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.
Principal Issues: 1. Does the payment of a specified percentage of future bonuses and incentive payments qualify as a support amount?
Position: 1. It is a question of fact but could qualify.
Reasons: 1. Previous interpretation of the law issued by ITRD.
XXXXXXXXXX
2011-042621
Robert Dubis
February 7, 2012
Dear XXXXXXXXXX :
We are replying to your letter of November 18, 2011 requesting confirmation that technical interpretation 2000-0058645 continues to apply when separation agreements and/or court orders provide for future support payments which are tied to future bonus and incentive payments.
We can confirm that interpretation 2000-0058645 continues to represent the Canada Revenue Agency's position with respect to the application of the law. Where a separation agreement and/or court order provides for spousal support payments which are tied to bonus and incentive payments, the payment could meet the definition of a support amount. As noted in paragraph 10 of interpretation bulletin IT-530R, Support Payments, a specified sum of money which is established by reference to a reasonable formula or index may qualify as an allowance even though the exact future amounts are not specified in the order or agreement. Providing all other requirements of the definition of "support amount" are met, a payment which is calculated with reference to bonuses or incentive payments that are calculated at regular intervals (e.g. annually, quarterly or monthly), would meet the requirement of being periodic. If the payment is calculated with reference to bonuses or incentive payments that do not occur regularly, then the payment would not meet the requirement of being periodic.
To avoid unnecessary delays and adjustments to their tax returns, support payers should register their court orders or written agreements (including any amendments) with the Canada Revenue Agency (CRA) by using Form T1158, Registration of Family Support Payments. Through this process, the CRA is advised of the portion of the payment that is spousal support and, if applicable, the portion that is child support. Since payments tied to bonus and incentive payments are not quantifiable at the time of registration, it is important that your client establish a process for retaining supporting documentation in order to respond to any requests for supporting documentation.
We trust that the information provided is helpful.
Yours truly,
Sharmini Ratnasingham
Assistant Director
for Director
Personal and Credit Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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