David Franklin v. Minister of National Revenue, [1981] CTC 2518

Roland St-Onge:—The appeal of Mr David Franklin came before me on March 2, 1981, in the City of Montreal, Province of Quebec, and it has to do with alimony payments under paragraphs 60(b) and (f) of the Income Tax Act in the appellant’s 1975 taxation year.

The facts of this appeal are well spelled out at paragraph 5 of the Reply to the Notice of Appeal, which reads as follows:

In assessing the Appellant for his 1975 taxation year the Respondent relied, inter alia, on the following assumptions of facts:

(a) During 1975, the Appellant was separated from his wife;

(b) On July 21, 1975, a judgment on provisional measures ordered the Appellant to pay to his wife an alimentary pension of $50.00 per week;

(c) The Respondent allowed an amount of $600.00 which represents the payments made by the Appellant to his wife pursuant to the said judgment (July 21, 1975 to October 3, 1975, 12 weeks X $50.00);

(d) On October 3, 1975, a Decree Nisi of Divorce was rendered by the Superior Court;

(e) The said Decree Nisi provided inter alia:

“LA COUR DONNE ACTE aux parties de la convention qu’elles ont souscrite le 3 octobre 1975, laquelle convention, produite comme pièce P-4, se lit comme suit:

“1- Petitioner will pay Respondent the sum of ($2,500.00) Two Thousand Five Hundred Dollars in full of all claims for alimentary pension past, present and future, payable at rate of $833.33 per month, commencing October 1975;”

(f) On October, November and December 1975, the Appellant paid to his wife $833.33 each month pursuant to the said Decree Nisi;

(f) By notice of reassessment, dated November 9, 1979, the Respondent denied the deduction of the amounts referred to in paragraph 5 (f);

At the hearing, the representative of the appellant referred the Board to the decision in MNR v William Albert Hansen, [1967] CTC 440; 67 DTC 5293, in which case Mr Justice Jackett decided in favour of the appellant and I quote the following:

The paragraph in question provided exclusively for the wife’s maintenance and for nothing else. Moreover, the paragraph did not provide for a lump sum payment but for a number of payments and these were payable on a periodic basis within the meaning of section 11, subsection (1)(l).

Counsel for the respondent argued that the word “sum” in the judgment of the Court with respect to the appellant means lump sum that was paid for all claims and also to discharge the appellant from supporting his wife.

Then, he referred the Board to T P Veliotis v The Queen, [1974] CTC 237; 74 DTC 6190, and Trotter v MNR, [1967] CTC 28; [1968] SCR 728; 67 DTC 5020. The headnote in Veliotis (supra) is part of my judgment and reads as follows:

In 1969 the plaintiff made a first instalment payment of $25,000 to his ex-wife pursuant to a decree that he pay a total of $50,000 to her in lieu of alimony. The remaining sum of $25,000 was payable in three yearly instalments of equal amounts. The plaintiff attempted to deduct the $25,000 as alimony and the Minister refused to allow it. When the Tax Review Board (72 DTC 1437) dismissed his appeal the plaintiff brought his case before the Federal Court.

HELD: The appeal was dismissed. The plaintiff was not entitled to deduct the sum paid to his ex-wife in 1969. Section 11(1)(I) of the Act allows the deduction of sums paid for alimony only if such sums were payable on a periodic basis. The plaintiff had been ordered to pay his wife $50,000 in lieu of alimony (ie, as a substitute for alimony) and the half of that sum paid in a single instalment could in no way constitute payment of alimony or other allowance payable on a periodic basis.

The payment of $25,000 was not an allowance payable on a periodic basis within the meaning of paragraph 11 (1)(l) of the Act and I read from the decision in Veliotis (supra). At CTC, page 240, Mr Justice Pratte said:

First, it seems clear that the sum of $25,000 was not paid “as alimony”. The word “alimony”, which, in the French version of paragraph 11 (1 )(l), is translated by the expression “pension alimentaire”, has a narrower meaning than that expression: it refers only to the periodic allowance which, pursuant to a judgment, one spouse must pay the other during the marriage, see Halsbury’s Laws of England, 3rd ed, Vol 12, p 288.

Secondly, the sum of $25,000 cannot be said to have been paid as an “allowance payable on a periodic basis”. In my view, the allowance payable on a periodic basis referred to in paragraph 11 (1)(l) is periodic in the same sense as alimony, and alimony is a periodic allowance not only in the sense that a payer must make payments at regular intervals, but also in the sense that at regular intervals the payer must provide a sum adequate to maintain the payee until the next payment. Consequently, a divorce decree which orders a husband to pay his spouse the sum of $100,000 in four monthly instalments of $25,000 would not in the normal course be a judgment ordering the payment of a periodic allowance within the meaning of paragraph 11 (1)(l).

In answer to these arguments, the representative for the appellant said that first, in the case of Veliotis (supra), the sum of $100,000 was awarded to his wife in lieu of regular maintenance payments whereas in the case at bar the sum of $2,500 was paid in full settlement of all claims for alimentary pension past, present and future.

Secondly, that according to the decision in No 67 v MNR, 7 Tax ABC 53; 6 DTC 308, it is not necessary for an alimony payment to continue for the lifetime of the recipient before it can be deemed an alimony payment.

There is no doubt that it is not necessary for an alimony payment to continue for the lifetime of the recipient before it can be deemed an alimony payment, but in the case at bar, the payment is specifically made to prevent the payment of alimony in the future. In other words, it is a payment in satisfaction of an obligation to indemnify the wife for the loss of her alimony, or to put it the other way, to discharge the appellant to support his wife, which is the reverse of alimony.

Consequently, although it is a predetermined fixed sum payable on a periodic basis pursuant to a court order, it is not alimony within the definition of that word in the decision of the Attorney General of Canada v James C Weaver and Freda J Weaver, [1975] CTC 646; 75 DTC 5462, which reads as follows:

an allowance,in our view is a limited pre-determined sum of money paid to enable the recipient to provide for certain kinds of expense; its amount is determined in advance and, once paid, it is at the complete disposition of the recipient who is not required to account for it. A payment in satisfaction of an obligation to indemnify or reimburse some one or to defray his or her actual expense is not an allowance; it is not a sum allowed to the recipient to be applied in his or her discretion to certain kinds of expense.

The Hansen (supra) decision referred to by the appellant does not find its application herein since in Hansen (supra) the paragraph in question provided exclusively for the wife’s maintenance and for nothing else whereas in the case at bar the paragraph discharged the appellant to support his wife in the future.

For these reasons, the appeal is dismissed.

Appeal dismissed.