DEBORAH ANDERSON, Appellant, v. HER MAJESTY THE QUEEN,, 2003 TCC 180

Docket: 2002-2203(IT)I BETWEEN: DEBORAH ANDERSON, Appellant, and HER MAJESTY THE QUEEN, Respondent. ____________________________________________________________________ Appeal heard on March 3, 2003 at Edmonton, Alberta Before: The Honourable Judge L.M. Little Appearances: For the Appellant: The Appellant herself Counsel for the Respondent: Mark Heseltine ____________________________________________________________________ JUDGMENT The appeal from the assessment made under the Income Tax Act for the 2000 taxation year is dismissed, without costs, in accordance with the attached Reasons for Judgment.

Signed at Vancouver, British Columbia, this 31st day of March 2003. "L.M. Little" J.T.C.C. Citation: 2003TCC180 Date: 20030331 Docket: 2002-2203(IT)I BETWEEN: DEBORAH ANDERSON, Appellant, and HER MAJESTY THE QUEEN, Respondent. REASONS FOR JUDGMENT Little, J. A.

FACTS : [ 1 ] The Appellant was divorced from William Aldridge ("Former Spouse"). [ 2 ] The Appellant and the Former Spouse have three children of the marriage, Jodi, Robert and Neil. [ 3 ] Pursuant to an Order of the Court dated December 21, 1982 the Former Spouse was ordered to pay the Appellant the sum of $100.00 per month per child for a total of $300.00 per month or $3,600.00 per year commencing on the 1st day of January 1983. [ 4 ] In 1983 the Former Spouse made support payments to the Appellant of $3,450.00.

The Former Spouse made no other support payments to the Appellant from 1983 to 1999. [ 5 ] The mother of the Former Spouse, Dorys Aldridge, died in 1998-1999.

The Former Spouse received an inheritance from his mother. [ 6 ] The Appellant commenced garnishee proceedings in the Queen's Bench Division of Alberta against the Estate of Dorys Aldridge to recover support payments that were owing to her by her Former Spouse for the 1983 and subsequent years. [ 7 ] In 1999 the Appellant received the sum of $51,500.00 from the Estate of Dorys Aldridge covering the past support payments owed to the Appellant by the Former Spouse from 1983 to 1999 plus interest. The amount of $51,500.00 is broken down as follows: Support payments due and owing $48,050.00 Interest 2,401.00

Plus related writs plus probable costs 1,000.00 Total $51,451.00 (Rounded off to $51,500.00) [ 8 ] When the Appellant filed her T1 general income tax return for the 2000 taxation year she advised officials of the Canada Customs and Revenue Agency (the "CCRA") that she had received a lump sum covering support payments owing to her.

The Appellant requested that Revenue Canada (the former name of the CCRA) re-evaluate her taxes from 1993 to 1999 as per a breakdown attached showing the support payments received by her for each year rather than subjecting the full amount of $51,451.00 to tax in the 2000 taxation year. [ 9 ] By memorandum from the CCRA dated July 23, 2001 the Minister of National Revenue (the "Minister") explained that with respect to Qualified Retroactive Lump-Sum Payment ("QRLSP") the CCRA reduces taxable income for the year by the part of the payment that relates to eligible tax years for which income tax returns were filed.

The memorandum from the Minister stated that if this special tax calculation benefits a taxpayer it will be used. The memorandum contains the following statement: The attached chart provides the details of our calculation. Since the amount of basic federal tax under the regular calculation (line

B) is less than the amount computed using the special tax calculation (line A), the special tax calculation for the QRLSP does not benefit you. As a result, we have assessed your return in the usual manner. The Federal Tax determined under the regular method was $11,344.83. The Federal Tax determined under the special method for QRLSP was $15,557.30. B. ISSUE [ 10 ] The issue is whether the Minister has correctly determined the tax applicable to the Lump-Sum Payment received by the Appellant. C.

ANALYSIS [ 11 ] Sections 110.2 and 120.31 of the Income Tax Act (the " Act ") were enacted to enable an individual such as the Appellant who received a qualifying Retroactive Lump-Sum Payment to benefit from a special tax calculation. [ 12 ] In this situation the Minister applied the provisions of sections 110.2 and 120.31 and determined that applying those sections would result in greater tax owing by the Appellant than the tax applicable where the principal is included in income for the 2000 taxation year. [ 13 ] The Appellant argued that she was being penalized since the CCRA imposed a "deemed" tax in its calculations. [ 14 ] Pursuant to

section 110.2 the principal amount may be deducted from the Appellant's income for the 2000 taxation year.

Section 120.31 of the Act provides for an addition to tax payable equal to an amount, if any, that the deemed or notional tax payable exceeds tax payable under

Part 1. The deemed or notional tax payable equals the total of two items: 1. additional tax that could have been triggered from each relevant preceding year, if a specified portion was added to taxable income (NOTE - In this situation, the amount of $3,600.00 (i.e. 12 x $300.00 per month = $3,600.00) was added to the Appellant's income for each year commencing in 1984 and ending in 1998 less a reduction for the children who had reached 18 years of age).

PLUS 2. the interest to reflect the tax that was not paid by the Appellant in the relevant years. [ 15 ] The tax calculated using the "special calculation" was $15,440.45. The tax calculated using the regular tax calculation was $11,344.83. [ 16 ] I have reviewed this situation in detail and I am unable to detect an error in the calculations made by officials of the CCRA. In other words the "special calculation" provided by sections 110.2 and 120.31 of the Act does not provide the Appellant with any relief or saving. [ 17 ] It is my responsibility to interpret the law.

I do not have the authority to amend the law. The Appellant was honest and forthright in advising the CCRA of the Lump-Sum Payment that she received. She is to be commended for doing so. However, I cannot say that she is being punished for being honest. She was simply doing what the law requires, i.e. reporting income of this nature.

If she had failed to report this income she might have been penalized for her failure to report. [ 18 ] By letter dated September 19, 2001, the Appellant was advised by Mona Berry of the CCRA that the Income Tax Act allows for a deduction of legal fees incurred in obtaining this settlement. I cannot ascertain from the Court record whether the Appellant has been allowed to deduct the legal fees incurred by her in obtaining the settlement. [ 19 ] The appeal is dismissed, without costs. Signed at Vancouver, British Columbia, this 31st day of March 2003 "L.M. Little" J.T.C.C.

CITATION: 2003TCC180 COURT FILE NO.: 2002-2203(IT)I STYLE OF CAUSE: Deborah Anderson and Her Majesty the Queen PLACE OF HEARING: Edmonton, Alberta DATE OF HEARING: March 3 2003 REASONS FOR JUDGMENT BY: The Honourable Judge L.M. Little DATE OF JUDGMENT: March 31, 2003 APPEARANCES: For the Appellant: The Appellant herself Counsel for the Respondent: Mark Heseltine COUNSEL OF RECORD: For the Appellant: Name: Firm: For the Respondent: Morris Rosenberg Deputy Attorney General of Canada Ottawa, Canada