Tax Court of Canada


Tax

Income Tax

Tax credits

Taxpayer entitled to claim legal fees to resolve matters relating to child support

Taxpayer and former spouse had two children P and R, both of whom lived with former spouse prior to late May 2014. In late May, P began living with taxpayer, and lived with him until mi-December 2014. P then moved back into mother’s home. In August 2015, Court ordered taxpayer to pay $19,989.60 of child support owed in respect of period from September 2013 to June 2014 by lump sum payment of $9,405.45 and by setting off remaining amount of obligation against amounts former spouse was required to pay taxpayer beginning June 2014, in respect of child support for P. In 2014 taxation year, taxpayer claimed, in respect of his son P, non-refundable tax credits under s. 118(1)(b) of Income Tax Act for wholly dependent person and under s. 118(1)(b.1) for child. Taxpayer also claimed $6,915 in respect of legal fees he asserted were incurred to collect support payments from his former spouse. Minister of National Revenue denied non-refundable tax credits and claimed legal fees. Taxpayer appealed. Appeal allowed in part. Reassessment was referred back to Minister for reconsideration on basis that taxpayer was entitled to deduct $2,284 in respect of legal fees. August Court order clearly provided that, effective June 2014, taxpayer and former spouse were each required to make support payments. Both taxpayer and former spouse were required, during 2014, to make support payments in respect of P. Therefore, as result of application of s. 118(5.1), s. 118(5) did not apply to deny taxpayer ability to claim s. 118(1)(b) and (b.1) credits. Taxpayer paid legal fees with respect to three separate issues: payment of child support by taxpayer to former spouse for P and R for period ending June 2014; payment of child support for R for period ending June 2014; and payment of child support by former spouse to taxpayer for P for period ending June 2014. It was reasonable to allocate legal fees equally among three issues. Only one-third of legal fees incurred in 2014 related to payment of child support by former spouse to taxpayer. Invoices for all services rendered totalled $6,853; taxpayer was hence entitled to deduction for one-third of amount or $2,284.

Ruel v. The Queen (2017), 2017 CarswellNat 2491, 2017 TCC 93, Steven K. D’Arcy J. (T.C.C. [Informal Procedure]).

 



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