1 November 1995 Internal T.I. 9501547 - INDIANS - ALIMONY

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

The basis for determining whether alimony & maintenance income is exempt.

Position:

The sole basis is the location of the residence of the recipient.

Reasons:

In Williams, it was concluded that the situs of the debtor is not the appropriate test to consider.

							November 1, 1995

	Winnipeg Taxation Centre		HEADQUARTERS
	Client Services			J.D. Brooks
							957-2103
	Attention:  Liz Pasieczka
							950154

Alimony Income of Status Indians

This is in reply to your enquiry of January 19, 1995 in which you requested our view on the taxation of alimony received by an Indian in the following fact situation:

1.The couple's residence while married was at XXXXXXXXXX Reserve in Manitoba.

2.When the separation agreement was entered into in 1986:

A)the agreement was signed in XXXXXXXXXX, Manitoba, off reserve.

B)the recipient resided temporarily in XXXXXXXXXX however, she still maintained her residence on the XXXXXXXXXX Reserve.

C)the payor resided on the XXXXXXXXXX Reserve in Saskatchewan.

3.Subsequent to the agreement being signed:

A)the recipient resided on the XXXXXXXXXX Reserve from 1986 to the present, and

B)the payor resided on the XXXXXXXXXX Reserve from 1986 to July of 1990, then moved to XXXXXXXXXX and he continues at the present time to maintain his residence off reserve.

4.From 1986 to 1990, the payor was employed as a
XXXXXXXXXX
and performed his employment duties on reserve. From 1990 to 1993, the payor was employed as a
XXXXXXXXXX

and performed his employment duties on reserve. Both employers are located on reserve.

Our Comments

Prior to the Williams case in 1992, the situs of the debtor would, pursuant to the decision in Nowegijick (83 DTC 5041), determine the taxability of the payments to the recipient. On this basis, the alimony payments received by the recipient from 1986 to July of 1990 would have been tax exempt since the payor lived on reserve during that time. Since the payor moved off reserve and continues to live off reserve since August of 1990, the alimony payments received by the recipient from August 1990 to December 1991 would have been subject to tax.

It is our present view that alimony and maintenance income will be exempt only if the recipient lives on a reserve. Thus, since the recipient has lived on reserve since before 1992, the alimony payments received by the recipient after 1991 will be exempt.

As a general rule, the Department does not normally reassess on the basis of a court decision, since that would require a retroactive application of the court decision. However, if the 1990 and 1991 taxation years are open for reassessment pending the results of the Williams decision, then the alimony received from August 1990 to December 1991 should be exempted on the basis that she lived on reserve at that time.

A deduction for alimony and maintenance paid is provided for in paragraphs 60(b) and (c) of the Income Tax Act and would be allowable to the payor provided the requirements for such a deduction are otherwise met, whether or not the recipient is taxable on the receipt of those payments.

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch