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: Whether payments being received by the taxpayer/guardian (sister of deceased former spouse/mother) from the father and the stepfather of a child would be taxable in the hands of the taxpayer.
Position: No.
Reasons: There is no written agreement or order of a competent tribunal under which the taxpayer is named as recipient, and under which the father or the stepfather is directed to make support payments to the taxpayer. The voluntary payments would not constitute a "support amount" as defined under subsection 56.1(4) of the Act. In this particular case, no portion of the amount received by the taxpayer would be considered income in her hands.
XXXXXXXXXX Tim Fitzgerald, CGA
2005-014240
March 16, 2006
Dear XXXXXXXXXX:
Re: Support Payments
This is further to your letter of July 15, 2005 requesting tax information regarding monthly child support payments being received by you. We further acknowledge our recent telephone conversations, the most recent being on March 1, 2006, wherein you provided additional information. We apologize for the delay in replying to you.
We understand the facts to be as follows:
1. Your sister passed away in XXXXXXXXXX. In her will, she appointed you guardian of her daughter. The child lives with you and your common-law partner and has been under your care since the time of your sister's death. The child is XXXXXXXXXX years old and will be turning 18 in XXXXXXXXXX.
2. Neither you nor your common-law partner has obtained nor plan to seek legal custody of the child.
3. By way of pre-XXXXXXXXXX court order, the first former spouse (the father of the child) was directed to make monthly child support payments to your now-deceased sister.
4. There exists no court order or other written agreement that directs the father to make support payments to you as the recipient.
5. Since the death of his former spouse (your sister), the father has voluntarily made monthly payments directly to the child's bank account. The child, along with both you and your common-law partner each has signing authority on the account but any withdrawals or cheques drawn on the account require any combination of at least two signatures.
6. There is also a post-XXXXXXXXXX court order directing your sister's second former spouse (the child's stepfather) to make monthly child support payments to your sister.
7. There exists no court order or other written agreement that directs the stepfather to make support payments to you as a recipient.
8. Upon the death of his former spouse (your sister), the stepfather voluntarily gave you a number of post-dated cheques, the last of which becomes due in the month immediately proceeding the child's 18th birthday.
9. The stepfather has told you that he will not provide any further support for the child once she turns 18.
10. Each month, as they became due, you deposited these post-dated cheques directly into the child's account; that being the same bank account mentioned above.
11. You and your common law partner routinely exercise your authorized right to access the child's bank account, to make discretionary use of the funds to cover personal expenses of the child including such things as food, shelter, medical expenses, car insurance, extra curricular activities, tutoring, and other of the child's personal expenses.
12. No portion of the amount of the support payments made by the first former partner (the father) as directed under the pre-XXXXXXXXXX court order and no portion of the amount of support payments made by the second former partner (the stepfather) as directed under the post XXXXXXXXXX court order, included any provision for maintenance of the recipient (your now-deceased sister). In both cases, the support payments were for child support only.
13. The payments voluntarily made by the father and the stepfather are not materially different from the support payments previously being made under their respective court orders to your sister, while your sister was alive and the child was in her care.
You have asked whether the amounts being received from the father and the stepfather are taxable in your hands.
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 income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings. Where the particular transactions are completed, the inquiry should be addressed to your local Tax Services Office. In response to your question we offer the following general comments.
In the situation you have described, the support payments made by the father and the stepfather are voluntary and are not paid under an order of a competent tribunal or under a written agreement. Accordingly, the voluntary payments would not be considered a "support amount" or a "child support amount" as defined in subsection 56.1(4) of the Income Tax Act. Based on the facts you have provided, the amounts received from the father and the stepfather would be regarded as a recoupment of your personal expenses incurred in caring for your niece. In such case, no portion of the amounts received would be included in computing your income for tax purposes.
We trust our general comments are of assistance.
Yours truly,
Bob Skulski
Section Manager
Business Incentives and Capital Transactions Section
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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