T-765-77
Donald A. Gillis (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Gibson J.—Vancouver, June 9,
1977.
Income tax — Calculation of income — Deductions —
Attribution — Dividends from Canadian corporations —
Gross up — Whether or not taxpayer can deduct under s. 109
part of attributable dividend income before electing and
adding balance of such income to his taxable income under s.
82(3) — Income Tax Act, R.S.C. 1952, c. 148, ss. 82(3),
109(1)(a)(i),(ii).
The plaintiff appeals his assessments for 1972-74. His spouse
had received dividend income, which was grossed up and added
to the plaintiffs income from other sources. His "taxable
income", less section 109 deductions permitted by Division C,
was then computed. Finally, the 20% dividend credit on the
grossed up amount of the dividends was deducted. The plaintiff
submits that he was entitled, under section 109, to deduct part
of the dividend income of his spouse before electing and adding
the balance to his taxable income under section 82(3).
Held, the action is dismissed. The plaintiff is in error.
Section 109 only comes into operation after the taxpayer's
taxable income has been computed, and section 82(3) makes it
mandatory in computing his taxable income that all such
income be added if any is added at all.
INCOME tax action.
COUNSEL:
Donald A. Gillis acting on his own behalf.
W. A. Ruskin for defendant.
SOLICITORS:
Donald A. Gillis, Burnaby, acting on his own
behalf.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
GIBSON J.: This is an appeal from assessments
for the taxpayer plaintiff's taxation years 1972,
1973, and 1974.
The income of the plaintiff's spouse was from
dividends from Canadian corporations in those
years as follows:
Actual Income Grossed up Income
1972 $361.74 $482.32
1973 $481.68 $642.24
1974 $601.69 $802.25
The said assessments are predicated upon the
following:
(1) The actual dividend income of the plaintiffs
spouse was grossed up one-third ( 1 / 2 ) from the
dividends actually received. (See sections
12(1)(j) and 82(1) of the Income Tax Act.)
(2) There was added to the plaintiff's income
from other sources all amounts of his spouse's
grossed up dividend income as permitted by
section 82(3) so that pursuant to that subsection
that income was "deemed to have been so
received by the taxpayer and not by his spouse".
In doing so, the "taxable income" of the taxpay
er less the deductions permitted by Division C of
the Act was computed. (See section 2(2) of the
Income Tax Act.)
(3) There was then deducted under Division C
the deductions under section 109 of the Act
namely $1,600 under section 109(1) (a) (i) and
$1,400 under section 109(1) (a)(ii). (No deduc
tion was made from this $1,400 because the
spouse's income was deemed by section 82(3) to
have been the income of the plaintiff husband
because of his election under that subsection.)
(The figures $1,600 and $1,400 were less in
1972—and the correct figures were used.)
(4) There was then deducted the 20 per cent
dividend credit on the grossed up.,amount of the
dividends pursuant to section 121 of the Act.
The taxpayer submitted that he was entitled to
deduct under section 109 of the Act part of the
dividend income of his spouse before electing and
adding the balance of such income to his taxable
income under section 82(3). In this he is in error.
Section 109 only comes into operation after the
taxpayer's taxable income has been computed, and
section 82(3) makes it mandatory in computing his
taxable income that all of such dividend income be
added if any is added at all.
The appeal is dismissed with costs, if demanded.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.