24 January 1997 Internal T.I. 9633597 - ASSIGNMENT OF RIGHTS TO RECEIVE SUPPORT PAYMENTS

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.

Principal Issues:

whether when a subrogation of rights to receive alimony or maintenance has occured, an amount can be included in the intended recipient's income (as alimony or maintenance) or a deduction is permitted to the payor as "alimony or maintenance."

Position:

amount received by the social assistance recipient is entirely social assistance as provided for in the social assistance legislation. No deduction can be given to the payor because the payments to the province, after formal assignment of the right to receive alimony or maintenace, are not received on behalf of the intended recipient nor are they received for his/her benefit.

Reasons:

XXXXXXXXXX Bishop jurisprudence
		January 24, 1997

	Ottawa Tax Centre	HEADQUARTERS
	Enquiries and Adjustments Division	Sandra Short
(613) 957-8953
	Attention:  Danielle Donders
		963359

Assignment of rights to receive support payments

This is in reply to your enquiry of October 8, 1996, concerning the position outlined in TOM 19(25)(19).1(8) in regard to subrogation of rights. The position in the Taxation Operations Manual says that when a subrogation of rights to receive alimony or maintenance has occurred, that no amount is to be included in the intended recipient's income nor may an amount be deducted by the payor. A subrogation of rights to receive alimony or maintenance occurs when such rights are formally assigned by the recipient, or by reason of provincial legislation, to a province in order to receive social assistance.

We have reviewed the position in the Manual and believe it to be technically accurate. XXXXXXXXXX It is believed that an argument under paragraph 60(b) or (c) and paragraph 56(1)(b) or (c), as well as subsection 56(2), fails for a number of reasons, primarily as cited in the Bishop's case (Bishop v. M.N.R. 93 DTC 333).

In Bishop, the Tax Court had to decide if an amount paid by William Bishop to the Treasurer of Ontario in 1988 was deductible by him in computing his income and whether the amount should be included in Carol Bishop's income. Mr. Bishop paid arrears of support to the Ministry of Community and Social Services (MCSS) because that Ministry started a garnishment proceeding against him for his failure to make support payments as required under the terms of the decree nisi. The right to support payments was assigned by Carol Bishop at the time she applied to receive social assistance. Mr. Bishop and the Treasurer of Ontario settled the garnishment proceedings by the MCSS agreeing to withdraw the proceedings if Mr. Bishop paid the amount due. The Court found that the amount was not income to Carol Bishop because she neither actually received nor indirectly benefited from the payment. The Court also decided that the payment was not deductible by William Bishop because the payment to the MCSS was not paid on behalf of Carol Bishop nor was it for her benefit under the decree nisi. Rather, the payment was made to discharge his indebtedness to the Ministry which arose in consequence of the decree nisi rather than under it, within the meaning of paragraph 60(b) of the Act.

The Bishop case would be the authority to conclude that the former spouse has not "received" support payments within the meaning of paragraph 56(1)(b) or (c) of the Act. And, for the reasons cited by the court, namely that payment to the MCSS by the client is not on behalf of the former spouse nor for the former spouse's benefit, no alimony or maintenance deduction is available to the client.

We hope these comments are helpful.

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch