Monette v. R., [1998] 3 CTC 2348

Lamarre Proulx T.C.J.:

This appeal under the informal procedure concerns the child tax benefit plan provided for in sections 122.6, 122.61, 122.62, 122.63 and 122.64 of the Income Tax Act (the “Acf ’) and, more particularly, the amounts received in respect of child tax benefits for the months of July and August 1995.

The point at issue is whether the appellant was living separate and apart from the father of their child during the 1994 base year. The Minister of National Revenue (the “Minister”) determined that the appellant was not living separate and apart from the father of their child during that year.

The Reply to the Notice of Appeal states that an equivalent-to-married credit was granted under paragraph 118(1)(b) of the Act and that the Minister intended to disallow it for 1994. Since this was only a notification of intent, I consider that this question is not in issue in the instant case and that I do not have to decide it. In any event, no argument was presented on that subject at the hearing.

The facts on which the Minister relied in making his decision are described in paragraph 6 of the Reply to the Notice of Appeal and are as follows:

[TRANSLATION]

In making the notice of child tax benefit dated September 20, 1995, in respect of the 1994 base year, the Minister made, in particular, the following assumptions of fact:

e the appellant and Jean-Paul Legendre were living together as de facto spouses at 677 Rue Gounod in Montréal during the 1994 taxation year;

° the appellant and Jean-Paul Legendre are the parents of Simon, who was born in July 1985;

• the child tax benefit was revised to nil after the Minister included the net family income in the calculation:

1994 Taxation Year	Net Income
Appellant	$ 96,933
Jean-Paul Legendre	$ 95,509
	$192,442

The appellant made the following representations in the notice of objection dated February 5, 1996:

[TRANSLATION]

I have received a notice of assessment for a person living with the father of my child, Jean-Paul Legendre.

I hereby declare that I am living alone with my child. Mr. Legendre lives with his mother.

1 wish to inform you that a portion of the house where I live is used for Mr. Legendre’s business.

The following reasons were given in her notice of appeal dated December 20, 1996:

[TRANSLATION]

A: I was living alone with my child during this period.

B: My lease proves that I lived at 7864 Rue St-André in Montréal during the period from May 1, 1993, to April 30, 1995.

C: My landlord can attest to the truth of my statements at all times.

The appellant and her child’s father Jean-Paul Legendre testified for the appellant. Gaétan Côté, the Minister’s officer, testified at the request of counsel for the respondent.

During the hearing, the appellant said that she had lived at 7864 Rue St- André in 1994, not 677 Rue Gounod. On this point, she filed Exhibit A-l, which is an apartment lease in which the appellant’s name appears as the lessee. The term is from May 1, 1993, to April 30, 1994. The appellant stated that the lease was extended until April 30, 1995.

With respect to her income, she explained that her employment income was $23,750. She owned an eight-unit apartment building in the City of Laval which was administered by Mr. Legendre. She had earned no profits from this rental business, but the appellant included a capital gain of $75,000 in respect of that property in 1994, which had the effect of increasing her income. Counsel for the respondent filed the appellant’s return of income as Exhibit I-1. Line 236 shows that the appellant’s net income for 1994 was $96,934.63.

That same return for 1994 shows that the appellant’s address was 677 Rue Gounod. The appellant’s address on the day care centre receipt appended to the income tax return is 677 Rue Gounod. The same address appears on the statement of remuneration, the T4 form.

Jean-Paul Legendre stated that he was not the appellant’s de facto spouse in 1994.

Mr. Legendre said that his personal effects were at 657 Rue Gounod in 1994, not 677 Rue Gounod. 657 Rue Gounod was the address of Mr. Legendre’s business, which was situated in the same building as 677 Rue Gounod, which is a residential dwelling. Mr. Legendre said that his personal effects and his bed were in the basement of 657 Rue Gounod and that he had slept there as well as at his mother’s home. He had worked for the government at night and operated the business during the day.

Mr. Legendre said that, when the appellant left the dwelling at 677 Rue Gounod in 1993, he did not rent it because he had hoped the appellant would return and live there, but that the dispute had lasted two years and she did not return until 1995.

His employment income was $38,000, but, in his case as well, a $75,000 capital gain in respect of his property situated at 657 and 677 Rue Gounod had been included.

Gaétan Côté is an officer of the Minister working in investigation services. He said that he met Mr. Legendre at 677 Rue Gounod four times in 1993 and twice in 1994, that is on November 12 and 19 and December 16 and 20, 1993, and February 1 and 21, 1994. He went to meet with Mr. Legendre concerning the latter’s business, which was a fur storage vault.

During a search of 677 and 657 Rue Gounod by the Sûreté du Québec in 1992, the personal effects of Mr. Legendre and the appellant were found in the residential portion. Moreover, a search by Revenue Canada on October 14, 1993, revealed only the personal effects of Mr. Legendre. However, at the time of Mr. Côté’s visits in 1994, the appellant was present on the premises as though she were at her own home. Mr. Côté said that he had never conducted searches at Mr. Legendre’s mother’s home because all of Mr. Legendre’s effects were obviously on the premises at 677 Rue Gounod.

Mr. Côté added that he had served requirements on the banks to obtain the appellant’s bank accounts, that he had given the appellant’s address as 677 Rue Gounod and that this was how he had obtained that of the Caisse populaire in Villeray. There had been no change of address.

Analysis

There is no evidence in this case leading me to conclude that the appellant and Mr. Legendre were not living together at 677 Rue Gounod, at least since May 1, 1994.

In the early months of 1994, Mr. Côté saw the appellant in the dwelling at 677 Rue Gounod as though she were at her own home. It is therefore possible that the appellant did not live at 7864 Rue St-André for the entire term of the lease (Exhibit A-l) and that she and Mr. Legendre had resumed living together. This seems all the more possible in view of the address the appellant gave to her bank and that appearing on her 1994 income tax return and the schedules thereto (Exhibit 1-1).

However, I find that the lease is an acceptable document in that it seems to me to be corroborated by the search conducted in October 1993 in which only Mr. Legendre’s personal effects were found, not those of the appellant, and that is why I accept that the child’s parents were not living together during the term of the lease.

I understand that the versions of the appellant and Mr. Legendre are that they never lived together, but it is unfortunately difficult for me to credit those versions because they changed and are simply not plausible. The appellant’s statement in her notice of objection that Mr. Legendre lived at his mother’s home simply cannot be true. Nor was Mr. Legendre’s version that he lived only in the basement of 657 Rue Gounod confirmed by Mr. Côté, an eyewitness on a number of occasions to the interior of 677 Rue Gounod.

I therefore conclude that for 1994 the appellant did not live separate and apart from her de facto spouse Jean-Paul Legendre since May 1, 1994. Accordingly, since he was her spouse at the end of 1994, the latter’s income must be added to the appellant’s income for the purposes of computing the adjusted earned income and adjusted income in accordance with the definitions of the terms “earned income”, “adjusted earned income” and “adjusted income” in section 122.6 of the Act.

A capital gain is an element that is taken into account in computing the child tax benefit since it is included in computing an individual’s income; an individual’s income is one of the elements considered in the application of subsection 122.61(1) of the Act. As the evidence has shown that the appellant’s income alone for 1994 was $96,934.63, it was in any case too high for her to be entitled to the benefits of the child tax benefit plan by virtue of the calculation provided for in subsection 122.61(1) of the Act.

The appeal is therefore dismissed.

Appeal dismissed.