Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Rulings Summary
Principal Issues:
Deductibility of payments under subsection 60.1(2) where the payor has an ownership interest in the property for which he or she is obligated to make the payments.
Position:
Ownership interest in the property will not affect the deductibility of the payment.
Reasons:
1988 amendments to subsection 60.1(2). Comments in Technical Notes.
960236
XXXXXXXXXX D. Zion
Attention: XXXXXXXXXX
February 13, 1996
Dear Sirs:
Re: Subsection 60.1(2) of the Income Tax Act (the "Act")
We are replying to your letter of January 8, 1996 in which you requested a technical interpretation regarding the deductibility of certain payments pursuant to subsection 60.1(2) of the Act.
As we understand the situation, two individuals, the taxpayer and his former spouse, are currently living separate and apart and have done so since the breakdown of their marriage. A Divorce Judgement (the "Order") granted in 1995 provides for joint custody of the child of the marriage as well as payment by the taxpayer of monthly maintenance for the child from which the taxpayer is to make direct payment of certain amounts which include mortgage payments, utilities, municipal property taxes, house insurance and maintenance on the residence. The monthly maintenance payments are to continue for the period of time the child remains a child under the Divorce Act of Canada. You have advised us that the Order specifically provides that it was made in contemplation of subsection 60.1(2) and 56.1(2) of the Act. Finally, the payments relating to the mortgage, taxes, utilities and maintenance of the residence for the year do not exceed 1/5 of the original principal amount of any loan or indebtedness incurred to finance in any manner whatever the acquisition or improvement of the residence.
You are concerned with the deductibility of the above-noted maintenance payments in two scenarios. In scenario one, title to the residence used by the former spouse and the child of the marriage is registered in the former spouse's name whereas in scenario two, title to the residence is jointly registered to the taxpayer and his former spouse. The taxpayer has no rights with respect to possession or disposition of the property for as long as the child remains a child under the Divorce Act.
A determination of the tax consequences applicable to a particular situation involves a finding of fact which can only be made following a review of all the relevant documentation and related information. This is normally the responsibility of the Tax Services office serving the area in which the client resides. However, we offer the following general comments concerning payments made by one spouse for a specific purpose.
Subsection 60.1(2) of the Act provides that certain payments that do not normally have the characteristics of an allowance, including mortgage payments related to the matrimonial home where the spouse and the child, but not the payor, reside, would be accepted as an allowance for the purposes of paragraph 60(b) and (c) if the agreement or court order specified that the provisions of subsections 60.1(2) and 56.1(2) would apply to the payments. Paragraphs 56(1)(b) and 60(b) of the Act set out the conditions under which a payment may be deducted by one spouse and included in the income of the other spouse. In order to be deductible to the payor and included in the recipient spouse's income, an amount must, among other things, be paid as alimony or an allowance payable on a periodic basis for the maintenance of the recipient, the child of the recipient or the recipient and the child of the recipient.
In the two scenarios with which you are concerned, the ownership interest of the taxpayer would have no bearing on the deductibility of the amounts in question.
We trust our comments will be of assistance to you.
Yours truly,
P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 1996
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 1996
Email this Content