2 February 1990 External T.I. 74550 F - Alimony and Maintenance

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.

Subject: Alimony and Maintenance

This is in reply to your memorandum of November 27, 1989, wherein you requested our opinion on whether the payment of income tax payable pursuant to a court order qualifies as an "allowance" based on the Gagnon decision in the 24(1)

The question being asked is whether or not the payment of income tax payable qualifies as an "allowance" based on the Gagnon decision and, if not, what is the difference between this case and Fortin v. M.N.R. 79 DTC 751, wherein the payment of taxes was determined to be a part of the payment of alimony.

It is your view that subsections 60.1(2) and 56.1(2) of the Income Tax Act (the "Act") deem certain amounts paid in respect of an expense to be an amount paid and received as an allowance payable on a periodic basis for the purposes  —  of paragraphs 60(b), (c) and (c.l) and paragraphs 56(1)(b), (c) and (c.l) of the Act.  However, the postamble to both of these subsections stipulates that the court order must provide that these subsections apply to any payments made thereunder.  Since the subject court order does not make specific reference to these subsections, the amounts paid in respect of the income tax expense cannot be deemed an allowance payable on a periodic basis.

It is also your view that the Gagnon decision would have no effect on the case at hand since the above-mentioned subsections would preclude the amount paid and received from being an allowance payable on a periodic basis.

Further, that the Fortin case differs from the case in question in that a specified sum was established which represented the arrears of taxes which the appellant was obligated to pay pursuant to a previous decree.  The amounts were allowed as an alimony deduction and, accordingly, you are of the opinion that the Fortin decision would not set any sort of precedent.

We have reviewed the court order submitted with your memorandum and are of the view that an amount paid as a consequence of the requirement on the taxpayer to pay his spouse's income tax payable is an "allowance" based upon the Gagnon case.  Subsection 56(12) of the Act was added to the Act subsequent to the Gagnon decision which in effect restores the status quo prior to the Gagnon decision applicable with respect to the 1988 and subsequent taxation years.  However, subsection 56(12) of the Act is applicable with respect to decrees, orders, judgements and written agreements made or entered into before March 28, 1986 or after 1987.

24(1)

We also advise that IT-118R2 entitled "Alimony and Maintenance" is under revision and the revised version will reflect the recent legislative and administrative changes brought about as a result of the Gagnon decision.

B.W. DathDirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch