Louis L’ecuyer v. Minister of National Revenue, [1979] CTC 2763, 79 DTC 639

Guy Tremblay [TRANSLATION]:—This case was heard in Montreal, Quebec on May 10, 1978.

1. /Ssue

The issue is whether for the 1974 and 1975 taxation years the sums of $1,385 and $1,800 respectively, considered to be the value of the accommodation the appellant provided for his wife and child pursuant to a court judgment, can be considered to be an alimony payment and thus to be deductible in the calculation of the appellant’s income.

2. Burden of Proof

The burden is on the appellant to show that the respondent’s assessments are incorrect. This burden of proof derives not from one particular section of the Income Tax Act but from a number of judicial decisions, including the judgment of the Supreme Court of Canada in R W S Johnston v MNR, [1948] CTC 195; 3 DTC 1182.

3. Facts

The undisputed facts are as follows.

3.1 During 1974 and 1975 the appellant was legally separated from his wife pursuant to a judgment of the Superior Court, District of Montreal, bearing number 05 001-161 72 and dated April 28, 1974 (Exhibit A-1).

3.2 This judgment provided for weekly alimony payments of $35 payable to the wife.

3.3 The judgment also ordered the appellant to keep his wife in his property at 10,270 St-Urbain Street, Montreal without payment of rent, “this free rent being equivalent to additional alimony of $35 per week” (Exhibit A-1).

3.4 In his 1974 and 1975 income returns the appellant claimed as a deduction not only the amounts paid to his wife by cheque pursuant to the judgment but also the “free rent” of $35 per week, these latter amounts adding up to $1,385 in 1974 and $1,800 in 1975.

3.5 The appellant filed documents signed by his wife (Exhibit A-2) stating that she had received the sum of $3,640 for each of the years 1974 and 1975.

3.6 By his notices of reassessment dated April 14, 1977 the respondent refused to allow the deductions of $1,385 in 1974 and $1,800 in 1975.

3.7 Notices of objection were filed on June 17,1977; the respondent replied on November 15, 1977, confirming the notices of reassessment issued.

3.8 An appeal was filed with the Tax Review Board on November 7, 1977.

4. Act, Case Law and Comments

4.1 Paragraph 60(b) of the new Act is the principal provision concerned in the present case.

Alimony payments—an amount paid by the taxpayer in the year, 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 reci- pient 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 Board must also cite s 60.1 of the new Act.

Maintenance payments.

Where, after May 6, 1974, a decree, order, judgment or written agreement described in paragraph 60(b) or (c), or any variation thereof, has been made providing for the periodic payment of an amount by the taxpayer to or for the benefit of his spouse, former spouse or children of the marriage in the custody of the spouse or former spouse, the amount or any part thereof, when paid, shall be deemed to have been paid to and received by the spouse or former spouse if the taxpayer was living apart from the spouse or former spouse at the time the payment was received and throughout the remainder of the year in which the payment was received.

4.2 The respondent cited the following 9 decisions:

1. Attorney General of Canada v James C Weaver and Freda J Weaver, [1975] CTC 646; 75 DTC 5462;

2. Her Majesty the Queen v Morton Pascoe, [1975] CTC 656; 75 DTC 5427;

3. Carl Caleb Cotton v Her Majesty the Queen, [1976] CTC 406; 76 DTC 6232;

4. Her Majesty the Queen v J R Guay, [1975] CTC 88; 75 DTC 5044; [1977] CTC 266; 77 DTC 5420;

5. John Douglas Rice v MNR, [1976] CTC 2001; 76 DTC 1017;

6. Gordon Singer and Paula Helene Singer v MNR, [1975] CTC 2066 and 2071; 75 DTC 40;

7. Irene R Sprentz v MNR, [1975] CTC 2033; 75 DTC 28;

8. Ronald E Volk v MNR, [1977] CTC 2012; 77 DTC 12.

4.3 Comments

The cases have consistently applied paragraph 60(b) literally, especially with respect to the requirements that the payment be made to the spouse, on a periodic basis and in a fixed amount.

Unfortunately for the appellant it cannot be said in the present case that the “free rent” was an expenditure, an amount paid within the meaning of paragraph 60(c). The Board has no other choice but to interpret the Act Strictly.

The Board has considered, however, whether it would not be possible to apply section 60.1, which is more favourable to the payer.

The first objection is that it only applies as of May 6, 1974. The judgment rendered by the Superior Court separating the appellant and his wife is dated April 28, 1974.

Moreover, the appellant filed as Exhibit A-2 the documents signed by his wife stating that she had received $3,640 for each of the years 1974 and 1975. Do these documents, which were signed after May 6, 1974, not constitute a “written agreement described in paragraph 60(b)”?

An acknowledgment of payment clearly shows a written agreement between two people. It is evidence of a fact, the payment. However, it is not the document pursuant to which the payment is made, within the meaning of paragraph 60(b).

If the appellant had entered into a written agreement with his wife after May 6, 1974 granting her free accommodation and if he had adduced in evidence the periodic payments made to maintain this accommodation, the Board is of the view that these payments would have been deductible because they would have been made “for the benefit of” his wife and children, the whole within the meaning of section 60.1.

These conditions have not been met, however.

5. Conclusion

The appeal is dismissed in accordance with the above-mentioned reasons for judgment.

Appeal dismissed.