27 January 1992 Administrative Letter 9201226 F - Maintenance Payments Third Party Mortgage

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.

January 27, 1992

Subject: 19(1) - Application of 60.1(1) Docket - 91-8552T

We are writing in reply to your memorandum of January 8, 1992, wherein you requested our opinion as to whether or not the letter from the former spouse's solicitor, dated September 13, 1988, would be sufficient evidence to support the taxpayer's claim for the deduction of third party mortgage payments under 60.1(1) of the Act.

Our understanding of the facts in this case is as follows:

24(1)

24(1)

4.     It is your opinion that there is sufficient documentary evidence to support the taxpayer's claim and that obtaining a new court order is unwarranted in the circumstances.  Since you are aware that informal correspondence does not constitute a written agreement, you have requested our views regarding the status of the letter of September 13, 1988.

Our Comments

We have reviewed the correspondence and other documentation which accompanied your submission. As a result of this review, we agree with your position that there is sufficient evidence to support allowance of the taxpayer's claim for the deduction of the third party payments. The reasons for our views are as follows:

1.     The taxpayer was, pursuant to a court order, required to pay 24(1)to his spouse. Since these payments, if made, were for the benefit of both the spouse and the children of the spouse, they would qualify for deduction under paragraph 60(c).

2.     In paragraph 3 of the letter dated September 13, 1988, the spouse's solicitor acknowledges the fact that the taxpayer will continue to pay 24(1) per month as ordered, and further acknowledges that payment of this amount is to be effected by way of a third party payment directly to the mortgage company with the remainder being paid directly to the spouse.  This, in our view, indicates that the spouse used her discretion to direct the taxpayer to make the mortgage payment on her behalf. 

3.     The only point in question is whether the taxpayer agreed to the payment arrangement. The September 13, 1988, letter requests confirmation of the spouse's understanding of the arrangement and there is no documentary evidence of that confirmation from the taxpayer, other than the taxpayer's implied concurrence by complying with its terms.

4.     Paragraph 5 of IT-118R3 discusses the significance of Court Orders, written agreements and informal writings relative to application of paragraphs 60(b,)(c) and (c.1) as the case may be. In the case at hand, the deductibility of the 24(1) per month as maintenance deductible under paragraph 60(c) has been established by Court Order. The correspondence, on the other hand, merely clarifies the payment arrangements previously established by the Court. 

In many instances, the Courts do not set out details of how their court ordered payments are to be effected. In those cases it is left to the parties to work out mutually acceptable arrangements as was done here. It should also be noted that there is nothing stated or implied in subsection 60.1(1), that requires that third party payments be detailed in the Court Order. This subsection merely deems such payments to have been made by the payer and received by the payer's spouse for purposes of paragraphs 60(b),(c) and (c.1).  Although not specifically on point with this case, it is our opinion that the comments in paragraphs 15 and 16 of IT-118R3 provide sufficient support for the allowance of the taxpayer's claim.

We conclude, therefore, that subsection 60.1(1) would deem the mortgage payments to have been paid by the taxpayer and received by the spouse and , since the payments otherwise qualify for deduction under paragraph 60(c), the taxpayer should be allowed the deduction.

The Minister's Mail docket is returned herewith.

B.W. DathDirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental  Affairs Branch