Michelle D’Elia v The Queen, 2012 TCC 180

Download PDF

Canada Child Tax Benefit as Between Parents

D’Elia v The Queen, 2012 TCC 180

This case had two main issues: (1) whether the appellant was the “eligible individual” in respect of her son for purposes of claiming the CCTB, and (2) whether her son was a dependent for purposes of the GST credit.

The CRA denied the above benefits to the taxpayer for the four months that the child was not in her care.  The CRA assumed that due to the breakdown of the marriage the parents  began to live separate and apart, and that the child’s primary residence was the spouse’s house while the appellant had reasonable access.  The child resided with the appellant 48 hours every two weeks for some of the periods in question, and 129 hours every two weeks for some other periods.

The Court concluded that for purposes of claiming the CCTB and the GSTC, a female parent with whom a child resides for any period of time in the relevant months is presumed to be the eligible individual, absent assumptions or evidence that bring in the circumstances found in regulation 6301(1) into play.

The CCTB is calculated as an overpayment on a   monthly basis, that is then paid to an eligible individual as a refund of the   overpayment.  The determination is made   at the beginning of the month, thus one must determine whether or not a   person is an “eligible individual in respect of a qualified dependent at   the beginning of a particular month”.The GSTC is determined for eligible individuals in   relation to specified months (122.5(3)), and the specified months are July   and October of the immediately following taxation year, and January and April   of the second immediately following taxation year (122.5(4)).To be an eligible individual in respect of a   qualified dependant, for purposes of CCTB, two conditions must be   satisfied every month at the beginning of the month: (1) the person must   reside with the qualified dependant; and (2) the person must be the parent of   the qualified dependant who primarily fulfills the responsibility of care and   upbringing of the qualified dependant (paras 9-10).For the GSTC, one need only qualify at the   beginning of the specified months, and this again requires that the dependent   person reside with the person who is to be the qualified individual.

The court referred to the decision of the SCC in   Thomson v. M.N.R., 1945 CarswellNat 23, [1946] C.T.C. 51, the decision of the   TCC in S.R. v. The Queen, 2003 TCC 649 (CanLII), 2003 TCC 649, [2004] 1   C.T.C. 2386, and the decision of the TCC in Lapierre v. The Queen, 2005 TCC   720 (CanLII), 2005 TCC 720, 2008 DTC 4248, and determined that the question   of residence must be determined by looking at the child’s “settled and   usual abode” (para 16).

The court commented that one problem with the   Minister’s assumptions is the use of the word “resided”, which is a   question of fact to be determined only after applying the law to the facts,   and that it’s not proper to assume where a person is residing as this is a   conclusion that must be drawn after looking at the facts (para 18) – see   Nadalin v. The Queen, 2012 TCC 48 (CanLII), 2012 TCC 48.  Thus, these assumptions by the Minster are   not proper assumptions.The court also rejected the assumption that the child   was primarily residing with the spouse, as the ITA’s eligibility criteria   only require the dependent to be residing with the qualified individual, not   primarily residing.  The court looked not at the separation agreement,   but evidence of the child’s actual residence, and determined that the child   had a settled and usual abode with both the spouse and the appellant for all   of the months in question.  The issue   then was whether she was the person primarily responsible for the child’s   care. The court noted that the ITA s 122.6 assumed that the female parent   fulfilled this role, absent prescribed circumstances found in the regulations   at 6301(1).The court stated that none of the prescribed   circumstances were in the assumptions of the Minister, nor were any proven by   the Minister during the proceedings. Thus, if the child resided with the   female parent during any of the months required, then the statutory   presumption makes her the eligible individual.

– Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

If you like this website, please share with others and consider supporting us with a donation.

Back To Top OR Home

Clearwater Seafoods Holdings Trust v The Queen, 2012 TCC 186

Download PDF

Who Gets to Continue an Appeal after a Plan of Arrangement

Clearwater Seafoods v The Queen, 2012 TCC 186

The issue here was whether a corporation that purchased the assets and liabilities of an income trust was able to become the appellant in an appeal commenced by the income trust prior to the implementation of the plan of arrangement.

The Income trust initiated an appeal in respect of an assessment that increased the tax payable by the trust. After the appeal was filed, the trust was involved in a plan of arrangement, the purpose of which was to convert the trust to a corporation.  The plan of arrangement stated that after the assets and liabilities passed to the corporation, “the trust will be dissolved in accordance with the applicable law and the [Trust’s] Declaration of Trust”.

The Court concluded that a corporation assuming the tax liability of a trust as part of a plan of arrangement does not thereby gain the trust’s objection/appeal rights. Neither the ITA nor the common law allows for the assignment of the tax obligation in a manner that is binding on the Minister.

Before the   court could apply section 29 of the Tax Court of Canada Rules (General Procedure), the successor corporation must be found to have   transmitted its liability in respect to the subject matter under appeal via   “assignment, bankruptcy, death or other means” (para 15).The court   considered that under the ITA the person who earns income is the taxpayer in   respect of the income, and is liable to pay income tax the moment the income   is earned.  It is this taxpayer who  is assessed under s 152, and who has the   right to file a notice of objection under s165.The court   noted that there are no provisions in the ITA that allow the appeal rights to   be assigned. Counsel for the appellant conceded that they relied on s 88.1 to   transfer assets of the trust and that this section incorporates the winding   up provisions of subsection 88(1).    Thus, the assignment/assumption of any potential tax debt did not   result in the acquisition of rights the rights of appeal.The court   then looked at the common law and stated that an agreement by which one party   assumes another’s tax liability is not binding on the Minister (para   29).  The court noted that at common   law, a party may assign his contractual benefits, but not his obligations   (without the consent of the party to whom the obligation is owed).

Thus, even   though the corporation now had the legal obligation, as between itself and   the trust, to pay any income tax debt of the Trust, this doesn’t change the   fact that this debt is owed by the trust to the Crown, AND the   assignment/assumption of such debt doesn’t transfer to the corporation the   Trust’s rights of appeal in respect of the assessment of the Minister.

– Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

If you like this website, please share with others and consider supporting us with a donation.

Back To Top OR Home

Income Tax – HST/GST – International Tax