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Docket: 2004-3680(IT)I |
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BETWEEN: |
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WAYNE CHU, |
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Appellant, |
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And |
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HER MAJESTY THE QUEEN, |
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Respondent. |
____________________________________________________________________
Appeal heard on February 1, 2005 in Vancouver, British Columbia
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Before: The Honourable Justice L.M. Little |
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Appearances: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Pavanjit Mahil |
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JUDGMENT
The appeal from the assessment made under the Income Tax Act for the 2002 taxation year is allowed, without costs, in accordance with the attached Reasons for Judgment.
Signed at Vancouver, British Columbia, this 8th day of April 2005.
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"L.M. Little" |
Little J.
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Citation: 2005TCC169 |
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Date: 20050408 |
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Docket: 2004-3680(IT)I |
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BETWEEN: |
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WAYNE CHU, |
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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
Little J.
A. STATEMENT OF FACTS:
[1] The Appellant was married to Kerry Ann Chu ("Kerry Ann").
[2] The Appellant and Kerry Ann are the natural parents of a daughter (the "Daughter") born in 1994 and a son (the "Son") born in 1998 (the Daughter and Son are collectively referred to as the "Children").
[3] The Appellant and Kerry Ann separated. They appeared before a Master of the Supreme Court of British Columbia for a custody order for the Children.
[4] An Interim Order of the Supreme Court of British Columbia dated November 14, 2001 provided as follows:
(a) the Appellant and Kerry Ann had joint custody of the Daughter and the Son;
(b) the Daughter and the Son were to alternate residences between the Appellant and Kerry Ann; and
(c) the Appellant was to pay child support of $200.00 per month to Kerry Ann in respect of the Daughter and the Son commencing on December 1, 2001 and continuing on the first day of each and every month thereafter until a trial or further Court Order.
[5] When the Appellant filed his income tax return for the 2002 taxation year he deducted the amount of $6,482.00. In Schedule 5 of the tax return the Appellant stated that the amount of $6,482.00 was claimed with respect to the Son.
[6] The Appellant testified during the hearing that the amount of $6,482.00 represented the payments that he made for the Children. The Appellant said that he pays for all of the financial needs of the Children including groceries at the home of Kerry Ann plus clothing and entertainment expenses. The Appellant also said that he did not realize that the amount of $6,482.00 was only claimed for the Son because, in his opinion, the amount related to the payments that he made in 2002 for the Son and the Daughter. The Appellant also testified that Kerry Ann does not work and he is the sole means of financial support of the Children.
B. ISSUE:
[7] The issue is whether the Appellant is entitled to claim either or both of the Children as a wholly dependent person for the purpose of calculating his non-refundable tax credit for the 2002 taxation year.
C. ANALYSIS:
[8] The Appellant testified that the Court Order issued by the Supreme Court of British Columbia was dated November 14, 2001 and that he made a payment of $200.00 on behalf of the Children on December 1, 2001. However the Appellant said that on January 1, 2002 Kerry Ann and the Children moved back into the Appellant's home and remained with him until May 2002. During this period the Appellant said that he did not make any support payments to Kerry Ann but he paid for all of the living expenses of the Children.
[9] Commencing on June 1, 2002 and on the first day of each month until the end of 2002 the Appellant paid child support to Kerry Ann in the amount of $200.00 per month.
[10] Paragraph 118(1)(b) of the Income Tax Act (the "Act") allows for a so-called equivalent to spouse tax credit where a taxpayer, at any time in the year, is married (or in a common-law partnership) and neither lived with the spouse and who is not supported by the spouse. To qualify for the credit the taxpayer must maintain a domestic establishment and support a dependent in that establishment.
[11] Subsection 118(5) of the Act is an exception to the tax credit provision. Where a taxpayer pays a support amount, as defined in the Act, and lives separate and apart from his spouse or former spouse (or common-law partner), the taxpayer is disentitled to the credit that is provided under subsection 118(1).
[12] Subsection 118(5) of the Act reads as follows:
118. (5) No amount may be deducted under subsection (1) in computing an individual's tax payable under this Part for a taxation year in respect of a person where the individual is required to pay a support amount (within the meaning assigned by subsection 56.1(4)) to the individual's spouse or common-law partner or former spouse or common-law partner in respect of the person and the individual
(a) lives separate and apart from the spouse or common-law partner or former spouse or common-law partner throughout the year because of the breakdown of their marriage or common-law partnership; or (underlining added)
(b) claims a deduction for the year because of section 60 in respect of a support amount paid to the spouse or common-law partner or former spouse or common-law partner.
[13] In this case, the Appellant was married to Kerry Ann. The Appellant testified that he alone supported his children and that Kerry Ann did not work.
[14] As noted subsection 118(5) precludes the tax credit under subsection 118(1) where a taxpayer is required to pay a support amount for a person in respect of whom the tax credit would otherwise be claimed.
[15] However, in order for the tax credit to be denied, one of two additional conditions as set out in paragraphs (a) and (b) must be met. Paragraph (b) does not apply in this case because the Appellant could not have claimed a deduction under section 60. The Appellant must fall within paragraph (a) in order for the Minister's position to be correct. Paragraph (a) states that the taxpayer must live separate and apart from his spouse, former spouse or common-law partner throughout the year. The Appellant lived separate and apart from Kerry Ann for part of the year, but they lived together during the months of January, February, March, April and May 2002.
[16] The word "throughout", when used in relation to a period of time, has been held to mean the entire period. In Smith v. M.N.R., [1995] 2 C.T.C. 2454, Justice Rip of the Tax Court considered the word "throughout" in relation to time periods, and at paragraph 10 noted:
Mr. Smith resided in a prescribed area during two distinct and separate periods, one in 1987 and the other in 1988. He did not reside in a prescribed area "throughout a period of not less than six months ...". The word "throughout" is defined in the Shorter Oxford English Dictionary on Historical Principles as:
b. Through or during the whole of (a period of time or course of action); from beginning to end of 1540.
Thus, "throughout" means through the entire time period. A "year" means a period of 12 consecutive months: Interpretation Act, R.S.C. 1985, c. I-21, s. 37(1). Therefore, the phrase "throughout the year" means the entire consecutive 12-month period from January 1 to December 31 of the particular taxation year. It is also noteworthy that Parliament has deliberately chosen other language (such as "at any time during the year") when it is intended that the provision apply to an event that occurs sporadically or periodically and not continuously for the whole year.[1]
[17] The Appellant did not live separate and apart from his spouse or former spouse throughout the 2002 year. Consequently, subsection 118(5) does not apply and the Appellant is entitled to a tax credit in the amount of $6,055.00 under paragraph 118(1)(b) of the Act.
[18] The appeal is allowed, without costs.
Signed at Vancouver, British Columbia, this 8th day of April 2005.
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"L.M. Little" |
Little J.
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CITATION: |
2005TCC169 |
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COURT FILE NO.: |
2004-3680(IT)I |
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STYLE OF CAUSE: |
Wayne Chu and Her Majesty the Queen |
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PLACE OF HEARING: |
Vancouver, British Columbia |
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DATE OF HEARING: |
February 1, 2005 |
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REASONS FOR JUDGMENT BY: |
The Honourable Justice L.M. Little |
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DATE OF JUDGMENT: |
April 8, 2005 |
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APPEARANCES: |
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For the Appellant: |
The Appellant himself |
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Counsel for the Respondent: |
Pavanjit Mahil |
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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: |
John H. Sims, Q.C. Deputy Attorney General of Canada Ottawa, Canada |