1 November 1995 Internal T.I. 9528567 - INDIANS - ALIMONY AND MAINTENANCE INCOME

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

	SOUTHERN INTERIOR 				HEADQUARTERS
	  TAX SERVICES OFFICE			J.D. Brooks
K. Ritcey, Director				(613) 957-2103
	Attention:  Mike Richet
								952856

Alimony/Maintenance Income - Status Indians

This is in reply to your telephone enquiry of October 5, 1995 in which you requested that we provide you with our present views on the taxation of alimony and maintenance payments received by status Indians.

Paragraph 87(b) of the Indian Act exempts from taxation the personal property of an Indian or band situated on a reserve. The courts have taken the view that the reference to personal property would include the income of an Indian. Prior to 1992, the situs of the debtor would, pursuant to the decision in Nowegijick (83 DTC 5041), determine the taxability of alimony and maintenance payments to recipients. Where the payor lived on reserve, it was the Department's view that the alimony payments received by a recipient would be tax exempt.

In the 1992 Williams case, it was concluded by the Supreme Court of Canada that the situs of the debtor was not the proper test to determine whether a specific source of income should be considered to be connected to a reserve. It is our present view that alimony and maintenance income will be exempt only if the recipient lives on a reserve. This new view is effective after 1991 since, 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.

As to the effect on the payor, 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