Lamarre Proulx T.C.J.:
These are appeals by way of the informal procedure concerning the 1994 and 1995 taxation years.
The question at issue is whether the Appellant, in application of paragraph 11 8(1)(b) of the Income Tax Act (the "Ac"), is entitled to a tax credit for a wholly dependent person, his eldest daughter, where he was also entitled to a deduction under paragraph 60(b) of the Act, in respect of alimony payments made to his former wife for the maintenance of his children.
The facts that the Minister of National Revenue (the “Minister”) took under consideration to make the reassessments are described at paragraphs 2 and 4 of the Reply to the Notice of Appeal as follows:
2. In computing his income for the 1994 and 1995 taxation years, the appellant claimed, inter alia, an amount of $5,380 for equivalent to spouse for his daughter, Valerie, in calculating his non refundable tax credits.
4. In so reassessing the appellant, the Minister made the following assumptions of fact:
a) the appellant and Mrs. Michele Williams (hereinafter, the “former spouse”) divorced on October 22, 1992;
b) from the marriage of the appellant and the former spouse three children were born: Valerie Peeck, born on July 10th, 1984, Stephanie Peeck, born on November 16th, 1986 and Jason Peeck, born on May 11th, 1988;
c) in conformity with the consent to judgment the appellant was required to make alimony payments to the former spouse for the three children;
d) the appellant claimed the amounts of $11,083 and $10,850 respectively, for the 1994 and 1995 taxation years, as a deduction for alimony paid;
e) consequently, the Minister disallowed the amount of $5,380 for equivalent to spouse for his daughter, Valerie, for the 1994 and 1995 taxation years, pursuant to paragraph 118(1)(b) of the Income Tax Act (hereinafter, the “Act”).
The facts are not in dispute.
The Appellant filed the judgment of divorce issued on October 22, 1992 as Exhibit A-1. Article 3 of the judgment states that the parties shall have joint custody. Articles 5 and 6 of the judgment read as follows:
5. The Applicant will pay, starting October 26th, 1992, to the Defendant, an alimentary allowance in the amount of two hundred and ten ($210) per week, payable in advance every Friday of the week at the Defendant’s residence. The present alimony will be modified when the Defendant earns more than $256 per week.
6. It is understood that the said alimentary pension should cover all expenses relating to the children, namely and without limitation, feeding, all clothing, medication and/or medical services, curricular and/or extra curricular activities such as sports and sporting equipment, school activities and/or outings and vacations;
The Appellant agreed that the alimony payments made to his former wife were for the maintenance of the children.
Analysis
Paragraph 118(1)(b) and subsection 118(5) of the Act read as follows:
118(1) For the purpose of computing the tax payable under this Part by an individual
for a taxation year, there may be deducted an amount determined by the formula
A x B
where
A is the appropriate percentage for the year, and
B is the total of,
(a) Married status —...
(b) Wholly dependent person — in the case of an individual not entitled to a deduction by reason of paragraph (a) who, at any time in the year,
(i) is an unmarried person or a married person who neither supported nor lived with the married person’s spouse and is not supported by the spouse, and
(ii) whether alone or jointly with one or more other persons, maintains a self-contained domestic establishment (in which the individual lives) and actually supports in that establishment a person who, at that time, is
(A) except in the case of a child of the individual, resident in Canada,
(B) wholly dependent for support on the individual, or the individual and the other person or persons, as the case may be,
(C) related to the individual, and
(D) except in the case of a parent or grandparent of the individual, either under 18 years of age or so dependent by reason of mental or physical infirmity,
an amount equal to the total of
(iii) $6,000, and
(iv) an amount determined by the formula
$5,000 - (D - $500)
where
D is the greater of $500 and the income for the year of the dependent person,
118(5) Alimony and maintenance — Where an individual in computing the individual’s income for a taxation year is entitled to a deduction under paragraph 60(b), (c) or (c.1) in respect of a payment for the maintenance of a spouse or child, the spouse or child shall, for the purposes of this section (other than the definition “qualified pension income” in subsection (7)) be deemed not to be the spouse or child of the individual.
Counsel for the Respondent submitted that the legal fiction created by subsection 118(5) of the Act, that the Appellant’s children are not his children because he is entitled to a deduction for alimony payments respecting his children, has the effect of preventing the Appellant from benefiting from the tax credit provided for in paragraph 118(1 )(£?) of the Act. In this regard, he referred to a decision of this Court in Gifford v. Minister of National Revenue, [1991] 2 C.T.C. 2254 (T.C.C.), that came to the same conclusion.
The Appellant stated that because he was entitled to a deduction for alimony payments he was less advantaged than if he was not entitled to such a deduction and instead was entitled to the tax credit of the equivalent to married status and the tax credit for the dependants. In the event that the Court could not but dismiss his appeal, he asked for the leniency of the Court for the two taxation years in question.
I do not wish to comment on the economic benefits of the various tax credits in comparison to the deduction allowed for alimony payments. I will leave that task to economists or to officials of the Department of Finance. The Court’s duty is to interpret the law as it stands. As for the leniency of the Court, there is no provision in the Act that gives the Court a discretionary power that would permit it to allow a taxpayer not to be assessed in accordance with the Act. It must be said here however that there is some discretion given in the Act regarding penalty or interest by paragraph 220(3.1) of the Act. But, this discretionary power is given to the Minister and the request has to be made to the Minister.
To conclude, the evidence was clear that there were alimony payments made to the Appellant’s former wife for the maintenance of the Appellant’s children and therefore the Appellant was entitled to a deduction pursuant to paragraph 60(b) of the Act. Consequently, pursuant to subsection 118(5) of the Act, the Appellant’s children are deemed not to be his children for the purpose of section 118 of the Act. Therefore, the Appellant is not entitled to the tax credit provided for in paragraph 118(1)(b) of the Act.
The appeals are dismissed.
Appeal dismissed.
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