Broad v. Minister of National Revenue, (2010) 403 N.R. 351 (FCA)

• Judge: Létourneau, Pelletier and Stratas, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: May 31, 2010
• Jurisdiction: Canada (Federal)
• Citations: (2010), 403 N.R. 351 (FCA);2010 FCA 146

Broad v. MNR (2010), 403 N.R. 351 (FCA)

MLB headnote and full text

Temp. Cite: [2010] N.R. TBEd. JN.028

James Broad (appellant) v. Her Majesty the Queen (respondent)

(A-624-08; 2010 FCA 146)

Indexed As: Broad v. Minister of National Revenue

Federal Court of Appeal

Létourneau, Pelletier and Stratas, JJ.A.

June 2, 2010.

Summary:

A judge of the Tax Court of Canada ruled that Broad was not able to deduct under s. 60(b) of the Income Tax Act support payments that he paid in 2005 to his former common law spouse. The judge held that the payments were not receivable under a written agreement as required by s. 56.1(4). Broad appealed.

The Federal Court of Appeal allowed the appeal, set aside the decision below and referred the matter back to the Minister for a new assessment on the basis that Broad's support payments for the 2005 taxation year were deductible from his income.

Income Tax - Topic 2605

Deductions in computing income - Alimony and maintenance payments - Requirement of written agreement or order - Broad and his common law spouse separated in 1990 - Broad paid support payments pursuant to a written separation agreement - The agreement contained a non-termination clause, providing that, if the parties cohabited again as man and wife, the agreement would remain in force until they mutually agreed to terminate or amend the agreement - The parties attempted a reconciliation between August 1993 and February 1995 - No support payments were made then - Thereafter, except for a brief period, Broad made support payments in the exact amount specified in the earlier separation agreement - A judge of the Tax Court of Canada ruled that Broad was not able to deduct the 2005 support payments pursuant to s. 60(b) of the Income Tax Act - The judge held that the reconciliation and failure to make the payments during that period terminated the separation agreement - Therefore, the subsequent payments were not receivable under a written agreement as required by s. 56.1(4) - The Federal Court of Appeal allowed Broad's appeal and held that Broad's support payments for the 2005 taxation year were deductible - Parliament had stated repeatedly a very strong public policy in favour of encouraging reconciliation - An attempt at reconciliation should not work detrimental consequences - Insofar as it was possible to be consistent with the text and scheme of the Income Tax Act, s. 56.1(4) should be interpreted in a manner consistent with that public policy - The taxpayer need only show that the parties continued to act under the earlier written agreement, without material variation, such that the agreement still described their relationship - Broad had done that.

Cases Noticed:

Aitken v. Aitken et al. (1999), 133 B.C.A.C. 151; 217 W.A.C. 151; 1999 BCCA 734, refd to. [para. 8].

Sydor v. Sydor (2003), 178 O.A.C. 155 (C.A.), refd to. [para. 8].

Minister of National Revenue v. Canada Trustco Mortgage Co., [2005] 2 S.C.R. 601; 340 N.R. 1; 2005 SCC 54, refd to. [para. 9].

Hodson v. Minister of National Revenue, [1988] 1 C.T.C. 2; 82 N.R. 308 (F.C.A.), refd to. [para. 9].

Foley v. Minister of National Revenue, [2000] 4 C.T.C. 2016 (T.C.C.), refd to. [para. 12].

Burgess v. Minister of National Revenue (1991), 91 D.T.C. 5076 (T.C.C.), refd to. [para. 12].

Statutes Noticed:

Income Tax Act, R.S.C. 1985 (5th Supp.), c. 1, sect. 56.1(4) [para. 2].

Counsel:

Richard E. Rhodes, for the appellant;

Christa Akey and Ron D.F. Wilhelm, for the respondent.

Solicitors of Record:

Richard E. Rhodes, White Rock, B.C., for the appellant;

Myles J. Kirvan, Deputy Attorney General of Canada, Ottawa, Ontario, for the respondent.

This appeal was heard at Vancouver, British Columbia, on May 31, 2010, by Létourneau, Pelletier and Stratas, JJ.A., of the Federal Court of Appeal. The following reasons for judgment of the court were delivered by Stratas, J.A., on June 2, 2010.