31 August 1998 External T.I. 9811335 - COMMENCEMENT DAY - EFFECT OF INTERIM ORDER.

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 an interim order for support will be subject to the old regime or new regime. The judge intended that the old regime would apply, that is that the payments would be deductible by the payor and included in the income of the recipient.

Position: The new regime applies.

Reasons: Since the interim order is dated after April 1997, there is a commencement day. Therefore, the new regime applies.

XXXXXXXXXX 5-981133
J. Gibbons

Attention: XXXXXXXXXX

August 31, 1998

Dear XXXXXXXXXX:

We are replying to your letter of April 22, 1998, in which you request our opinion as to the income tax consequences of an interim order for child support made on XXXXXXXXXX, between XXXXXXXXXX (the “recipient”) and XXXXXXXXXX (the “payor”).

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. The following comments are, therefore, of a general nature only.

According to your letter, XXXXXXXXXX intended that the tax effects of an earlier order, which was dated XXXXXXXXXX, would apply to the interim order. In other words, she intended that the child support payments would be governed by the old regime, that is, they would be deductible by the payor and included in the income of the recipient. In comparison, under the new regime, payments of child support under an agreement or court order are generally not deductible by the payor nor required to be included in the income of the recipient.

The new regime applies whenever there is a “commencement day,” which is defined in subsection 56.1(4) of the Income Tax Act. Under the definition, a commencement day means, inter alia, the day on which the first payment of a varied amount is required to be made where an order is varied after April 1997. In your situation, the order between the recipient and the payor was varied on XXXXXXXXXX, with the first payment of the varied amount being due on XXXXXXXXXX. Accordingly, there is a commencement day of XXXXXXXXXX, and the new regime will apply to the support payments made after that day.

We trust that these comments will be of assistance.

Yours truly,

J.F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate