Takis P. Veliotis (Plaintiff)
v.
The Queen (Defendant)
Trial Division (T-2644-72), Pratte J.—Quebec,
November 23, 1973; Ottawa, January 3, 1974.
Income tax—Alimony or maintenance—Lump sum for
part payment—Whether deductible under s. 11(1)(l) of the
Income Tax Act.
The plaintiff claimed to be entitled to deduct an amount of
$25,000 from his income for 1969 which amount was in part
payment of the sum awarded to his wife in lieu of regular
maintenance payments. The decree nisi, based on an agree
ment between the husband and wife, awarded the wife
$50,000, $25,000 payable within 15 days of a decree abso
lute and the balance payable in 3 equal yearly payments.
Held, upholding the decision of the Tax Review Board,
the payment of $25,000 is not an "allowance payable on a
periodic basis" within the meaning of section 11(1)(1) of the
Income Tax Act.
M.N.R. v. Trottier [1967] 2 Ex.C.R. 268, [1968] S.C.R.
728, followed; No. 427 v. M.N.R. 57 DTC 291; M.N.R.
v. Hansen [1968] 1 Ex.C.R. 380, considered.
APPEAL.
COUNSEL:
G. Drolet for plaintiff.
Louise Lamarre-Proulx for defendant.
SOLICITORS:
Amyot, Lesage, Lesage & Co., Quebec, for
plaintiff.
Deputy Attorney General of Canada for
defendant.
PRATTE J.—This is an appeal from the deci
sion of the Tax Review Board, dismissing the
plaintiff's appeal from his income tax assess
ment for the year 1969.
This action raises the question of whether the
plaintiff was entitled, under section 11(1)(0 of
the Income• Tax Act, to deduct from his income
for 1969 the sum of $25,000.00 paid by him to
his former wife during that year.
Section 11(1)(n reads as follows:
11. (1) ... the following amounts may be deducted in
computing the income of a taxpayer for a taxation year:
(I) 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
allowance 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 plaintiff was, formerly married to Mrs.
Bessie Charkas. The marriage was dissolved by
divorce. A decree nisi was granted by the Supe
rior Court of Quebec on July 23, 1969. It is in
order to quote certain portions bf that decree, in
which the plaintiff is described as "petitioner"
and his then wife as "respondent":
WHEREAS ... respondent was justified in seeking a
divorce in her favour;
IN VIEW OF the conditions agreed on by the parties,
regarding custody of the children, in accordance with the
agreement concluded on June 16, 1969, and forming part of
the record;
WHEREAS by the said agreement the parties determined
their rights and financial obligations as a consequence of
their marriage;
FOR THESE REASONS:
GRANTS a decree nisi between petitioner and
respondent ...
APPROVES the agreement concluded by the parties on June
16, 1969 regarding custody of the children, subject to any
recourse by either party to the Court in a case of necessity;
ORDERS petitioner to pay respondent, in lieu of an alimen
tary pension and in settlement of claims resulting from the
marriage, the sum of $50,000.00, $25,000.00 of which shall
be payable within fifteen (15) days of a decree absolute on
this petition, and $25,000.00 payable in three equal annual
instalments, the first to be payable one year from the date of
a decree absolute on this petition ...
This decree nisi was declared absolute on
October 30, 1969. A few days later, the plaintiff
made the first payment of $25,000.00, referred
to in the decree nisi, to his former wife. It is this
amount which he claims to be entitled to deduct
from his income for 1969.
The decree nisi refers to an agreement con
cluded between the plaintiff and his former
spouse on June 16, 1969. The purpose of this
agreement, made in anticipation of the divorce,
was to determine the supplementary orders to
be contained in the divorce decree. In the first
paragraph the parties agreed that for eleven
months of the year the two children of their
marriage would be in the custody of the plain
tiff. The second paragraph was headed "Other
Visits and Communications with the Children".
Finally, the third and fourth paragraphs read as
follows:
3. MONETARY MEASURES:
Mr. Veliotis shall renounce any and all claims he may
have or pretend to have on the property of Le Breton Street,
St. Foy, which is now registered in Mrs. Veliotis's (sic)
name;
Mr. Veliotis shall deposit with a trust company or jointly
with both counsels the sum of twenty-five thousand dollars
($25,000.00) or any other negotiable instruments, the latter
subject to joint agreement, in order that the said sum of
twenty-five thousand dollars ($25,000.00) or the proceeds
of any negotiable instruments be paid unto Mrs. Veliotis if
and when a final ordinance of divorce is rendered in which
would be embodied the provisions of the accessory
measures outlined herein; especially those concerning the
custody of the children and the respective rights and obliga
tions of the parties, these accessory measures to be consid
ered as an essential part of the agreement;
Over and above the cash amount to be paid to Mrs.
Veliotis, as above provided for, Mr. Veliotis agrees to pay
unto Mrs. Veliotis an additional amount of twenty-five
thousand dollars ($25,000.00) by three yearly instalments of
$8333.33 each, the first becoming due one year after the
payment of the initial amount of $25,000.00. The unpaid
instalments would bear interest at the rate of 7% and the
amount of the interest will be added to each yearly instal
ment and be paid at the same time thereas;
Mrs. Veliotis expressly renounces her right to any alimo
ny or pension and undertakes to give and execute a final
discharge to Mr. Veliotis following the payment of the last
instalment;
Mrs. Veliotis agrees to and does desist from her action for
separation as to bed and board and all other accessory and
incidental proceedings related thereto, comprising Court
action, Petition or Petitions, judgment or judgments ren
dered thereon;
Should the Court see fit, the parties hereto agree that a
final ordinance be rendered immediately notwithstanding the
provisions of Article 13, Paragraph 1 but according to
Paragraph 2a) of Article 13 of the Divorce Act;
4. LEGAL OR CONTRACTUAL MATRIMONIAL BENEFITS:
Mrs. Veliotis specifically renounces all rights to the ben
efits stipulated in the marriage contract in her favour; in
consideration of the settlement above provided for the said
marriage contract to be annulled by the Ordinance of
Divorce if and when rendered; with the exception of the
furniture, which the Petitioner recognizes as the property of
the respondent.
Section 11(1)(1) lays down the conditions the
payments to which it refers must meet if they
are to be deductible from the income of the
taxpayer making them. Clearly, the $25,000.00
payment in question meets several of these con
ditions. It was paid by plaintiff in 1969 in
accordance with the judgment of a competent
tribunal; it was paid to plaintiff's ex-wife; final
ly, at the time of the payment, and for the
remainder of 1969 the plaintiff "was living apart
from and was separated pursuant to a divorce
... from his former spouse ... to whom he was
required to make the payment".
The foregoing is admitted by the defendant,
who nevertheless maintains that the sum of
$25,000.00 which the plaintiff claims to deduct
was not paid "as alimony or other allowance
payable on a periodic basis for the mainte
nance" of the plaintiff's former spouse. In sup
port of this contention counsel for the defend
ant argued that the sum of $25,000.00 was not
paid in settlement of an alimentary obligation,
since it was part of a larger sum ($50,000.00)
which the plaintiff had to pay in order to be
released from any alimentary obligation toward
his former spouse. Counsel also contended that
the obligation imposed on the plaintiff to pay
the sum of $25,000.00 was not in the nature of
an alimentary obligation, since the right of the
plaintiff's former wife to require this payment
was assignable and could be passed on to her
heirs. On this point counsel for the defendant
referred the Court to the judgment of the Ex
chequer Court in M.N.R. v. Trottier [1967] 2
Ex.C.R. 268. In this judgment, which was
subsequently upheld by the Supreme Court
(Trottier v. M.N.R. [1968] S.C.R. 728), Cat-
tanach J. said (at page 278):
Alimony or maintenance continues through the joint lives
of the husband and wife but terminates upon the death of
either. If Mrs. Trottier had died during the currency of the
second mortgage the payments under the second mortgage
would continue to be payable to her assignee, if she had
assigned it, and otherwise to her heirs, executors or adminis
trators in accordance with a covenant in the indenture to
that effect. It follows that the periodic payments cannot be
classified as payments for maintenance.
Further maintenance is payable for the support of the
wife and as such is not assignable by her and neither do
such payments, from their very nature, bear-- interest. The
payments here under consideration are both assignable and
interest bearing under the terms of the second mortgage.
Of course, counsel for the plaintiff argued
that the various sums plaintiff was required to
pay by the divorce decree did constitute an
"allowance payable on a periodic basis for the
maintenance of plaintiff's former spouse". He
pointed to the terms of the judgment and of the
agreement of June 16, 1969, in support of his
claim that the sum of $25,000.00 was paid for
the maintenance of plaintiff's former spouse.
He also argued, on the basis of various diction
ary definitions and a decision of the Tax Appeal
Board (No. 427 v. M.N.R. 57 DTC 291), that
payments are "periodic" when they are to be
made one after another on prearranged dates,
even if the amounts of the various payments are
unequal. Finally, counsel for the plaintiff
referred the Court to the judgment delivered by
Jackett P., as he then was, in M.N.R. v. Hansen
[1968] 1 Ex.C.R. 380.
In my opinion, even assuming that the plain
tiff paid the sum of $25,000.00 which he seeks
to deduct for the maintenance of his former
wife, that sum was still not paid, as required by
section 11(1)(n, "as alimony or other allowance
payable on a periodic basis ...".
First, it seems clear that the sum of
$25,000.00 was not paid "as alimony". The
word "alimony", which, in the French version
of section 11(1r, is translated by the expres
sion "pension alimentaire", has a narrower
meaning than that expression: it refers only to
the periodic allowance which, pursuant to a
judgment, one spouse must pay the other during
the marriage. (See Halsbury's Laws of England,
3rd ed., vol. 12, p. 288.)
Secondly, the sum of $25,000.00 cannot be
said to have been paid as an "allowance payable
on a periodic basis". In my view, the allowance
payable on a periodic basis referred to in sec
tion 11(1)(l) is periodic in the same sense as
alimony, and alimony is a periodic allowance
not only in the sense that the payer must make
payments at regular intervals, but also in the
sense that at regular intervals the payer must
provide a sum adequate to maintain the payee
until the next payment. Consequently, a divorce
decree which ordered a husband to pay his
spouse the sum of $100,000.00 in four monthly
instalments of $25,000.00 would not in the
normal course be a judgment ordering the pay
ment of a periodic allowance within the meaning
of section 11(1)0. Moreover, it ahould be noted
that the section refers to a sum paid as an
"allowance payable on a periodic basis". An
allowance is a specific sum of money paid to
someone. An allowance is payable on a periodic
basis when a specific sum of money is payable
at regular intervals. A judgment does not create
an obligation to pay an allowance on a periodic
basis if it does not require the payer to pay the
same sum of money at regular intervals. In the
case at bar the divorce decree may impose on
the plaintiff an obligation to make certain pay
ments on a periodic basis; but it does not
require him to make a periodic allowance to his
spouse of $25,000.00.
In my view, therefore, plaintiff is not entitled
to the deduction he is claiming, and his action
should be dismissed.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.