Principal Issues: A written agreement dated XXXXXXXXXX , between the taxpayer and his spouse indicates that they agree that the recipient spouse will report the payments made for child and spousal support on her income tax return and that the payer will claim the payments on his income tax return. The agreement also stipulates that the payer will pay any income tax liability incurred by the recipient spouse as a result of the recipient reporting the spousal and child support payments on her tax return. Furthermore, the agreement indicates that any tax benefit resulting from this arrangement will be split evenly between the parties. However, the written agreement does not indicate how much spousal or child support amounts payable is required to be made.
A court order dated XXXXXXXXXX , requires the payer to pay $XXXXXXXXXX per month in spousal and child support effective XXXXXXXXXX . The court order also provides that, for income tax purposes, the recipient spouse will report the support payments as income on her income tax return and the payer will claim the support payments as deductions on his income tax return.
Is the court order considered to be a court order made after April 1997? Are the child support and spousal support payments made pursuant to the court order taxable and deductible under the provisions of the Act because the wording of the court order orders that they are deductible and taxable for income tax purposes.
Position: Yes, the court order dated XXXXXXXXXX , is considered to be a court order made after April 1997 and paragraph (a) of the definition of “commencement day” in subsection 56.1(4) applies. The global child support and spousal support payments of $XXXXXXXXXX per month, commencing XXXXXXXXXX , are not deductible to the payer or taxable to the recipient.
Reasons: Paragraph (a) of the definition of “commencement day” in subsection 56.1(4) states that where an agreement or order is made after April 1997, the commencement day of the agreement or order is the day it is made. The written agreement dated XXXXXXXXXX , does not require that support payments are to be made by the payer nor does it indicate the amount of the support payments that are to be made. Accordingly, any support payments made before the date of the court order are not taxable or deductible. In this particular case, subsections 56.1(3) and 60.1(3) do not apply. There is no indication from the wording of the court order that the payments made prior to the court order are deemed to be made pursuant to the court order.