T-2272-78
J. Adrien Lavoie (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Addy J.—Quebec City, December
1; Ottawa, December 13, 1978.
Income tax — Income calculation — Deductions — Alimo
ny — Alimony paid in 1974 included $33,000 final lump sum
payment calculated as one-third of plaintiff's worth which
included $60,000 owing plaintiff for expropriated land and
accrued interest of $12,495 on that sum — Allegation that tax
on one-third of $12,495 ($4,160.83) should be paid by wife
Whether or not $4,160.83 deductible on account of alimony in
1975, the year interest paid to plaintiff — Income Tax Act,
S.C. 1970-71-72, c. 63, s. 60.
INCOME tax appeal.
COUNSEL:
Irenée Simard, Q.C. for plaintiff.
Pierre Barnard for defendant.
SOLICITORS:
Irenée Simard, Q.C., Quebec City, for
plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
ADDY J.: The issue here is whether the amount
of $4,160.83, claimed by plaintiff as a deduction
from his income for the taxation year 1975 on
account of alimony paid to his wife, meets the
requirements of section 60 of the Income Tax
Act.'
The facts are not in dispute. Plaintiff was
ordered by a decree nisi of the Superior Court of
Quebec to pay his wife $100 a week. By a decree
absolute dated October 17, 1975 he was ordered to
pay her the sum of $11,000 in debts, including
certain arrears of the weekly amount of $100, and
in addition a final lump sum of $33,000 alimony.
This sum of $33,000 represented one-third of the
' S.C. 1970-71-72, c. 63.
net worth of plaintiff, which the Court estimated
at that time to be $130,000 [sic]. Included in this
sum of $130,000 was an amount of $60,000 owed
him by the Province of Quebec for an expropriated
property, as well as $12,495 in accrued interest.
As soon as the decree was made, that is in 1974,
plaintiff paid his wife the full amount which the
Court had ordered him to pay her. However, the
capital sum and interest owed plaintiff for the
expropriation were not paid to him by the Province
until March 26, 1975.
Since the amount of the decree of $33,000 in
favour of his wife was calculated on a third of his
worth, and this worth included a third of the
accrued interest of $12,495 on the compensation
owed to him, plaintiff alleged that the tax on a
third of the sum of $12,495, that is $4,160.83,
should be paid by his wife and not by him. He
therefore deducted this sum of $4,160.83 as alimo
ny for the taxation year 1975, since the interest
was paid to him in that year.
Section 60(b) of the Act reads as follows:
60. ...
(b) an amount paid by the taxpayer in the year, pursuant to
a decree, order or judgment of a competent tribunal or
pursuant to a written agreement, as alimony or other allow
ance payable on a periodic basis for the maintenance of the
recipient thereof, children of the marriage, or both the
recipient and children of the marriage, if he was living apart
from, and was separated pursuant to a divorce, judicial
separation or written separation agreement from, his spouse
or former spouse to whom he was required to make the
payment at the time the payment was made and throughout
the remainder of the year;
The expression "an amount paid ... in the year"
means that a deduction for alimony may only be
claimed for a taxation year during which the
amount was paid. In the case at bar, plaintiff is
claiming a deduction for the taxation year 1975
for monies which were paid by him in 1974. The
deduction claimed therefore does not meet the
requirements of the section.
Moreover, a lump sum paid to discharge an
obligation to pay alimony is not an "allowance
payable on a periodic basis" as required by the
section in question: see Veliotis v. The Queen. 2 In
that case, Pratte J. cited the judgment of Cat-
tanach J. in M.N.R. v. Trottier, 3 at page 278, a
judgment which was upheld on appeal by the
Supreme Court of Canada (see Trottier v.
M.N.R. 4 ).
Finally, even if the interest is considered on its
own, without reference to section 60(b), it is clear
that the wife enjoyed no right of ownership over
the interest, whether before or after the decree
absolute. The decree gave her a right to receive a
lump sum of $33,000. Furthermore, the interest
had been calculated by the Court itself as forming
part of plaintiff's total worth. This is therefore a
situation which appears to call for application of
the principle which the Supreme Court of Canada
itself applied in Woodward's Pension Society v.
M.N.R. 5 Speaking for the whole Court, Judson J.
stated, at page 228:
The income received by the appellant was its own income, not
subject to the legal claim of any other person. After receipt it
was applied by the appellant in accordance with its stated
objects. The learned President rightly held that the case was
within the principle of Mersey Docks & Harbour Board v.
Lucas (1882-3), 8 App. Cas. 891.
For these three reasons, the Court dismisses the
action of plaintiff with costs and affirms the addi
tional assessment of $4,160.83 at issue.
JUDGMENT
Having examined the proceedings and the
exhibits included in the record, and heard the
witnesses and the parties through their counsel, the
Court dismisses the action of plaintiff with costs
and affirms the additional assessment of $4,160.83
made against plaintiff by the Minister of National
Revenue for the taxation year 1975.
2 74 DTC 6190.
3 [1967] 2 Ex.C.R. 268.
4 [1968] S.C.R. 728.
5 [1962] S.C.R. 224.
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