Cook – Tax Court of Canada gives tax effect to a retroactive court order

Whether the taxpayer was able to take a deduction for a dependent child depended on whether in the year in question she was considered to have a support obligation to her ex-spouse. They had agreed that she no longer was obligated to pay support, but this was not reflected in a court order until a subsequent year, although the court order was stated to have effect to the date of their support-cessation agreement. After noting conflicting authority on the point, Russell J stated that he preferred the authority that the retroactive nature of the subsequent court order should be respected.

However, the taxpayer’ claim still failed on the ground that “no statutory language used in or in connection with subsection 118(1) indicates that the deductions may be prorated for a taxation year” – and here, the support obligation had been agreed to be terminated only partway through the year.

Neal Armstrong. Summary of Cook v. The Queen, 2017 TCC 188 under s. 118(5).