Foster v. The Queen

[OFFICIAL ENGLISH TRANSLATION]

Date: 20001115

Docket: 1999-4801(IT)I

BETWEEN:

MICHEL FOSTER,

Appellant,

and

HER MAJESTY THE QUEEN,

Respondent.

REASONS FOR JUDGMENT

(rendered orally on the bench

on September 8, 2000, at Montréal, Quebec

and edited for greater clarity)

Archambault, J.T.C.C.

[1] Michel Foster objects to a notice of assessment made by the Minister of National Revenue (the Minister) for the 1997 taxation year. In computing Mr. Foster's income, the Minister disallowed a deduction for an amount of $22,500 paid to Andrée Boivin on November 5, 1997. The Minister claims that this amount does not represent support that may be deducted under section 60 of the Income Tax Act (the Act).

[2] At the outset of the hearing, Mr. Foster's counsel admitted the following paragraphs of the Reply to the Notice of Appeal: 3(a), (b), (c), (d), (e) and (f). The only other evidence adduced at the hearing consists of two documents: the first, the "amended divorce declaration" of Andrée Boivin and, the second, the decision handed down on August 7, 1997, by the Superior Court of Quebec allowing the action for divorce and determining certain terms and conditions for the payment of support and a lump sum.

[3] The amended divorce declaration contains the following relevant passages:

[TRANSLATION]

17. The applicant seeks a support amount of $500 per week for her maintenance, payable in advance at her place of residence, on the Thursday of every week, and asks that the said support be indexed according to the method provided for in Article 590 of the Civil Code of Québec;

18. The applicant further asks that the defendant pay her, at the beginning of each term, on presentation of her proof of registration as a full-time student, the amount of $765.55 in payment of her basic university fees;

19. The applicant also seeks a lump sum of $7,000 for the purchase of a used motor vehicle;

20. The applicant seeks a lump sum of $60,000 in full and final settlement of all the defendant's support obligations, representing:

$6,698 for dentist expenses;

$7,000 for the purchase of a used motor vehicle;

$5,000 representing two and one-half years of tuition fees;

$9,400 to cover the partial payment of the applicant's debts;

$32,000 as support;

in order to facilitate the re-establishment of the applicant and to keep her from being dependent in any way whatever on the defendant in future;

21. The applicant asks the Court to divide the value of the family patrimony of the parties.

[4] In the relief sought in the divorce declaration, the following is stated:

[TRANSLATION]

ORDERS the defendant to pay the applicant, for her support, a weekly support amount of $500, payable in advance at her residence;

ORDERS the said support amount to be indexed ...;

ORDERS the defendant to pay the applicant a lump sum of $7,000 for the purchase of a used motor vehicle;

In the alternative, ORDERS the defendant to pay the applicant a lump sum of $60,000 in full and final settlement of all support obligations;

[Emphasis added.]

[5] At page 2 of his decision, the Superior Court justice refers to the "decision on provisional measures" of his colleague Mr. Justice Tremblay:

[TRANSLATION]

A judgment for provisional measures was issued on December 21, 1994, by Mr. Justice Roland Tremblay, awarding the applicant $100 in support per week, indexed to inflation, plus an amount for tuition fees and another amount for the reimbursement of dental expenses.

[Emphasis added.]

[6] At page 9 of the decision, the following passage may be found:

[TRANSLATION]

The applicant seeks support and a lump sum. Counsel agreed that, if support were granted, it would be retroactive to the date on which the motion to amend the order on provisional measures was filed, that is, December 18, 1995. Thus, an amount of money would be determined that would be, as it were, a lump sum. This is granted for support, in the same manner as support amounts.

The parties' situation is unequal. The applicant has no income other than the support, a benefit from IVAQ, and the tuition fees paid by the defendant. According to her statement of income and expenses, she thus receives $171.76 a week in this way. As mentioned above, she is a student at the Université du Québec, and I do not see that she could not complete her bachelor's degree, which would probably enable her to find a job. She reported debts amounting to $40,000, comprising of $10,000, Visa bills, dental care and so on.

The defendant receives a salary of at least $90,000 a year. He also receives a reimbursement for his representation expenses and automobile expenses.

[Emphasis added.]

[7] Further on, at page 10, the Superior Court Judge adds:

[TRANSLATION]

Although the defendant's statement of capital does not show much in the way of assets, his income is certainly enough for him to pay support and a lump sum equivalent to retroactive support. Judgment was rendered on a motion for provisional measures and the support amount has been paid since that date. This must be taken into account in assessing the lump sum, which also takes into account the retroactive support.

The applicant seeks a lump sum of $60,000, which seems excessive to me, considering the length of the marriage, the age of the parties, the opportunity for the applicant to find a new job by allowing her to finish her education. I believe that an amount of $22,500 will pay off her loan for the purchase of an automobile, which is for her a necessity, the orthodontic treatments that she began during the marriage, which were partially paid for by the defendant, her overdue tuition fees, and the student loan that she has to repay.

In addition, I am partially allowing her claim for support at $225 per week payable every week to the applicant in advance to serve both as support and as tuition fees. The support will end on June 30, 1998, when she obtains her degree, which will allow her to find herself a job.

[Emphasis added.]

[8] In the disposition of his decision, the Superior Court Judge writes:

[TRANSLATION]

ORDERS the defendant to pay the applicant a lump sum of $22,500 payable in two instalments, the first, 30 days after the date of this judgment and the second, 60 days after the date of this judgment;

ORDERS the defendant to pay support of $225 per week to the applicant payable in advance at the applicant's residence every week until June 30, 1998;

ORDERS that the division of the family patrimony, by a payment of $5,035 by the defendant to the applicant ...

Analysis

[9] The parties agree that essentially the only point at issue here is whether the amount of $22,500 was paid as support or as a payment of capital. Section 60 of the Act allows a deduction only in respect of support. Paragraph (b) provides:

(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;

[10] The term "support amount" is defined in subsection 56.1(4):[1]

(4) Definitions - The definitions in this subsection apply in this section and section 56.

...

"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 former spouse of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage 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] It is also acknowledged by the parties that, if the judge had made it clear in the wording of his judgment that the amount of $22,500 represented retroactive support, there would have been no dispute before this Court.

[12] Counsel for Mr. Foster argues that it is clear that the amount of $22,500 represents support paid retroactively to December 18, 1995. Counsel for the respondent argues the contrary. The Court must therefore decide.

[13] Even if the wording of the disposition of the decision is not as explicit as one might wish, I believe that it is reasonable to conclude that a portion of the lump sum of $22,500 represents support paid retroactively and that another portion is intended to reimburse specific expenses incurred before August 7, 1997. I underlined the relevant portions of the above decision that support this conclusion. Among the most important relating to retroactive support, there is the following: [TRANSLATION] "his income is certainly enough for him to pay support and a lump sum equivalent to retroactive support". There is also the passage where the judge wrote that, in determining the lump sum, the support paid under the decision on provisional measures should be taken into consideration: [TRANSLATION] "This must be taken into account in assessing the lump sum, which also takes into account the retroactive support." On the issue of reimbursing expenses, there is a passage where the judge asserts that [TRANSLATION] "the lump sum of $22,500 will allow Ms. Boivin to pay certain specific expenses, such as orthodontic treatments and tuition fees."

[14] I also note that this approach is similar to the one taken by Judge Tremblay in his decision on provisional measures. Judge Tremblay granted Ms. Boivin two rights: the first was the right to $100 in support and the second was the right to be reimbursed for certain expenses¾dental expenses and tuition fees. The $100 support constitutes "a support amount" within the meaning of subsection 56.1(4) of the Act and is therefore deductible from Mr. Foster's income while reimbursement for specific expenses does not as a general rule constitute a "support amount"[2] within the meaning of the Act and is therefore not deductible.

[15] Since the judge did not explicitly break down the lump sum, it must be determined whether this may be done in reading the judge's reasons. An analysis of the reasons of the Superior Court judge leads me to believe that the amount awarded as retroactive support was $225 a week. There is nothing that enables me to believe that the $225 paid in support beginning on August 7, 1997, (that is, the date of the judge's decision) is different from that for the period prior to the decision. There is no evidence establishing that the support needs of Ms. Boivin during the period from December 18, 1995, to August 7, 1997, were greater or less than those in the period following the judgment. Since Ms. Boivin has already received an amount of $100 awarded by Judge Tremblay in his decision on provisional measures, the net amount of the retroactive support is $125 a week. I determined that there were 85 weeks from the date on which the amended divorce declaration was filed (December 18, 1995) to the date of the final decision of the Superior Court (August 7, 1997). I come therefore to the conclusion that an amount of $10,625 [$125 x 85] represents support. The balance, that is, $11,875 represents reimbursement for specific expenses.

[16] For these reasons, the appeal of Mr. Foster is allowed, and the assessment is referred back to the Minister for reconsideration and reassessment on the basis that Mr. Foster is entitled to a deduction for an additional amount of $10,625 as support. Since this amount is less than half of the amount at issue, no costs are awarded.

Signed at Ottawa, Canada, this 15th day of November 2000.

"Pierre Archambault"

J.T.C.C.

Translation certified true

on this 30^th day of September 2003.

Sophie Debbané, Revisor

[1] Subsection 56.1(4) of the Act applies to section 60 by virtue of subsection 60.1(4) of the Act.

[2] Because it is not an allowance payable on a periodic basis that the recipient may use at her discretion.