INCOME TAX |
Income Calculation |
Deductions |
Veilleux v. Canada
A-816-00
2002 FCA 201, Létourneau J.A
16/5/02
17 pp.
Application for judicial review of Tax Court of Canada decision determining applicant not justified, under Income Tax Act, ss. 60, 60.1(2), in deducting payments made to third parties pursuant to agreement with former spouse--Applicant divorced in 1989 and agreement on corollary relief incorporated into divorce judgment--Under agreement, applicant made payments directly to creditors--For 1994, 1995, 1996, and 1997, amounts paid by applicant on that basis totalled $17,369, $19,265, $20,104 and $19,921--Applicant deducting amounts from income--Purpose of ss. 56.1(2), 60.1(2) to allow payor to deduct payments made to third parties for benefit of former spouse, provided amounts included in former spouse's income--Respondent adopted very strict interpretation of ss. 56.1(2), 60.1(2)-- Express reference to ss. 56.1(2), 60.1(2) not required in written agreement; parties need only have understood tax consequences of agreement--Combined purposes of ss. 56, 60, 56.1(2), 60.1(2) to give divorced couples option of reducing tax burdens and ensure divorced couples aware and informed of consequences for both of doing so--S. 60 not mandatory but merely permissive: does not create obligation--Given context agreement entered into and written, applicant not only implicitly reserving right to claim tax advantages that resulted when assuming obligations to make payments to third parties for benefit of former spouse but clearly stating in testimony he was aware of advantages and seeking them--S. 60.1(2) creating presumption payments made to third parties by taxpayer for benefit of recipient constituting allowance on periodic basis that recipient may use at his or her discretion and are therefore support amounts--Disallowing deductions claimed by applicant in circumstances amounts to penalizing him unfairly by denying him right that is corollary of all support obligations he assumed and carried out in good faith--Applicant entitled to deductions claimed for 1994 to 1997-- Application allowed--Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, ss. 56 (as am. idem, Sch. II, s. 32), 56.1 (as am. idem, Sch. VIII, s. 18), 60 (as am. idem, Sch. II, s. 34), 60.1 (as am. idem, Sch. VIII, s. 22).