Date: 20010130
Docket: 2000-2172-IT
BETWEEN:
WILLIAM CHESNEY,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
Hamlyn, J.T.C.C.
[1] This is an appeal from an assessment for the 1998 taxation year.
[2] In computing income for the 1998 taxation year, the Appellant sought to deduct the amount of $1,672.00 as support payments made ("support payments").
[3] The Minister of National Revenue ("Minister") assessed the Appellant for the 1998 taxation year, by Notice of Assessment dated July 26, 1999, deleting the support payments.
FACTS
[4] In 1998 the Appellant was separated from his then wife. The Appellant states that in 1998 he paid his wife voluntary spousal support in the amount of $1,672.00, and that his wife gave him a receipt (Exhibit A-1) for the support received and claimed it in income on her 1998 tax return. The Appellant did not make the support payments under either a court order or a written agreement. The Appellant states that his former wife would not have supplied him with a written agreement at that time because she was interested in furthering her claim for support and other issues that had to be dealt with in the settlement of the marriage issues.
[5] The Appellant also argued that Exhibit A-1, the receipt, could be interpreted as a written agreement. However, the receipt was signed only by the Appellant's ex-spouse and did not create a support obligation.
STATUTORY FRAMEWORK
[6] The relevant provisions of the Income Tax Act ("Act") are:
56.1(4) "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 ... 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.
60. There may be deducted in computing a taxpayer's income for a taxation year such of the following amounts as are applicable:
...
(b) (support is determined by a formula).
ANALYSIS
[7] Support payments for a spouse are deductible by the payer under paragraph 60(b) of the Act, and must be included in the income of the recipient under paragraph 56(1)(b).
[8] For purposes of paragraph 60(b), subsection 56.1(4) defines "support amount". Part (a) of that definition requires, inter alia, that a support payment must have been made under the terms of either an order of a competent tribunal or a "written agreement". In McConnell v. The Queen,[1] Judge Sarchuk reaffirmed that for purposes of paragraph 60(b), an agreement must be in writing. He stated at page 183:
It is not disputed that for the purposes of subsection 60(b) of the Act an agreement must be in writing. In Hodson v. The Queen, Heald J. stated:
... I conclude that the words employed by Parliament in paragraph 60(b) must be interpreted "... in their ordinary grammatical sense". ... The language used is clear and unequivocal ... there must be either a Court order or written agreement which requires such payment.
[9] Accordingly, unless the support payments claimed by the Appellant were made under the terms of either an order of a competent tribunal or a written agreement, such payments would not be included in the definition of "support amount" under subsection 56.1(4), and thus not be deductible under paragraph 60(b).
[10] The Appellant stated that the negotiation period was a difficult time; he was trying to do his best and that throughout he was acting in good faith.
CONCLUSION
[11] The receipt signed by the Appellant's ex-spouse was not an agreement signed by both parties and it did not set forth amounts payable on a periodic basis for the maintenance of the recipient. The payments were not made under the terms of an order of a competent tribunal or written agreement. As a consequence the payments were not "support amounts" within the meaning of the Income Tax Act. As such, the appeal must be dismissed.
[12] It is unfortunate the payments made by the Appellant were not acknowledged in the divorce judgment filed (Exhibit A-2) in that pursuant to subsection 60.1(3), support payments made prior to obtaining a judicial order or entering into a written agreement are deductible if the order or written agreement specifically so provides, and the payments are made in the year that the order or agreement is made or in the previous year. This allows a taxpayer to make payments that are deductible and still have some time to negotiate a written agreement or obtain a court order.
DECISION
[13] The appeal is dismissed.
Signed at Ottawa, Canada, this 30th day of January 2001.
"D. Hamlyn"
J.T.C.C.