Date: 20020730
Docket: 2002-729-IT-I
BETWEEN:
JOHN BRACE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Little, J.
A. FACTS
[1] The Appellant was separated from his ex-spouse, Mary Colleen Brace.
[2] Pursuant to an Order of the Honourable Mr. Justice Whalen of the Ontario Court (General Division) dated the 11th day of October 1996 the Appellant was ordered to pay his ex-spouse the sum of $300.00 per month, for each of three children for a total of $900.00 per month.
[3] The Appellant was unemployed and was therefore unable to pay the child support payments as ordered by the Court by Order dated the 11th day of October 1996.
[4] On the 4th day of July 1997 the Honourable Mr. Justice Dunn of the Ontario Court (General Division) ordered that the Appellant pay to his former wife, child support of $506.00 per month commencing July 1, 1997. (Note: This represented a reduction in the child support payments as ordered by the Court on October 11, 1996.)
[5] In the 1997 taxation year the Appellant paid his ex-spouse child support payments in the total amount of $8,042.00.
[6] In computing his income for the 1997 taxation year the Appellant deducted the amount of $8,042.00 as child support payments.
[7] In a Notice of Reassessment dated the 1st day of June 2001 the Minister of National Revenue (the "Minister") disallowed the deduction for child support payments in the amount of $8,042.00.
[8] The Appellant filed a Notice of Appeal to the Court. At the commencement of the hearing of the Appellant's appeal on July 22, 2002, counsel for the Respondent conceded that the Appellant was allowed to deduct the child support payments of $5,400.00 that were made for the period January 1, 1997 to June 1, 1997. However, counsel for the Respondent stated that the Minister maintains that the child support payments that were made from July 1, 1997 to December 1, 1997 are not deductible.
B. ISSUE
[9] The issue to be determined is whether the Appellant is entitled to a deduction from income, for the child support payments of $3,036.00 (6 x $506.00) that he made for the period commencing July 1, 1997 and ending December 31, 1997.
C. ANALYSIS
[10] Under what has been sometimes described as the old régime (pre-May 1997), spouses making payments to separated or ex-spouses for the support of children were allowed to deduct those payments and the recipient was required to include the amount of the payments in their income. Following the decision of the Supreme Court of Canada in Thibaudeau v. Canada, [1995] 2 S.C.R. 627, the Income Tax Act (the "Act") was amended and new provisions were introduced to deal with child support payments.
[11] The amended Act provided that if a pre-May 1997 agreement remained unchanged the deduction/inclusion system as provided by the old régime prevailed. However, if a new agreement were entered into by the parties or if a new Court Order was issued, or if an old agreement was changed in a particular way the deduction/inclusion régime did not apply and only payments made up to the commencement day, as defined, were deductible from income by the payor and included in income by the payee.
[12] Subsection 56.1(4) of the Income Tax Act (the "Act") defines "child support amount", "commencement day" and "support amount". Subsection 56.1(4) reads as follows:
"child support amount" means any support amount that is not identified in the agreement or order under which it is receivable as being solely for the support of a recipient who is a spouse or former spouse of the payer or who is a parent of a child of whom the payer is a natural parent.
"commencement day" at any time of an agreement or order means
(a) where the agreement or order is made after April 1997, the day it is made; and
(b) where the agreement or order is made before May 1997, the day, if any, that is after April 1997 and is the earliest of
(i) the day specified as the commencement day of the agreement or order by the payer and recipient under the agreement or order in a joint election filed with the Minister in prescribed form and manner,
(ii) where the agreement or order is varied after April 1997 to change the child support amounts payable to the recipient, the day on which the first payment of the varied amount is required to be made,
(iii) where a subsequent agreement or order is made after April 1997, the effect of which is to change the total child support amounts payable to the recipient by the payer, the commencement day of the first such subsequent agreement or order, and
(iv) the day specified in the agreement or order, or any variation thereof, as the commencement day of the agreement or order for the purposes of this Act.
"support amount" means an amount payable or receivable as an allowance on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and children of the recipient, if the recipient has discretion as to the use of the amount, and
(a) the recipient is the spouse or former spouse of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage and the amount is receivable under an order of a competent tribunal or under a written agreement; or
(b) the payer is a natural parent of a child of the recipient and the amount is receivable under an order made by a competent tribunal in accordance with the laws of a province.
[13] Paragraph 60(b) of the Act reads as follows:
(b) Support -- the total of all amounts each of which is an amount determined by the formula
A - (B + C)
where
A is the total of all amounts each of which is a support amount paid after 1996 and before the end of the year by the taxpayer to a particular person, where the taxpayer and the particular person were living separate and apart at the time the amount was paid,
B is the total of all amounts each of which is a child support amount that became payable by the taxpayer to the particular person under an agreement or order on or after its commencement day and before the end of the year in respect of a period that began on or after its commencement day, and
C is the total of all amounts each of which is a support amount paid by the taxpayer to the particular person after 1996 and deductible in computing the taxpayer's income for a preceding taxation year;
[14] In my opinion the Order of the Ontario Court (General Division) dated the 4th day of July 1997 effective the 1st day of July 1997 trigged a commencement date of July 1, 1997. It therefore follows that the Appellant is caught by the amended legislation in section 56.1 and section 60 of the Act and he is not allowed to deduct the child support payments of $506.00 per month that he made for the period commencing July 1, 1997 and ending December 31, 1997.
[15] The appeal will be dismissed.
Signed at Vancouver, British Columbia, this 30th day of July 2002.
"L.M. Little"
J.T.C.C.
COURT FILE NO.: 2002-729(IT)I
STYLE OF CAUSE: John Brace and
Her Majesty the Queen
PLACE OF HEARING: Toronto, Ontario
DATE OF HEARING: July 23, 2002
REASONS FOR JUDGMENT BY: The Honourable Judge L.M. Little
DATE OF JUDGMENT: July 30, 2002
APPEARANCES:
For the Appellant: The Appellant himself
Agent for the Respondent: Brian Puddington (Student-at-law)
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada
2002-729(IT)I
BETWEEN:
JOHN BRACE,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on July 23, 2002 at Toronto, Ontario, by
the Honourable Judge L.M. Little
Appearances
For the Appellant: The Appellant himself
Agent for the Respondent: Brian Puddington (Student-at-law)
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1997 taxation year is dismissed in accordance with the attached Reasons for Judgment.
Signed at Vancouver, British Columbia, this 30th day of July 2002.
|
"L.M. Little" |
J.T.C.C.