Digests

Income Tax

Income Calculation

Deductions

Appeal from Tax Court of Canada decision appellant unable to deduct support payments to former common law spouse because payments not receivable under written agreement pursuant to Income Tax Act, R.S.C., 1985 (5th Supp.), c. 1, s. 56.1(4)—Couple signing written separation agreement, then briefly reconciling before permanent separation—Whether reconciliation terminating earlier agreement so that payments after reconciliation not receivable under written agreement—Tax Court erring by relying on general common law rule that reconciliation terminating prior agreement—General common law rule not absolute—S. 54.1’s purpose of avoiding fraudulent arrangements, coupled with Parliament’s public policy of encouraging reconciliation, suggesting that taxpayer in appellant’s circumstances need not show clear, specific intent of continuing, binding agreement—Such burden too high—Taxpayer need only show that parties continuously acting under earlier written agreement, without material variation, such that agreement still describing their relationship—If shown, subsequent payments receivable under earlier written agreement—Facts in this case supporting finding parties continuing to act under earlier written agreement still describing relationship—Appeal allowed.

Broad v. Canada (A-624-08, 2010 FCA 146, Stratas J.A., judgment dated June 2, 2010, 8 pp.)