Ryan v. R. – TCC: Support payments made in 2013 pursuant to an agreement entered into in 2014 (evidenced by a 2015 court order) were deductible

Ryan v. R. – TCC:  Support payments made in 2013 pursuant to an agreement entered into in 2014 (evidenced by a 2015 court order) were deductible

https://decision.tcc-cci.gc.ca/tcc-cci/decisions/en/item/356486/index.do

Ryan v. The Queen (December 18, 2018 – 2018 TCC 257, Bocock J.).

Précis:  The issue here was whether there was evidence of a binding agreement entered into in 2014 to pay the disputed amounts in respect of 2013.  The Tax Court Judge found that there was evidence of such an agreement from a 2015 court order enforcing the 2014 agreement.  Thus the taxpayer’s appeal was allowed.

Decision:   The problem was a simple one:

[4]  Ms. Ryan’s ex-common-law partner was recalcitrant as to completing the terms of separation, attending at Court, instructing his lawyer and even picking-up his payments. These stalling techniques may have been related to his disagreement or contestation of the process, but also possibly relate to his dilatory character. The delay had consequences. The relationship broke down in 2013. Ms. Ryan dutifully, and in accordance with her lawyer’s instructions, paid the support amounts in 2013 and 2014 in advance of a completed agreement. She did that so such payments would qualify as spousal support when a court order or agreement was completed the following year, 2014.

[5]  Things did not go as planned. As the proceedings dragged on, the ex-partner even failed to attend in person a mandatory settlement conference on November 7, 2014. Ultimately, his own lawyer brought him on the telephone line, read the terms of the settlement audible to all parties and the judge and secured the ex-spouse’s recorded agreement. On the basis of that agreement, Ms. Ryan proceeded to obtain funds for the additional payments provided for by the agreement, execute various deeds of land and establish a closing time on December 15, 2014. Her ex-spouse again failed to show.

[6]  Ultimately, recourse to the family law courts was necessary, in the Minister’s words, to “enforce a settlement agreed by the parties on November 7, 2014.” That enforcement order was dated March 5, 2015 (the “March 2015 Order”). As such, the Minister assumes the March 2015 Order and its date are operative and effective documents for the purposes of interpreting subsections 56.1(4) and 60.1(3). The Minister made no assumption concerning the existence or otherwise concerning any agreement aside from 6(c) above. Ms. Ryan was unable to produce a written version of the “settlement agreed” emanating from the recording of the agreed terms, in turn, arising and agreed to at the November 7, 2014 settlement meeting. 

CRA’s position was that there was no enforceable agreement to pay support until the date of the 2015 order.  The Court disagreed:

[14]  All the terms of the settlement were reflected in the record of a Superior Court so agreed to by the ex-spouse and upheld as reflective of a binding agreement so recorded by the judge. This is buttressed by the judge who ultimately issued the March 2015 Order enforcing the agreement. Formalism is not required. Deductively, there needed to be an agreed settlement reflected in written form in the transcript or minutes of the proceedings in 2014. If there were not, the judge (a different judge from the settlement conference judge) would not have enforced it, because she would not have known the terms or have been comfortable with both ex-spouses’ agreement with same. The March 2015 Order enforced the known terms of the settlement agreed to in November of 2014. Enforcement is distinct from and was subsequent to the memorialization of, and agreement with, the terms.

[15]  These unique facts satisfy the provisions of subsection 56.1(4) mandating “an amount payable … on a periodic basis for maintenance…under a written agreement”. Since that agreement was concluded in 2014, it satisfies subsection 60.1(3) and thereby reaches back to 2013, affording deductibility of the spousal support amounts agreed to and paid in that taxation year. 

Thus the appeal was allowed.  There was no order as to costs since this was an informal procedure appeal.