Date: 19980127
Docket: 97-901-IT-I
BETWEEN:
JAMES F. SHERRER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Reasonsfor Judgment
Lamarre Proulx, J.T.C.C.
[1] This is an appeal by way of the informal procedure for the 1995 taxation year. The question at issue is whether the Appellant is entitled to claim the wholly dependent person tax credit provided for in paragraph 118(1)(b) of the Income Tax Act (the "Act") for his children, when he is entitled to a deduction under paragraph 60(b), (c) or (c.1).
[2] The facts of this case are described at paragraphs 13, 14 and 17 of the Reply to the Notice of Appeal (the "Reply") as follows:
13. In computing his tax payable for the 1995 taxation year, the Appellant claimed in the computation of his non-refundable tax credits, among other things, an amount of $5,380.00 for the wholly dependent person credit.
14. By Notice of Reassessment dated September 3, 1996, the Minister reassessed the Appellant's income tax return for the 1995 taxation year and disallowed the wholly dependent person credit referred to in paragraph 13 above.
...
17. In confirming the reassessments with respect to the 1995 taxation year, the Minister made the following assumptions of fact:
(a) the facts hereinbefore stated and admitted;
(b) the Appellant paid an amount of $3,900.00 to Esther Aiken, his former spouse, during the 1995 taxation year for the support of his two children pursuant to a Divorce Judgment dated February 21, 1991;
(c) in computing his net income for the 1995 taxation year, the Appellant was entitled to a deduction under paragraphs 60(b), 60(c) or 60(c.1) of the Act in respect of alimony or maintenance payments;
(d) the said amount of $3,900.00 was deducted by the Appellant in computing his net income for the 1995 taxation year pursuant to paragraphs 60(b), 60(c) or 60(c.1) of the Act;
(e) pursuant to subsection 118(5) of the Act, the Appellant's children are deemed not to be the children of the Appellant during the 1995 taxation year for the purposes of section 118 of the Act; and
(f) the Appellant is not entitled to a wholly dependent person credit in the computation of his non-refundable tax credits and tax payable for the 1995 taxation year.
[3] The reasons given by the Appellant for appealing the Minister's reassessment are found in his Notice of Appeal as follows:
...
I am the father of two children and I have been divorced for many years. The custody agreement provides for joint custody of the two children. It specifies that the two children are to live with each of the separated parents for one half of the time. This has been the case.
Within the agreement I allowed that I would make monthly payments to my former wife through the now named "Family Support Plan". This I have done. These payments were to assist in providing for my children during the one half of time that they are in her care, and in her home. She, in return was to assume financial responsibility for all of the day-care costs incurred.
...
I support two dependants within my home for one half of the year.
It is therefore my contention that my year is divided in halves. Since I have two dependants in my care for one half of the year I should then be allowed to claim the equivalent of one for the year.
Further the support payments that I make are not intended for the time that the two are in my care but rather for the half of the year that they are not. The dollar amount of support payments I make is certainly far less than it would be if I were a non-custodial parent.
Is it not the premise of the dependants deduction to assist parents in the expenses of raising children? The home that I maintain is not one for a single person but rather one equipped for my family of two children. My clothing budget has to cover the expenses for the two growing children. The grocery bill and laundry costs certainly exceed that of a single person.
Yet I cannot claim the same deduction that is extended to all other parents and supporters of children.
...
I must contend that the guidelines enforced by the taxation department are not fair in my case. I am asking that allowance be made for the division of the taxation year into halves thereby allowing me to claim the equivalent of one dependant.
[4] There was no dispute as to the facts. The income tax return was filed as Exhibit R-1 and the divorce judgment referred to in subparagraph 17(b) of the Reply was filed as Exhibit A-1. The Appellant referred more particularly to the following clauses of the divorce judgment:
...
b) The husband and the wife shall have joint custody of the children of the marriage ...;
...
e) The children shall share equal time with the parents;
Arguments and Conclusions
[5] The Respondent's representative submitted that the Appellant was entitled to a deduction under paragraph 60(b), (c) or (c.1) and that pursuant to subsection 118(5) of the Act, the Appellant's children were deemed not to be the children of the Appellant during the 1995 taxation year, for the purposes of section 118 of the Act. Therefore, the Appellant was not entitled to a wholly dependent person credit provided for in paragraph 118(1)(b) of the Act, in the computation of his non-refundable tax credits and tax payable for the 1995 taxation year.
[6] The Respondent's representative referred to the following decisions:
Morin v. The Queen, 1997 CanRepNat 739
Werring v. The Queen, CanRepNat 599
Paustian v. The Queen, [1995] 1 C.T.C. 2395
[7] The Appellant submitted that the amount of his payments in support for his children took into account the fact that they were in their mother's care for half the time and therefore, to allow only that deduction was not equitable, as he had also to maintain a self-contained domestic establishment where he supported his children when they were with him for half the year. In this respect, he submitted that he was economically entitled to the wholly dependent person tax credit provided for in paragraph 118(1)(b) of the Act or at least to some apportionment as specified in the aforementioned last paragraph of his Notice of Appeal.
[8] Subsection 118(5) of the Act reads as follows:
Where an individual in computing the individual's income for a taxation year is entitled to a deduction under paragraph 60(b), (c) or (c.1) in respect of a payment for the maintenance of a spouse or child, the spouse or child shall, for the purposes of this section (other than the definition "qualified pension income" in subsection (7)) be deemed not to be the spouse or child of the individual.
[9] Paragraph 118(1)(b) of the Act reads as follows:
(1) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted an amount determined by the formula
A x B
where
A is the appropriate percentage for the year, and
B is the total of,
...
(b) Wholly dependent person - in the case of an individual not entitled to a deduction by reason of paragraph (a) who, at any time in the year,
(i) is an unmarried person or a married person who neither supported nor lived with the married person's spouse and is not supported by the spouse, and
(ii) whether alone or jointly with one or more other persons, maintains a self-contained domestic establishment (in which the individual lives) and actually supports in that establishment a person who, at that time, is
(A) except in the case of a child of the individual, resident in Canada,
(B) wholly dependent for support on the individual, or the individual and the person or persons, as the case may be,
(C) related to the individual, and
(D) except in the case of a parent or grandparent of the individual, either under 18 years of age or so dependent by reason of mental or physical infirmity,
an amount equal to the total of
(iii) $6,000, and
(iv) an amount determined by the formula
$5,000 - (D - $500)
where
D is the greater of $500 and the income for the year of the dependent person;
[10] It is my view that subsection 118(5) of the Act clearly prevents the Appellant from benefiting from the tax credit provided for in subparagraph 118(1)(b) of the Act. Any entitlement to a deduction for an alimony payment of any amount for a child results in the deeming provision that this child is not the child of the individual entitled to the said deduction. The legislative provision does not allow any prorating of the amount or partitioning of the taxation year.
[11] I have heard a somewhat similar case in the appeal of Christopher P. Youé and The Queen. My decision was rendered on November 17, 1995. I dismissed the appeal as follows:
This deeming provision contemplates, without any doubt whatsoever, the whole of the taxation year. It contains nothing that would allow of a partition of the year and I see no ambiguity in its wording.
[12] This conclusion is also consistent with the cases cited by the Respondent's representative and with the decision of the Federal Court of Appeal in The Queen v. Marshall, 96 DTC 6292, where it is said at page 6293 that only Parliament can provide for a prorating of benefits and where it has not done so the Court cannot legislate at its place. I quote the relevant portion:
This section of the Act contemplates only one parent being an "eligible individual" for the purpose of allowing the benefits. It makes no provision for prorating between two who claim to be eligible parents. Only Parliament can provide for a prorating of benefits but it has not done so.
This decision was rendered regarding the apportionment of the child tax benefit between spouses who have the responsibility for the care and the upbringing of the children. The same reasoning applies to the case at bar.
[13] Consequently, the appeal is dismissed.
Signed at Ottawa, Canada, this 27th day of January, 1998.
|
"Louise Lamarre Proulx" |
J.T.C.C.
COURT FILE NO.: 97-901(IT)I
STYLE OF CAUSE: James F. Sherrer and The Queen
PLACE OF HEARING: Ottawa, Canada
DATE OF HEARING: January 21, 1998
REASONS FOR JUDGMENT BY: The Honourable L. Lamarre Proulx
DATE OF JUDGMENT: January 27, 1998
APPEARANCES:
For the Appellant: The Appellant himself
For the Respondent: Nadine Hamelin (Student-at-Law)
COUNSEL OF RECORD:
For the Appellant:
Name:
Firm:
For the Respondent: George Thomson
Deputy Attorney General of Canada
Ottawa, Canada
97-901(IT)I
BETWEEN:
JAMES F. SHERRER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
Appeal heard on January 21, 1998, at Ottawa, Canada, by
the Honourable Judge Louise Lamarre Proulx
Appearances
For the Appellant: The Appellant himself
Agent for the Respondent: Nadine Hamelin (Student-at-Law)
JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 1995 taxation year is dismissed, in accordance with the attached Reasons for Judgment.
Signed at Ottawa, Canada, this 27th day of January, 1998.
|
"Louise Lamarre Proulx" |
J.T.C.C