Date: 20010316
Docket: 2000-2258-IT-I
BETWEEN:
COLLEEN MURPHY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Rip, J.T.C.C.
[1] Colleen Murphy appeals the income tax assessment for the 1997 taxation year on the basis that she did not receive any support from her husband in the year in issue.
[2] Ms. Murphy was married to Mr. John Michael Brace. During their marriage they jointly owned their matrimonial home. The matrimonial home was ordered by the Ontario Court on September 20, 1996 to be sold on the terms and conditions set out in an Agreement of Purchase and Sale and, among other things, the signatures of Ms. Murphy and Mr. Brace were ordered to be disposed with, with respect to the acceptance of the Agreement of Purchase and Sale. Apparently, according to Ms. Murphy, Mr. Brace was not co-operative and refused to sign documents.
[3] The Court also ordered any financial institutions where Mr. Brace had assets not to dissipate or otherwise release assets in which Mr. Brace had an interest without a Court Order.
[4] The matrimonial home was sold in September 1996. By Order of the Ontario Court dated October 11, 1996, the net proceeds of sale, about $22,000.00, were deposited into Court.[1] The Court also ordered that:
. . . the sum of $300.00 per month, per child, (for a total of $900.00 per month) shall be paid out to the Petitioner wife as child support from the Respondent husband.[2]
[5] The Order of October 11, 1996 also stated that the non-dissipation order was to remain in effect to permit an accounting and determination of the equalization entitlement and payment, including in respect of the matrimonial home. No funds were to be released by banks holding deposits without a Court Order.
[6] On July 4, 1997, the Ontario Court ordered Mr. Brace to pay to Ms. Murphy support for their three children at $506.00 per month commencing July 1, 1997 and also ordered divorce judgment to issue upon proper application.
[7] The Court Order of July 4, 1997 also provided that for the months of July, August, September and October, support was to be paid out of funds then held in Court only. The taxability of the receipt of these payments is not in issue. Paragraph 56(1)(b) and subsection 56.1(1) of the Income Tax Act ("Act") had been amended to the effect that, for the facts at bar, any monies received by Ms. Murphy after July 1, 1997 are not to be included in her income.[3] Counsel for the respondent conceded that at the very outset of the hearing. Thus, only those amounts received by Ms. Murphy from January 1, 1997 to June 30, 1997 that is $5,400.00 ($900.00 x 6 months) are in issue.
[8] Ms. Murphy claims no amount from the proceeds of the matrimonial home deposited in Court should be included in her income; the monthly payments for January, February, March, April, May and June 1997 came from these funds. Ms. Murphy states that all of the proceeds on deposit are hers since her former husband had dissipated more than his one-half share of the assets and more than $22,000.00 notwithstanding the Court Order. In any event, one-half of the deposited funds belong to Ms. Murphy. The amounts were not received by her, she alleges, for support of the children.
[9] Counsel for the respondent submitted that the Order of the Ontario Court of October 11, 1996 states that the $900.00 shall be "paid out to the . . . wife as child support from the . . . husband". The definition of "support" is that one gives money to another, that is, money is given to the wife, in this case, for support and is payable by the husband. The payments in her view were support payments.
[10] In analyzing the facts at bar one must not lose sight of one particular fact: the money received from the sale of the matrimonial home was a capital asset belonging to both spouses; the Court was holding the capital in trust. According to the evidence the source of the $900.00 per month to be "paid out" to the appellant – wife as child support from the husband, as described in paragraph 2 of the Court Order of October 11, 1996, is the proceeds from the sale of the matrimonial home, described in paragraph 1 of the Order. Paragraph 2 of the Order contemplates that the funds held in trust be reduced by $900.00 a month and that the money be used for the children of the appellant and her former husband; the $900.00 are monthly advances out of the capital of the trust. These are not amounts that Parliament contemplated or the Act requires to be included income of the recipient.
[11] The appeal is allowed with costs.
Signed at Ottawa, Canada, this 16th day of March 2001.
"Gerald J. Rip"
J.T.C.C.