Date: 20001109
Docket: 1999-3131(IT)I
BETWEEN:
JOHN FRIESEN,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Counsel for the Appellant: Bruce D. Gregory
Agent for the Respondent: Stacy Cawley (Student-at-law)
____________________________________________________________________
REASONS FOR JUDGMENT
(Delivered orally from the Bench at
Winnipeg, Manitoba on August 24, 2000)
McArthur J.T.C.C.
[1] This is an appeal from an assessment for the 1995 taxation year. The issue is the deductibility under subsection 60.1(3) and paragraph 60(b) of the Income Tax Act of payments made by the Appellant to his spouse, from whom he was separated, for her support and that of their three children.
[2] In 1995, paragraph 60(b) permitted the deduction of alimony or maintenance payments as follows,
60 There may be deducted in computing a taxpayer's income for a taxation year such of the following amounts as are applicable:
(a) ...
(b) an amount paid by the taxpayer in the year as alimony or other allowance payable on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and the children, if the taxpayer, because of the breakdown of the taxpayer's marriage, was living separate and apart from the spouse or former spouse to whom the taxpayer was required to make the payment at the time the payment was made and throughout the remainder of the year and the amount was paid under a decree, order or judgment of a competent tribunal or under a written agreement;
[3] The Appellant and his wife Catherine separated in January 1995. In February of that year, the Appellant agreed to pay Catherine for her support and that of their three children $1,500 monthly. He paid this amount for 11 months in 1995. In December 1995, Catherine petitioned him for divorce, proposing that he pay $1,500 per month for her support and that of their children. In the Appellant's Answer to the Petition dated February 1996, he indicated that he contested only the child support quantum. In March or April 1996, Catherine hand-wrote a note in which she stated that the Appellant paid her $750 in February 1995 and $1,500 for the months of March through to December 1995 inclusive. Under these amounts, Catherine wrote:
This is what I received from you and on my income tax I will not claiming (sic) your part on the mortgage and truck payments as child support from you.
The Appellant also signed the note.
[4] In August 1996, by interim order of the Court of Queen's Bench, Family Division, the Appellant was ordered to pay $900 per month to Catherine and the children. Paragraph 2 of the Order provides that $5,100 had been paid by the Appellant by way of periodic payments between January and August 1996. The Order did not provide that the 1995 payments be considered to have been paid.
[5] The position of the Appellant is that a combination of Catherine's Petition for Divorce, his Answer and Catherine's note together with the cancelled cheques is sufficient to establish that there was no doubt that the payments were made in 1995. Counsel for the Appellant suggests that this is sufficient to establish that the 1995 payments were made pursuant to a written agreement. Only the 1996 payments were allowed as deductions by the Minister.
[6] The position of the Respondent is that the 1995 payments were not made under a decree, order or judgment of a competent tribunal pursuant to the requirements in paragraph 60(b). The Court Order made in August 1996 contained no retroactivity provision of the type contemplated by subsection 60.1(3) which states:
60.1(3) For the purposes of this section and section 60, where a decree, order or judgment of a competent tribunal or a written agreement made at any time in a taxation year provides that an amount paid before that time and in the year or the preceding taxation year is to be considered to have been paid and received thereunder, the amount shall be deemed to have been paid thereunder.
The question before me is whether the payments in 1995 were made pursuant to a written agreement. Despite the able argument of the counsel for the Appellant, the answer has to be no.
[7] While the Appellant is to be commended for making the payments, the Act is clear. The payments to be deductible must be made pursuant to a court order or written agreement. I cannot construe the December 1995 Petition, the February 1996 Answer and the March or April note, together with the oral agreement and the cheques, to form a contract or written agreement envisioned by paragraph 60(b). That paragraph provides that the taxpayer must have been required to make the payment at the time the payment was made and throughout the remainder of the year under an order or written agreement. This was not the case. It would be stretching the law of contracts beyond reason to accept that there was an agreement in 1996, let alone in February 1995, when the payments commenced.
[8] No matter how I may struggle to find in the Appellant's favour, the various documents and oral agreement cannot be held to be a written agreement. In Foley v. The Queen, [2000] T.C.J. 485, Bowman J. referred to the decision of R.S.W. Fordham, Q.C., of the Tax Review Board in Kostiner v. M.N.R., 63 DTC 478 at 479 where he stated:
The Board has held consistently that informal writings such as correspondence and memoranda between a husband and wife, or between their respective solicitors, will not be acceptable as evidence of the right to deduct alimony or maintenance payments from the payor's taxable income. The wording of section 11(1)(1) is reasonably clear and means just what it implies. It contains no reference whatever to correspondence and other informal writings.
Here we have an oral agreement in February, a Petition for Divorce in 1995, an Answer to that Petition in February 1996 which appears to contest the amount claimed for alimony or maintenance, and an acknowledgement of receipt of the monies by Catherine in March or April 1996 as well as a Court Order in August 1996 that does not incorporate the 1995 payments. All of these disjointed documents fall far short of meeting the requirements of paragraph 60(b) and the appeal is dismissed.
Signed at Ottawa, Canada, this 9th day of November, 2000.
|
"C.H. McArthur" |
J.T.C.C.
COURT FILE NO.: 1999-3131(IT)I
STYLE OF CAUSE: John Friesen and Her Majesty the Queen
PLACE OF HEARING: Winnipeg, Manitoba
DATE OF HEARING: August 23, 2000
REASONS FOR JUDGMENT BY: The Honourable Judge C.H. McArthur
DATE OF JUDGMENT: August 31, 2000
APPEARANCES:
Counsel for the Appellant: Bruce D. Gregory
Agent for the Respondent: Stacy Cawley (Student-at-law)
COUNSEL OF RECORD:
For the Appellant:
Name: Bruce D. Gregory
Firm: Bruce D. Gregory
For the Respondent: Morris Rosenberg
Deputy Attorney General of Canada
Ottawa, Canada