26 July 1995 External T.I. 9516445 - TAXABLILITY OF SUPPORT PAYMENTS

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.

		951644
XXXXXXXXXX	J.A. Szeszycki

Attention: XXXXXXXXXX

July 26, 1995

Dear Sirs:

Re: The Taxability of Support Payments

This is in reply to your enquiry of May 16, 1995 addressed to our Toronto Centre Tax Services office in which you requested comments on the tax treatment of certain court ordered support payments. Your enquiry was forwarded to this Directorate for response.

In your letter you set out the following two situations in which the recipient of the court ordered payments is an individual other than the spouse, or former spouse, of the payer:

1.A respondent is ordered to pay periodic support for a child, where the applicant is not a spouse and the respondent is not a biological parent, but liability arises by virtue of the respondent having demonstrated a settled intention to treat the child as a child of his or her family.

2.A respondent is ordered to pay periodic support for his or her parent.

Your concern, as we understand it, is whether the recipient of the payments is required under any of the provisions of sections 56 or 56.1 of the Income Tax Act (the Act) to include the amounts received in income.

Our Comments

In order for a court ordered support payment in respect of a child of the taxpayer to be considered a taxable receipt it must be a payment described in paragraph 56(1)(c) of the Income Tax Act. The amount must be an allowance payable on a periodic basis pursuant to an order of a competent tribunal, in accordance with the laws of a province, for the maintenance of the child of the taxpayer. It must be received at a time when the recipient taxpayer and the payer were living separate and apart and the payer must be a natural parent of a child of the taxpayer.

Although it is not clear from your description of the first situation, it is assumed for the purposes of these comments that the payer and the recipient are living separate and apart. You describe the payments as "periodic support" suggesting that the payments are for the maintenance of the child and the amounts are payable on a periodic basis. You indicate that the payer is not the natural parent of the child in question. That circumstance will disqualify the payment as an amount described under paragraph 56(1)(c) of the Act unless the payer is a natural parent of another child of the recipient taxpayer.

If the payer is not a natural parent of any of the recipient taxpayer's children then the amount received would not be required to be included in the recipient's income (and would not be deductible to the payer). If the payer is the natural parent of any other child of the taxpayer then, on the assumption that the other criteria described above have been met, the amounts received would be required to be included in the income of the recipient (and deductible to the payer).

The second situation described in your letter appears to be more straightforward. There is no provision in the Act that would require the inclusion in the income of the recipient of an amount received as court ordered support from a son or daughter. Conversely, no amount would be deductible to the payer in respect of amounts paid to the parent under such circumstances.

We trust our comments will be of assistance to you.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

c.c. S. Loconte, Client Assistance 2W,

Toronto Central T.S.O.