http://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/181413/index.do
Judickas v. The Queen (October 12, 2016 – 2016 TCC 225, D’Auray J.).
Précis: CRA denied the taxpayer Canada Child Tax Credits in 2009 and 2010. The Taxpayer established that both he and his former wife were paying support. He paid her for four children in her custody and she paid him for two children in his custody. There was no set-off. The Court accepted his evidence and allowed his appeal. There was no order as to costs as this was an informal procedure appeal.
Decision: This was an exceptional case where the taxpayer’s position was on all fours with the requirements of the Income Tax Act:
[14] The respondent submitted that the appellant was not entitled to claim the Tax Credits because the appellant was paying child support to his former spouse in accordance to subsection 118(5) of the Act. To support her position, the respondent quoted the decision in Verones v R.
[15] In Verones, Mr. Verones and his former spouse had two children. The children resided 50% of the time with each parent in a joint custody agreement. The child support payments were based on the income of both parties. The person having the higher income, Mr. Verones, had to pay the difference (a “set‑off” amount) to his former spouse for the children of the marriage. Mr. Verones stated that since he and his former spouse were both paying support, he should have been entitled to the Tax Credits. Justice Trudel of the Federal Court of Appeal in Verones explained that the set off concept did not apply since the income of both spouses is always taken into account to establish the child support payments. She stated at paragraph 8 the following:
[8] Once each parent’s obligation vis-à-vis the children is determined, the higher income parent may be obligated to make child support payments to the lower income parent as part of his or her performance of said obligation. However, in the end, the set-off concept does not translate the parents’ respective obligation to contribute to child rearing into a "support payment" as defined in the Act.
[16] The appellant argued that he and his former spouse were both obligated to pay child support. Therefore, the appellant argues that he should be granted the Tax Credits.
[17] In my view, the appellant’s position is correct, this appeal can be distinguished from the decision in Verones. In this appeal, both parents have the legal obligation pursuant to the September Agreement to pay child support, which was not the case in Verones.
[18] In Verones, the child support was based on the Guidelines taking into account the two children. The child support was determined on a pro rata basis in accordance with the parents’ respective income. Only Mr. Verones had the obligation to pay child support.
[19] In this appeal, both parents have an obligation to pay child support under the September Agreement. The appellant has to pay for the four children under the legal custody of Ms. Stuifbergen and she has to pay for the two children under the legal custody of the appellant.
[20] This appeal falls within the first example provided by Justice Miller of this Court in Letoria v Canada, who stated:
9 I dealt with a somewhat similar situation in the case of Ochitwa where I stated:
8. While I cannot disagree with the Respondent's conclusions, I am perturbed by the implications that in the same circumstances of a shared custody arrangement, that simply due to the crafting of an order or agreement a parent will or will not get the eligible dependant amount. For example, where there is a shared custody arrangement with two children it strikes me there are three possible ways to craft the child support, where each parent earns some income:
1. Each parent agrees to or is ordered to pay support for one child ($400 for one for example and $300 for the other -- net $100.00): both could claim the eligible dependant amount. . . .
[Emphasis added.]
[21] This type of agreement triggers the application of subsection 118(5.1) of the Act. If subsection 118(5.1) of the Act did not exist, both the appellant and his former spouse would have not been entitled to claim the child amounts for the children Ma and Mar, since both Ma and Mar did not ordinarily reside throughout the taxation years with Ms. Stuifbergen, and the appellant was paying child support.
[22] Therefore, the appellant is entitled to claim the Tax Credits for the 2009 and 2010 taxation years as he falls within the ambit of subsection 118(5.1) of the Act. However, as Ma was over the age of 18 at the end of 2009, the appellant may only claim the Tax Credits in respect of Mar for both taxation years. The appeal is therefore allowed on that basis.
[Footnote omitted]
There was no order as to costs as this was an informal procedure appeal.