18 January 1990 Ministerial Letter 74598 F - Support and Custody Agreement

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:  Support and Custody Agreement

This is in reply to your memorandum of December 15, 1989, wherein you advise 24(1)  requested a ruling with respect to the applicability of paragraphs 60(b), (c) or (c.l) of the Income Tax Act (the "Act") to payments made pursuant to a paternity agreement and/or a separation agreement entered Into under: the Family Law Act, 1986.

We have reviewed the draft copy of the paternity agreement, the draft copy of the separation agreement and the applicable provisions of the Family Law Act, 1986 and offer the following comments.

With respect to the draft paternity agreement submitted with your memorandum we note it contains the following elements:

a)     the agreement is between two individuals who have never cohabited but are the natural parents of children in respect of whom support payments will be made;

b)     the agreement is a paternity agreement entered into under section 59 of the Family Law Act, 1986;

c)     one party agrees to pay the other party a specified sum periodically in respect of the support of each of their children until such time as a specific event occurs;

d)     the agreement terminates when the recipient party ceases to qualify for support out of public money.

Based upon the above, it is our view that the amounts paid pursuant to the paternity agreement would be maintenance payments deductible from income by the payer by virtue of paragraph 60(c.l) of the Act provided the paternity agreement is subsequently incorporated in a court order and further provided that at the time the payments were made and throughout the remainder of the year the taxpayer making the payments was living apart from the recipient.

Additionally, the maintenance payments, in our view, would be income in the hands of the recipient by virtue of paragraph 56(1)(c.l) of the Act provided the other requirements as discussed previously were met.

The draft separation agreement submitted with your memorandum contained the following elements:

a)     the agreement is between two individuals who have cohabited and who are the natural or adoptive parents of children in respect of whom support payments will be made;

b)     the individuals have been living separate and apart at the time of entering into the separation agreement;

c)     the agreement is a domestic contract entered into under section 54 of the Family Law Act, 1986;

d)     one party agrees to pay the other party a specified sum periodically in respect of the support of the recipient party until such time as some specific event or events occur;

e)     one party agrees to pay the other party a specified sum periodically for the support of their children until such time as a specific event occurs;

f)     the two parties agree that the separation agreement terminates when the recipient party ceases to qualify for support out of public money.

Based upon the above, we are of the view that the payments made by the payer pursuant to the separation agreement would be deductible from the payer's income by virtue of paragraph 60(c.1) of the Act provided the separation agreement is subsequently incorporated in a court order and further provided that at the time the payments were made and throughout the remainder of the year the taxpayer making the payments was living apart from the recipient.  It is also our view that the payments would be income to the recipient by virtue of paragraph 56(1)(c.1) of the Act provided the other requirements as discussed above are met.

We trust our comments will enable you to respond to the 24(1)

for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch

c.c.     Mr. R. Roy10th Floor123 Slater Street

c.c.     Provincial and InternationalRelations Division