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Principal Issues: [TaxInterpretations translation] Can Monsieur deduct from his income, under paragraph 60(b) of the Income Tax Act, the amounts of $XXXXXXXXXX and $XXXXXXXXXX paid as support for the years 2005 and 2006 respectively in computing his income?
Position: No. There is no evidence that those amounts were payable by him on a periodic basis. Those amounts do not constitute support within the meaning of subsection 56.1(4).
August 23, 2007
Jonquière Tax Centre Headquarters
Business and Partnerships Division
Attention: Robin Plourde M.-F.Pleau
2007-024559
Deductibility of an amount as support payments
This is in response to your letter dated July 12, 2007, in which you asked for our opinion on the deduction of an amount paid in respect of support payments.
More specifically, you stated the following facts:
On XXXXXXXXXX 2006, Monsieur and Madame signed a provisional consent before the Superior Court of Quebec, according to which Monsieur undertook to pay Madame $XXXXXXXXXX per week in support, starting on XXXXXXXXXX 2006 and continuing until the family residence is sold;
- Monsieur agreed to pay Madame XXXXXXXXXX child support of $XXXXXXXXXX per week;
- The parties agreed that from XXXXXXXXXX 2006, half of the mortgage costs paid by Monsieur would be taxable to Madame and deductible to Monsieur;
- During the currency of the agreement, Madame would remain in the family residence;
- Madame was required to amend her tax returns for the 2005 taxation year to add to her income a support payment of $XXXXXXXXXX paid by Monsieur for the benefit of Madame and the children of the union of Monsieur and Madame, in addition to the provincial property tax credit and work premium;
- On XXXXXXXXXX 2007, a consent to judgment on ancillary measures to the divorce of Monsieur and Madame was ratified by the Superior Court of Quebec in the following terms: [TaxInterpretations translation]
o In paragraph XXXXXXXXXX, which amends paragraph XXXXXXXXXX of the provisional consent, the parties agree that Madame will be required to amend her tax returns for the 2005 and 2006 taxation years to add to her income the amounts of $XXXXXXXXX and $XXXXXXXXXX respectively, each of which represents support payments. The subsection provides that Monsieur will be able to take the appropriate deductions in respect of those amounts.
- On XXXXXXXXXX 2007, the divorce between Monsieur and Madame was pronounced.
Thus, you wish to know if Monsieur can deduct from his income, pursuant to paragraph 60(b) of the Income Tax Act (the "Act"), the amounts of $XXXXXXXXXX and $XXXXXXXXXX, paid as support payments, in computing his income for the years 2005 and 2006, respectively.
Unless otherwise indicated, all legislative references herein are to provisions of the Act.
Analysis
Subsection 60.1(3) specifies that payments made in the year or the preceding year as provided in a written agreement or order of a competent tribunal are deemed to have been paid under the order or agreement if the instrument so provides.
Paragraph 60(b) sets out the formula for calculating the amount that a payer may deduct as support payments made in a taxation year to
- The payer's spouse or common-law partner;
- A former spouse or common-law partner of the payer;
- The parent of a child of whom the payer is the natural parent;
Subsection 56.1(4) defines the term "support amount". IT-530 lists the characteristics of such an amount in these terms:
- it is payable to the recipient;
- it is payable as an allowance for the maintenance of the recipient, children of the recipient or both;
- it is payable on a periodic basis;
- the recipient has discretion as to the use of the amount;
- where the recipient is the payer's current or former spouse or common-law partner, the amount is payable under an order of a competent tribunal or under a written agreement;
- the payer and recipient are living separate and apart because of the breakdown of their marriage or common-law partnership.
Subsection 60.1(4) clarifies that the definitions in 56.1(4) apply to sections 60 and 60.1.
Clauses XXXXXXXXXX of the Interim Consent and XXXXXXXXXX of the Consent to Judgment on Ancillary Relief refer to the obligation of Madame to amend her 2005 income tax return to include an amount of $XXXXXXXXXX. Clause XXXXXXXXXX of the consent decree also requires her to amend her 2006 tax return to include an amount of $XXXXXXXXXX. It is intended that Monsieur may deduct those amounts in computing his income for the 2005 and 2006 taxation years.
While the weekly periodic allowance of $XXXXXXXXXX provided for in the interim consent appears to constitute support for Madame within the meaning of the Act, we cannot so conclude with respect to the amounts of $XXXXXXXXXX and $XXXXXXXXXX. In particular, there is no evidence that those amounts were payable by the husband on a periodic basis. In addition, we have no indication that the amounts of $XXXXXXXXXX and $XXXXXXXXXX represent the total of the periodic amounts of $XXXXXXXXXX paid by the individual as of XXXXXXXXXX 2006.
Consequently, we are of the view that the amounts of $XXXXXXXXXX and $XXXXXXXXXX are not deductible under the applicable provisions of the Act.
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, the electronic library version can be provided. Alternatively, the client may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Madame Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
We hope you find these comments of assistance. If you have any questions regarding this application, please do not hesitate to contact us.
François Bordeleau, Advocate
Interim Manager
Business and Partnerships Section
Income Tax Rulings Directorate.
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