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Docket: 2004-830(IT)I |
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BETWEEN: |
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LES RIVARD, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN,
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Respondent. |
Appeals heard on July 13, 2004 at Edmonton, Alberta
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Before: The Honourable Justice G. Sheridan |
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Appearances: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Susan Jantz |
JUDGMENT
The appeals from the assessments made under the Income Tax Act for the 1999, 2000 and 2001 taxation years are dismissed, without costs.
Signed at Ottawa, Canada, this 26th day of November 2004.
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"G. Sheridan" |
Sheridan, J.
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Citation: 2004TCC777 |
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Date: 20041126 |
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Docket: 2004-830(IT)I |
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BETWEEN: |
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LES RIVARD, |
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Appellant, |
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and |
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HER MAJESTY THE QUEEN, |
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Respondent. |
REASONS FOR JUDGMENT
Sheridan, J.
[1] The Appellant Les Rivard is appealing the reassessments of the Minister of National Revenue for the taxation years 1998, 1999, 2000 and 2001. At the hearing, it was conceded that there was no appeal for 1998. The issue in the three remaining appeals is whether Mr. Rivard may deduct from his income for those years the amounts he paid to his former spouse for the support of their children.
[2] Mr. Rivard and his former spouse Patricia Rivard have lived separate and apart since 1994. There were three children of the marriage born in 1977, 1984 and 1989. By Interim Interim Order dated August 19, 1994 Mr. Rivard was required to pay "... Interim Interim Maintenance for the [three] children of the marriage in the sum of $500 per month per child, for a total of $1,500 per month with such maintenance to commence the 1st day of September, A.D. 1994, and be payable on the first of each and every month thereafter until such further Order of this Honourable Court may be made." Pursuant to Clause 6 of the 1994 Interim Order, Mr. Rivard's obligation to pay support for the eldest child, then 17, was conditional upon his remaining in school on a full-time basis.
[3] Some time after the issuance of the 1994 Interim Order Mr. Rivard fell into arrears. Upon the application of the Director of Maintenance Enforcement, a new order was issued on March 26, 1997 directing him to pay "ongoing maintenance of $1,000 per month" and $300 per month towards the "arrears of maintenance". Both of these monthly payments were payable "commencing the 15th day of May, 1997 and continuing on the 15th day of each and every month thereafter." Unlike the 1994 Interim Order, the March 1997 Order did not specify the children for whom the maintenance was to be paid but the use of the word "ongoing" would suggest that it was a meant to be continuation of the 1994 Interim Order maintenance amount of $500 per month per child, as well as of the conditions upon which it was payable. I note that by this date, the eldest child of the three children was 20 years old and presumably no longer in school. In such circumstances, Clause 6 of the 1994 Interim Order would have terminated Mr. Rivard's obligation to pay maintenance for that child thus resulting in the $1,000 per month maintenance amount. That amount, together with the other monthly payment for arrears of $300 resulted in a total of all child support amounts under the March 1997 Order of $1,300.
[4] By Divorce Judgment dated March 18, 1999, it was ordered that Mr. Rivard "...pay to the Petitioner, Patricia Ann Rivard, the monthly sum of $1,000 ($500 per month, per child), for the support of [the two younger children of the marriage], commencing on the 1st day of November, 1998 and continuing on the 1st day of each and every month thereafter...". Here, the Court specified the children for whom support must be paid. The date upon which the maintenance became payable was changed from the fifteenth of each month to the first. There was no order made for arrears of maintenance; thus, under the 1999 Divorce Judgment, the total child support amount was decreased from $1,300 to $1,000 per month.
[5] The issue in this appeal is whether the amounts paid by Mr. Rivard for the support of his children in 1999, 2000 and 2001 are deductible. These amounts were paid pursuant to court orders which span the years 1994 to 1999. In April 1997, certain changes were made to the provisions of the Income Tax Act which, prior to that date, had permitted child support to be deducted from the income of the payor and required them to be included in the income of the recipient. In David M. Krutko v. The Queen[1], Campbell, J. explained these changes and set out the new provisions governing the deductibility of these amounts:
[9] Before May 1997, spouses were entitled to deduct payments which were made to separated or ex-spouses for the support of the children. The recipient of these support payments was required to include the amount of these support payments in their income. This is often referred to as the old régime or inclusion/deduction system. As a result of the decision of the Supreme Court of Canada in Thibaudeau v. The Queen, [1995] 2 S.C.R. 627 (S.C.C.), Parliament eliminated the old régime or inclusion/deduction of support payments made pursuant to an agreement or order made after April 30, 1997 that contemplated a commencement date. The Income Tax Act was amended to provide that if a pre-May 1997 agreement remained unchanged, the inclusion/deduction system prevailed. If the parties entered into a new agreement or if a new court order issued or if an old agreement was altered in a particular way, the old régime no longer applied and only those payments made up to the commencement date as defined in the Act were deducted by the payor and included by the recipient.
[10] The terms "child support amount", "commencement date" and "support amount" are defined in subsection 56.1(4) of the Act as follows:
"child support amount" means any support amount that is not identified in the agreement or order under which it is receivable as being solely for the support of a recipient who is a spouse or common-law partner or former spouse or common-law partner of the payer or who is a parent of a child of whom the payer is a natural parent.
"commencement date" at any time of an agreement or order means
(a)where the agreement or order is made after April 1997, the day it is made; and
(b where the agreement or order is made before May 1997, the day, if any, that is after April 1997 and is the earliest of
(i) the day specified as the commencement day of the agreement or order by the payer and recipient under the agreement or order in a joint election filed with the Minister in prescribed form and manner,
(ii) where the agreement or order is varied after April 1997 to change the child support amounts payable to the recipient, the day on which the first payment of the varied amount is required to be made,
(iii) where a subsequent agreement or order is made after April 1997, the effect of which is to change the total child support amounts payable to the recipient by the payer, the commencement day of the first such subsequent agreement or order, and
(iv) the day specified in the agreement or order, or any variation thereof, as the commencement day of the agreement or order for the purposes of this Act.
"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 or common-law partner or former spouse or common-law partner of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage or common-law partnership 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.
[11] Paragraph 60(b) of the Act reads as follows:
60(b) Support - the total of all amounts each of which is an amount determined by the formula
A - (B + C)
where
A is the total of all amounts each of which is a support amount paid after 1996 and before the end of the year by the taxpayer to a particular person, where the taxpayer and the particular person were living separate and apart at the time the amount was paid,
B is the total of all amounts each of which is a child support amount that became payable by the taxpayer to the particular person under an agreement or order on or after its commencement day and before the end of the year in respect of a period that began on or after its commencement day, and
C is the total of all amounts each of which is a support amount paid by the taxpayer to the particular person after 1996 and deductible in computing the taxpayer's income for a preceding taxation year;
[6] There is no dispute that the amounts paid by Mr. Rivard qualify as "child support amounts" and "support amounts". The only issue is whether there exists in any of the orders a "commencement date" as defined in subsection 56.1(4) of the Income Tax Act. This is an important question as, if there is a commencement day, the Minister was correct to disallow the deductions claimed by Mr. Rivard.
[7] Mr. Rivard was self-represented and testified on his own behalf. Although he did not state it in precisely these words, he took the position is that there is no commencement day. The gist of his argument was that in each of the orders made in 1994, 1997 and 1999, the amount of maintenance ordered remained constant at $500 per child. The apparent decrease from $1,500 in the 1994 Interim Order to $1,000 in the March 1997 (and subsequently maintained in the 1999 Divorce Judgment) was simply the result of the eldest child's having ceased to be eligible for maintenance under the terms of the 1994 Interim Order. The effect of all this was to preserve the deductible status the child support originally ordered under the 1994 Interim Order which pre-dated the 1997 changes.
[8] In my view, Mr. Rivard cannot succeed on this basis. First of all, his argument overlooks the fact of the $300 per month maintenance arrears made payable under the March 1997 Order. The total child support amount under that order is $1,300, not $1,000 as argued by Mr. Rivard. This change makes it impossible to read the three maintenance orders as one seamless order for child support as urged by Mr. Rivard. For the purposes of identifying a commencement day, the relevant time of the change in child support amount is between March 1997 and 1999, the transition period from the old regime to the new. Looking then at the March 1997 Order, the child support amount was $1,300; the 1999 Divorce Judgment reduced the maintenance amount to $1,000. This is sufficient to bring the transaction within subparagraph 56.1(4)(b)(iii) which, together with the opening preamble to the subsection, reads as follows:
(b) where the agreement or order is made before May 1997, the day, if any, that is after April 1997 and is the earliest of
...
(iii) where a subsequent agreement or order is made after April 1997, the effect of which is to change the total child support amounts payable to the recipient by the payer, the commencement day of the first such subsequent agreement or order, ...
[12] The March 1997 Order was made before May 1997, and by a subsequent order - namely, the 1999 Divorce Judgment - was made after April 1997, its effect having been to change the total child support amounts payable from $1,300 to $1,000 per month. Pursuant to this provision, the commencement day was November 1, 1998, the day on which the changes payment obligations started. Thus, there is a commencement day under this subparagraph.
[13] In closing, however, I acknowledge and accept Mr. Rivard's statement that he thought he was "within his rights" in claiming the child support deduction. Even the Canada Revenue Agency officials experienced some uncertainty: under the first reassessment in January 2003, the deductions were allowed; after a period of reflection, a second reassessment was done in May 2003 and they were disallowed. Given the perversely difficult way in which Parliament has chosen to express itself in subsection 56.1(4) and paragraph 60(b), it is not surprising that both those affected by the legislation and those charged with administering it are sometimes confused by these provisions.
[14] In any event, for the above reasons I find that a commencement day was triggered and accordingly, the child support amounts for the taxation years 1999, 2000 and 2001 are not deductible. The appeals are dismissed, without costs.
Signed at Ottawa, Canada, this 26th day of November 2004.
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"G. Sheridan" |
Sheridan, J.
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CITATION: |
2004TCC777 |
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COURT FILE NO.: |
2004-830(IT)I |
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STYLE OF CAUSE: |
Les Rivard and H.M.Q. |
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PLACE OF HEARING: |
Edmonton, Alberta |
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DATE OF HEARING: |
July 13, 2004 |
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REASONS FOR JUDGMENT BY: |
The Honourable Justice G. Sheridan |
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DATE OF JUDGMENT: |
November 26, 2004 |
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APPEARANCES: |
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Counsel for the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Susan Jantz |
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COUNSEL OF RECORD: |
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For the Appellant: |
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Name: |
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Firm: |
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For the Respondent: |
Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada |