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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Taxpayer making support payments through a maintenance enforcement program pursuant to a maintenance order. Director of program later reimbursing the taxpayer because intended recipient of support not located. Whether reimbursement should be included in income.
Position: No.
Reasons: Reading of the Act. No provision of the Act provides for the inclusion of such reimbursement.
XXXXXXXXXX 2002-015805
P. Massicotte, CA, M.Fisc.
December 2, 2002
Dear XXXXXXXXXX:
Re: Reimbursement of Support Payments
We are writing in reply to a request you made with Ms. Barbara Laybourne-Lafontaine of the Client Services Branch in the Saskatoon Tax Services Office, which was forward to us on August 15, 2002, regarding the application of the Income Tax Act (the "Act") to a reimbursement of support payments you made in previous years.
Facts
The facts of your situation as we understand them are as follows:
1) During the year 1995, a maintenance order was made by a court in Alberta pursuant to which you were required to pay a support amount, as defined in subsection 56.1(4) of the Act, to your spouse or former spouse or common-law partner or former common-law partner (the "creditor").
2) Pursuant to section 7 of the Maintenance Enforcement Act of Alberta, the maintenance order required the amounts owing to be paid to the creditor through the Director of the Maintenance Enforcement Program of Alberta, for the benefit of the creditor, children in the creditor's custody or both the creditor and those children.
3) You have made the required support payments to the Director of the Maintenance Enforcement Program of Alberta pursuant to the maintenance order since 1995.
4) During the year 2002, the Director of the Maintenance Enforcement Program determined that the creditor could not be located and reimbursed you support payments you made since 1995.
5) The reimbursement was not made pursuant to a decree, order or judgment of a competent tribunal but is an administrative decision of the Director of the Maintenance Enforcement Program of Alberta.
You are concerned about the tax treatment of such reimbursement. In addition, you indicated that the amount you received also included interest.
Written confirmation of the tax implications arising from proposed transactions is given by this Directorate only where the transactions are the subject matter of an advance income tax ruling request pursuant to Information Circular 70-6R5. Where the particular transactions are completed the inquiry, including all related documentation should be addressed to the relevant tax services office. However, we are prepared to provide you with the following general comments.
As mentioned in paragraph 34 of Interpretation Bulletin IT-530, Support Payments (copy enclosed), where an individual who has deducted support payments under section 60 of the Act receives a reimbursement of all or a portion of such payments under a court order, the individual is required, under paragraph 56(1)(c.2) of the Act, to include the amount of the reimbursement in income in the year received.
Based on the facts described above, the requirements of paragraph 56(1)(c.2) of the Act would not be met as it appears that the reimbursement of support payments was not made pursuant to a decree, court order or judgment of a competent tribunal. Accordingly, it is our opinion that a reimbursement of support payments in the circumstances described above would not be required to be included in income.
However, we would caution that the tax treatment of amounts paid or received under any particular agreement or order is a question of fact, such that the determination of the tax treatment of the amounts paid under the maintenance order or the reimbursement ultimately requires a review of all relevant facts and documents.
Finally, it is our understanding that depending on the location of the creditor's domicile, interest may also be paid on the amount of support payments reimbursed. Where interest is paid, it should be included in income pursuant to paragraph 12(1)(c) of the Act, as explained in Interpretation Bulletin IT-396R (copy enclosed).
We trust these comments will be of assistance to you.
Yours truly,
Milled Azzi, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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