Robichaud v. R., [1998] 3 CTC 2041

Somers D.J.T.C.:

This appeal, which concerns the appellant’s income tax for the 1994 taxation year, was heard at Bathurst, New Brunswick, on June 16, 1997, pursuant to the informal procedure of this Court.

In a notice of reassessment for the 1994 taxation year, the Minister of National Revenue (“the Minister”) informed the appellant that his net taxable income had been adjusted since he was not entitled to claim $2,400 in child care expenses.

The facts on which the Minister relied in making his decision, which were admitted by the appellant through his agent, are set out as follows in paragraph 6 of the Reply to the Notice of Appeal:

(a) at all times in 1994 the Appellant’s spouse was Rosaline Robichaud;

(b) in 1994, the Appellant’s spouse filed an income tax return for the 1994 taxation year and reported a business loss of $1,941.00;

(c) in 1994, the net income of the Appellant was $43,724;

(d) the Appellant paid $2,400 in child care expenses for the care of the Appellant’s children, Catherine and Marie Eve;

The Minister based his decision on subsections 63(1) and (2) of the Income Tax Act, which read as follows:

Section 63: Child care expenses.

(1) Subject to subsection (2), where a prescribed form containing prescribed information is filed with a taxpayer’s return of income (other than a return filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) under this Part for a taxation year, there may be deducted in computing the taxpayer’s income for the year such amount as the taxpayer claims not exceeding the total of all amounts each of which is an amount paid, as or on account of child care expenses incurred for services rendered in the year in respect of an eligible child of the taxpayer,

(a) by the taxpayer, where the taxpayer is a taxpayer described in subsection (2) and the supporting person of the child for the year is a person described in subparagraph (2)(Z?)(vi), or

(b) by the taxpayer or a supporting person of the child for the year, in any other case,

to the extent that

(c) the amount is not included in computing the amount deductible under this subsection by an individual (other than the taxpayer), and

(d) the amount is not an amount (other than an amount that is included in computing a taxpayer’s income and that is not deductible in computing the taxpayer’s taxable income) in respect of which any taxpayer is or was entitled to a reimbursement or any other form of assistance,

and the payment of which is proven by filing with the Minister one or more receipts each of which was issued by the payee and contains, where the payee is an individual, that individual’s Social Insurance Number, but not exceeding the amount, if any, by which

(e) the lesser of

(i) A of the taxpayer’s earned income for the year, and

(ii) the total of

(A) the product obtained when $5,000 is multiplied by the number of eligible children of the taxpayer for the year each of whom

(I) is under 7 years of age at the end of the year, or

(II) is a person in respect of whom an amount may be deducted under section 118.3 in computing a taxpayer’s tax payable under this Part for the year, and

(B) the product obtained when $3,000 is multiplied by the number of eligible children of the taxpayer for the year (other than those referred to in clause (A))

exceeds

(f) the total of all amounts each of which is an amount deducted, in respect of the eligible children of the taxpayer that are referred to in subparagraph (e)(ii), under this subsection for the year by an individual (other than the taxpayer) to whom subsection (2) is applicable for the year.

(2) Income exceeding income of supporting person.

Where the income for a taxation year of a taxpayer who has an eligible child for the year exceeds the income for that year of a supporting person of that child (on the assumption that both incomes are computed without reference to this section and paragraphs 60(v.1) and (w)), the amount that may be deducted by the taxpayer under subsection (1) for the year as or on account of child care expenses shall not exceed the lesser of

(a) the amount that would, but for this subsection, be deductible by the taxpayer for the year under subsection (1), and

(b) the product obtained when the total of

(i) the product obtained when $150 is multiplied by the number of eligible children of the taxpayer for the year each of whom

(A) is under 7 years of age at the end of the year, or

(B) is a person in respect of whom an amount may be deducted under section 118.3 in computing a taxpayer’s tax payable under this Part for the year, and

(ii) the product obtained when $90 is multiplied by the number of eligible children of the taxpayer for the year (other than those referred to in subparagraph (i)) is multiplied by the number of weeks in the year during which the child care expenses were incurred and throughout which the supporting person was

(iii) a person in full-time attendance at a designated educational institution (within the meaning assigned by subsection 118.6(1)),

(iv) a person certified by a medical doctor to be a person who

(A) by reason of mental or physical infirmity and confinement throughout a period of not less than 2 weeks in the year to bed or to a wheelchair or as a patient in a hospital, an asylum or other similar institution, was incapable of caring for children, or

(B) by reason of mental or physical infirmity, was in the year, and is likely to be for a long-continued period of indefinite duration, incapable of caring for children,

(v) a person confined to a prison or similar institution throughout a period of not less than 2 weeks in the year, or

(vi) a person who, because of a breakdown of the person’s marriage, was living separate and apart from the taxpayer at the end of the year and for a period of at least 90 days beginning in the year.

The appellant’s net income for the 1994 taxation year was $43,724, while the appellant’s spouse incurred a loss of $1,941 that year from her hairdressing business.

The appellant’s spouse calculated that her hairdressing business had sales of $22,241; she was unable to make a profit from this, but instead incurred a loss of $1,941. Obviously, her income was less than the appellant’s.

Paragraph 3(f) of the Income Tax Act reads as follows:

Section 3: Income for taxation year.

The income of a taxpayer for a taxation year for the purposes of this Part is the taxpayer’s income for the year determined by the following rules:

(f) in any other case, the taxpayer shall be deemed to have income for the year in an amount equal to zero.

This paragraph must be interpreted according to its plain meaning. Based on this clear interpretation, the appellant’s spouse had an income for the 1994 taxation year that was lower than the appellant’s, even though she incurred a loss of $1,941.

The grounds of appeal do not fall under the exceptions set out in subsection 63(2) of the Income Tax Act and the appeal is therefore dismissed.

Appeal dismissed.