It’s Income Tax Time: Deduction of Legal Fees

When you pay money to a lawyer to:

- collect late support payments from a current or former spouse;

- obtain a spousal or a child support order from a current or former spouse; or,

- seek an increase in spousal or child support payments from a current or former spouse,

you can deduct those legal fees from your taxable income.  These deductions should be set out in line 221 of your Income Tax Return, and are discussed further in a tax guide issued by the Canada Revenue Agency.  Henderson Heinrichs can help review and identify which client expenses are deductible to make the process as simple as possible.

Posted: April 2nd, 2012 under Child Support, Spousal Support.
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Review Hearing vs. Variation of an Order for support

The BC Court of Appeal just released a decision called Domirti v. Domirti, 2010 BCCA 472, which considered an appeal by the husband from an Order that he pay indefinite spousal support to his wife. The basis on which the husband made his appeal was the manner in which the judge treated the application at the Supreme Court level; that is, that the judge made a mistake in treating his application as a variance instead of a review. The Court of Appeal agreed with him and reversed the judge’s order.

Previously, the parties have been separated since 1994. The initial child and spousal support order was made in 1996, and varied in 2004. The 2004 Order specified that, anytime after a year had passed, either party could seek a review hearing on the issue of spousal maintenance. The husband sought that review in 2005, and then again in 2009 when it was alleged the youngest child of the parties was no longer a child of the marriage. The husband sought to terminate spousal support at that point.

At the 2009 application the judge indicated she was relying on Section 17 of the Divorce Act, which relates to the variation of support orders. She concluded the husband ought to keep paying indefinite support to the wife in the amount of $1250.00 per month.

On appeal, the Court of Appeal noted that Section 17 of the Divorce Act is irrelevant in the context of review hearings and should not have been relied on by the judge. Instead, at a review hearing, the judge should have conducted a “reconsideration” of entitlement and quantum of support having an eye to the Spousal Support Advisory Guidelines, which the Court of Appeal concluded would have assisted the husband in terms of the duration of support.

This decision clarifies the test that a party must satisfy when bringing an application for a review of support as opposed to the test that must be met on an application to vary support. Procedurally, this distinction is important to note as the legal test is markedly different.

Posted: October 27th, 2010 under Case Analysis, Child Support, Divorce, Procedure.
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Early Retirement – What Happens to Spousal Support?

An interesting case out of the B.C. Supreme Court this year dealing with a party responsible for spousal support deciding to retire early. In Szczerbaniwicz v. Szczerbaniwicz, 2010 CarswellBC 759, 2010 B.C.S.C. 421, the Plaintiff and the Defendant separated in 2006 after a 31 year marriage. In 2007, the parties entered into a consent order setting out that the Defendant was to pay to the Plaintiff $3300.00 per month in interim spousal support. The Defendant was a Lieutenant Colonel with the Canadian Armed Forces and earned an income of approximately $118,000.00 a year. The Plaintiff’s income earning abilities during the marriage had been hampered by the frequent moves required by the Defendant’s military career. After separation, the Plaintiff began working as a receptionist and later as a processing technician at a hospital, earning approximately $31,000.00 a year.

In 2009, at the age of 52, the Defendant decided to retire. He wished to pursue a PhD and took the position that, “… he had 30 years of service so his severance pay was maximized and any further work would not increase his pension significantly.” (paragraph 19) Upon retirement, he received pension income of $4700.00 per month.

The Plaintiff sought a permanent order for spousal. At issue was whether the Defendant’s obligation to pay the Plaintiff maintenance would be lessened due to his unilateral decision. The short answer is, ‘not by much’.

In making his decision, Mr. Justice Punnett reviewed the case of Gajdzik v. Gajdzik, 2008 BCSC 160, 50 R.F.L. (6th) 390 (B.C.S.C. [In Chambers] in which the court, somewhat nebulously, found that, “…there are no general principals applicable to variation of spousal support on voluntary retirement, that it depends on the individual circumstances of each case” [paragraph 21] The case does, however, provide some direction in that the court did review the motivation for retirement and whether it was reasonable in light of the ongoing obligation.

In applying this guidance to the case before him, Mr. Justice Punnett stated that if the decision to retire was motivated by a desire to avoid maintenance, it would most likely impute income [paragraph26]. He further found that if the retirement was not voluntary – that is, due to illness, economic circumstances, or employer actions, maintenance would likely be reduced [paragraph 27]. He found that Mr. Szczerbaniwicz’s decision was discretionary and based upon his personal wishes and inferred that the decision was at least partly motivated by a desire to avoid his maintenance obligation. The court found that, though the Defendant could not return to his previous income level, he would certainly be able to obtain of $90,000.00 per annum and imputed income to him on that basis. It is interesting that the court, in finding that the Defendant’s decision to retire was partly based on a desire to avoid maintenance, did not assess his income back to its original level, but rather to what the Defendant could be earning were he to return to the workforce.

Posted: June 11th, 2010 under Case Analysis, Spousal Support.
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