Date: 20000114
Docket: 98-1970-IT-I
BETWEEN :
MADELEINE ST-JACQUES,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasons for Judgment
(Delivered orally from the bench at Montréal, Quebec, on December 3, 1999, and revised on January 14, 2000)
P.R. Dussault, J.T.C.C.
[1] The appellant is contesting assessments for her 1994, 1995 and 1996 taxation years. Through those assessments, the Minister of National Revenue ("the Minister") added $5,370.00, $5,859.00 and $5,993.00 to the appellant's income for each of those years, respectively, as pension benefits from Mutuelle-Vie des Fonctionnaires du Québec ("Mutuelle-Vie").
[2] In making the assessments, the Minister assumed, inter alia, the facts set out in subparagraphs (a) to (g) of paragraph 16 of the Reply to the Notice of Appeal. Those subparagraphs read as follows:
[TRANSLATION]
the appellant and Guy Roberge were married on July 1, 1953;
the appellant and Guy Robert entered into their marriage under the regime of separation of property;
on March 26 and 28, 1992, the appellant and Guy Roberge signed a separation agreement and corollary relief settlement, under which they agreed, inter alia, on an equal division of the pension benefits that Mr. Roberge would receive from Mutuelle-Vie des Fonctionnaires du Québec;
the divorce judgment rendered on October 21, 1992, confirmed the clauses of the separation agreement dated March 26 and 28, 1992;
during the years at issue, the administrator of the pension plan of Mutuelle-Vie des Fonctionnaires du Québec paid Mr. Roberge the full amount of the pension;
according to the vouchers submitted, Mr. Roberge gave the appellant the following amounts during the 1994 and 1995 taxation years as her share of the pension benefits received from Mutuelle-Vie des Fonctionnaires du Québec:
(i) 1994 $5,370,
(ii) 1995 $5,859;
for the 1996 taxation year, the Minister considered that the appellant had received half of the pension benefits collected by Mr. Roberge from Mutuelle-Vie des Fonctionnaires du Québec.
[3] The respondent is basically relying on subparagraph 56(1)(a)(i) of the Income Tax Act ("the Act"), which provides for the inclusion in computing income of "any amount received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of, a superannuation or pension benefit including, without limiting the generality of the foregoing," certain pensions, benefits and payments that are specifically listed.
[4] In a separation agreement and corollary relief settlement that was signed on March 26 and 28, 1992, and confirmed by a divorce judgment rendered on October 21, 1992, the appellant and Guy Roberge made certain financial arrangements, which are found, inter alia, in articles 2-6 and 15-17. Those articles read as follows:
[TRANSLATION]
2. The assets that may be divided are as follows:
Guy's pension from Mutuelle-Vie des Fonctionnaires du Québec;
Guy's benefits from the Régie des rentes du Québec;
Mado's benefits from the Régie des rentes du Québec;
a 1992 Honda Accord EXR;
the movable property furnishing and decorating the family home at 58 chemin Rivière à Simon in St-Sauveur;
the residence at 58 chemin Rivière à Simon in St-Sauveur.
3. At the time of the signing of this agreement, the above-mentioned property is encumbered with a debt of $155,413.00, broken down as follows:
$69,000.00 in respect of the purchase of the residence at 58 chemin Rivière à Simon;
$10,700.00 financing balance in respect of a previous automobile;
$44,466.00 in respect of the purchase of capital stock and/or land in St-Lazare, which was owned by Guy;
$31,247.00 in respect of a business in Place Versailles that is wholly owned by Société de Gestion GMR, 100 percent of the capital stock of which is owned by Guy;
4. In consideration of their life together, in fulfilment of any right or obligation that results or may result from their marriage or its breakdown, from the matrimonial regime, from the marriage contract or from any contract entered into by them, and as compensation for any contribution and/or advance and/or loan, Guy and Mado effect the following division:
Mado shall remain the sole owner of the residence at 58 chemin Rivière à Simon in St-Sauveur and shall assume all the charges thereon;
Mado shall also retain full ownership of all the movable property furnishing and decorating the home at 58 chemin Rivière à Simon, with the exception of that appearing on a list attached hereto as Schedule A and initialled by the parties to acknowledge its accuracy. The said list shall be of the movable property of which Guy shall be the sole owner on the signature of this agreement;
Guy shall retain full ownership of the 1992 Honda Accord EXR;
All of the income from Guy's pension fund at Mutuelle-Vie des Fonctionnaires du Québec and all of Guy's and/or Mado's income from the Régie des rentes du Québec shall be divided equally;
5. . . .
By paying the Caisse Populaire Anjou all amounts related to the use of a line of credit by Société de Gestion GMR and the balance, up to $20,000.00, through a cheque made out to Guy Roberge;
6. Guy undertakes to complete all the necessary documents in order for Mado to become the sole and irrevocable beneficiary of his pension plan with Mutuelle-Vie des Fonctionnaires du Québec and shall provide proof thereof within 60 days after the signature of this agreement, failing which he acknowledges that Mado is entitled to undertake all necessary procedures with Mutuelle-Vie des Fonctionnaires du Québec in order to be recognized as the sole and irrevocable beneficiary of the said pension plan;
. . .
15. Subject to the agreements reached above on the division of property, inter alia as regards the residence, the movable property and the benefits existing under private and/or public pension plans, Mado and Guy renounce their interest in the family patrimony, requesting the Court to confirm the said renunciation and formally recognize it in any judgment of divorce and/or separation from bed and board that may be rendered;
16. Mado and Guy acknowledge and declare that this agreement is not being made for the purpose of having their marriage dissolved. However, it is expressly agreed that this agreement shall be attached to an application for divorce and/or separation from bed and board as a corollary relief agreement in the event that either of them brings such proceedings;
17. In such an event, Mado and Guy thus undertake to request the Court to confirm this agreement in full and incorporate it into any judgment.
[5] As regards article 15 above, it should be noted that the divorce judgment of October 21, 1992, specifically recognizes the parties' renunciation of the family patrimony.
[6] In her testimony, the appellant explained that she had borrowed the $155,413.00 referred to in article 3 of the agreement for the purpose of debt consolidation, most of the debts being attributable to Mr. Roberge. The loan was secured by a mortgage, and the appellant undertook to make the loan payments alone, as indicated in article 4(a) of the agreement. The appellant had also agreed to pay $20,000.00 to reduce Mr. Roberge's line of credit and thus provide him with some liquid assets, as indicated in article 5(a) of the agreement. However, in consideration of those undertakings, the appellant expected to receive half of Mr. Roberge's pension from Mutuelle-Vie, as provided for in article 4(d) of the agreement.
[7] According to the appellant, since Mr. Roberge was often late in giving her half of the amounts he received from Mutuelle-Vie, in order to be able to make the monthly payments of principal and interest on the mortgage she had promised to repay, she applied to Mutuelle-Vie through her lawyer, Benoît Roberge, to receive directly from it the half of Mr. Roberge's pension to which she claimed to be entitled.
[8] An initial reply sent to Benoît Roberge by the director of Mutuelle-Vie's actuarial and group insurance department on March 23, 1993, reads as follows:
[TRANSLATION]
As discussed during our telephone conversation last week, I am confirming to you that Ms. St-Jacques remains Mr. Roberge's spouse for the purposes of the revertibility of the pension in the event of death. The text of the plan provides that spousal status is established on the day the pension is established. If Mr. Roberge dies, Ms. St-Jacques will therefore receive, throughout her lifetime, a pension equal to 50 percent of that payable to Mr. Roberge on the eve of his death.
However, we cannot pay part of Mr. Roberge's pension directly to Ms. St-Jacques as you request. Under section 264 of the Supplemental Pension Plans Act, the pension is unassignable and unseizable. This interpretation has been confirmed to us verbally by the Régie des rentes du Québec.
I am attaching a copy of a letter sent to Mr. Roberge asking him to designate Ms. St-Jacques in writing as an irrevocable beneficiary.
I trust that you will find this satisfactory.
Yours truly . . .
[9] A confirmation letter sent directly to the appellant on November 15, 1999, reads as follows:
[TRANSLATION]
Ms. St-Jacques:
As noted in my letter to Benoît Roberge dated March 23, 1993, given the documents we have in our possession, we cannot pay you directly the pension amount transferred to you by Mr. Roberge. Section 264 of the Supplemental Pension Plans Act makes the pension unassignable and unseizable.
As for the partition of benefits provided for by section 107 of the Supplemental Pension Plans Act, we cannot give effect to it since the judgment of which we have a copy provides for a division of income, not a division of the plan's value.
Yours truly . . .
[10] The second paragraph of section 264 of the Supplemental Pension Plans Act (Revised Statutes of Quebec, volume 14, c. R-15.1) states that, unless otherwise provided by law, "all amounts refunded or pension benefits paid under a pension plan or this Act and derived from member or employer contributions" are unassignable and unseizable.
[11] Section 107 of the same Act, which is in Chapter VIII, "Transfer of Benefits Between Spouses", reads as follows:
CHAPTER VIII
TRANSFER OF BENEFITS BETWEEN SPOUSES
Partition of benefits.
107. In the event of separation from bed and board, divorce or annulment of marriage, the benefits accumulated by a member under a plan shall, upon application in writing to the pension committee, be partitioned between the member and his spouse to the extent provided in the Civil Code of Québec or by a court judgment.
Transfer to the spouse.
Where the court awards to the spouse of a member, in payment for a compensatory allowance, benefits accumulated by the member under a pension plan, the benefits shall, upon application in writing to the pension committee, be transferred to the spouse to the extent provided by the court judgment.
[12] In the case at bar, the benefits accumulated by Mr. Roberge under his pension plan with Mutuelle-Vie were never partitioned in accordance with this provision. Mr. Roberge never transferred benefits under his pension plan to the appellant. The family patrimony was not divided between the parties, nor was there any transfer of benefits as a result of such a division. Moreover, as I mentioned above, the divorce judgment of October 21, 1992, formally recognizes the fact that the parties renounced the division of the family patrimony.
[13] Accordingly, the appellant never acquired any benefits under Mr. Roberge's pension plan with Mutuelle-Vie and moreover never received any amount from Mutuelle-Vie. For the purposes of subparagraph 56(1)(a)(i) of the Income Tax Act, it therefore cannot be argued that she received an amount "as, on account or in lieu of payment of, or in satisfaction of, a superannuation or pension benefit" during each of the years at issue.
[14] First of all, note must be made here of the prepositional phrase "au titre de" in the French version of paragraph 56(1)(a), which means "as". Note must also be made of the expression "in satisfaction of ". Next, for the appellant to be able to receive an amount as, or in satisfaction of, a superannuation or pension benefit, the parties would have had to provide for the division of the value of that asset forming part of the family patrimony and Mr. Roberge would then have had to transfer to the appellant a portion of the benefits he had accumulated under his pension plan as provided for by section 107 of the Supplemental Pension Plans Act. Neither of these occurred here.
[15] There cannot, at one and the same time, be a division of benefits that include a pension plan forming part of the family patrimony and a renunciation of the partition of that patrimony. I repeat, the divorce judgment of October 21, 1992, specifically recognizes such a renunciation in this case.
[16] In actual fact, all that the parties agreed to do in article 4(d) of the agreement was to share equally the income from three separate pension plans, namely the income from Mr. Roberge's pension plan with Mutuelle-Vie and the income of Mr. Roberge and the appellant from the Régie des rentes du Québec. An agreement to share income from various sources is not a transfer of entitlement to that income. A taxpayer who is employed and who simply agrees to share his or her employment income with his or her spouse does not give the spouse an amount that could be described as "employment" income. The taxpayer is simply sharing his or her own employment income with another person. The same is true in the case at bar.
[17] In light of the foregoing, I therefore conclude that subparagraph 56(1)(a)(i) of the Act is not applicable to this case.
[18] In closing, I will add a brief comment on this Court's decision in Walker v. Canada, [1994] T.C.J. No. 982, on which counsel for the respondent relied in support of her position that subparagraph 56(1)(a)(i) applies to the instant case. As noted by counsel for the appellant, it was clear in that case that the parties' intention was to assign half of the husband's benefits to his wife. The following extract from article 14 of the separation agreement in Walker, to which counsel for the appellant referred and which is found at page 3 of the judgment, could not be any clearer in this regard. It reads as follows:
The husband shall assign one half of the gross proceeds of his pension income from his military service and until such time as the payments resulting from the assignment are processed and reach the wife, the husband shall pay to the wife the sum of four hundred and eighteen dollars and forty two cents ($418.42) per month on the first day of every month commencing on the first day of April, 1988. The wife may elect to set off monies payable to the husband for child support against pension income until the assignment is perfected but must advise the husband of such election prior to the twenty fifth of the previous month. The husband warrants that he will proceed with due diligence to process such assignment.
[19] It will be easily understood that assigning entitlement to a gross pension income does not have the same effect as sharing net pension income with another person.
[20] I will also point out that paragraph 11 of Interpretation Bulletin IT-499R dated January 12, 1992, which concerns superannuation or pension benefits, deals with the division of pension benefits in accordance with the applicable provincial legislation in the event of separation or divorce. In my view, the opinion expressed in that paragraph that both spouses must include in their income the portion they receive upon a division of benefits, even if the administrator of the pension plan issues only one cheque, namely to the plan member—whether or not that opinion be correct for the case concerned—is not applicable to the present situation, as a division of benefits under section 107 of the Supplemental Pension Plans Act never occurred here since no such division was possible given the terms of the agreement signed by the parties on March 26 and 28, 1992, and confirmed by the divorce judgment of October 21, 1992.
[21] For these reasons, the appeals from the assessments made for the appellant's 1994, 1995 and 1996 taxation years are allowed and the assessments are referred back to the Minister for reconsideration and reassessment on the basis that the amounts of $5,370, $5,859 and $5,993 must not be included in the appellant's income for 1994, 1995 and 1996, respectively.
[22] The whole with costs to the appellant as requested in the Notice of Appeal.
Signed at Ottawa, Canada, this 14th day of January 2000.
"P.R. Dussault"
J.T.C.C.
[OFFICIAL ENGLISH TRANSLATION]
Translation certified true this 25th day of January 2001.
Erich Klein, Revisor