the Act requires that payment be made in the year for which the deduction is claimed. As payment was not made in 1992, the appellant may not claim a deduction for it in 1992 and that is the year that is in appeal. I do not have to decide whether it may be deducted for 1993.

The appeal is accordingly dismissed.

Appeal dismissed.