The taxpayer was a mother of two and a recipient of the Canada child benefit (CCB), had an income of approximately $27,000 in 2018, and her husband had an income of approximately $7,000 in 2018 under the Canada pension plan and also received monthly disability payments under the Ontario Disability Support Program Act, 1997 (the ODSP payments), totalling approx. $24,000 per annum. S. 56(1)(u)(ii) required the ODSP payments to be included in the income of the taxpayer, as the higher-earner spouse, and they were deducted in computing her taxable income pursuant to s. 110(1)(f). As a result of the January 2020 death of the taxpayer’s husband, the Minister applied s. 122.62(5)(b) - which provided that, effective after the first month ending after the death of her spouse, her “adjusted income” (i.e., family income) for her 2018 base taxation year was deemed to her income for that year - to redetermine the taxpayer’s CCB entitlement amount on the basis that, pursuant to s. 56(1)(u)(ii), the ODSP payments were income of her and not him for that base taxation year, thus nearly doubling her income and greatly reducing the CCB benefit.
Before allowing her appeal, Russell J noted (at para. 17) that the Explanatory Notes regarding s. 122.62(5) indicated that, “[t]he deceased person’s income…will not be taken into account in calculating the individual’s adjusted income for the relevant [base] taxation year for…computing the [CCB] for each month subsequent to the month of death” and (at para. 20) that the Explanatory Notes regarding s. 56(1)(u)(ii) helped to “clarify that the allotment of social assistance income per subparagraph 56(1)(u)(ii) from the lesser income spouse to the higher income spouse is without any intended effect upon the latter spouse’s CCB entitlement, upon the death of the lesser income spouse who had generated the social assistance income in the first place.”
Russell quoted from Villa Ste-Rose in stating (at paras. 34, 37):
Analogously [to that case], in the present case there is “a literal interpretation which may produce illogical or absurd results [and so] must be set aside”.
… [S]ubparagraph 56(1)(u)(ii) does have, unintentionally, a profoundly detrimental effect upon subsection 122.62(5), frustrating both purpose and proper application of that provision … as to allowing proper re-determination of CCB entitlement.