29 February 1996 External T.I. 9604315 - NO DEDUCTION FOR EXP OF CHILD IN CUSTODY OF PAYER

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:

where separated or divorced parents have joint custody and the court order/agreement specifies that 56.1(2) and 60.1(2) apply, whether payments for the maintenance of children residing with the payer will qualify for the deduction on the basis that the other spouse shares in the custody of those children -also whether children who have reached the age of majority can still be in the custody of parents

Position:

no and no (except where a child who has reached the age of majority cannot withdraw from parents care and control because of disability or other reason)

Reasons:

question of fact. While not relevant to making the decision, the payer was resident in Canada and the other spouse was resident in the U.S. which may explain why she agreed that 56.1(2) should apply to payments made while the children were living with the other spouse

A. Humenuk
XXXXXXXXXX 960431

Attention: XXXXXXXXXX February 29, 1996

Dear Sirs:

Re: Alimony and Maintenance

We are replying to your letter of January 29, 1996 in which you ask for our views on the deductibility of payments made by a parent for the maintenance of a child as a result of a breakdown of marriage.

The particular circumstances outlined in your letter appears to relate to a factual situation involving specific taxpayers. As explained in Information Circular 70-6R2 "Advance Income Tax Rulings", it is not our practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a transaction that is already in progress, you may wish to submit all relevant facts and documentation to the appropriate Tax Service Office for their views. However, we are prepared to offer the following general comments which may be of some assistance to you.

Where a court order or separation agreement specifies that subsections 60.1(2) and 56.1(2) of the Act will apply to the payments made pursuant to that court order or agreement, certain eligible expenses incurred for the maintenance of the other spouse or children in the custody of that other spouse are deemed to be paid and received by that spouse as an allowance payable on a periodic basis. Where the other criteria set out in paragraph 60(b) or (c) of the Act are also met, these amounts will be deductible by the spouse who is required to make the payments and will be included in the income of the other spouse.

You have asked for our comments on the extent to which expenses paid for the maintenance of the children of the marriage may be claimed under this provision where custody of the children is held jointly. In addition, you ask whether payments made on behalf of the children after they reach the age of majority may be claimed under this provision.

Although the Income Tax Act does not define the term "custody", reference can be made to other relevant legislation. Under the Divorce Act, 1985, a court may make custody orders in respect of children under the age of sixteen years, or sixteen and over if the child is unable to withdraw from parental charge or obtain the necessities of life. Custody orders under Ontario's Children's Law Reform Act are governed by Part II of that Act, wherein a reference to a child is a reference to the child while a minor. Ontario's Age of Majority and Accountability Act provides that a person ceases to be a minor on attaining the age of 18 years. Except where the facts indicate otherwise, it is our view that a child who has reached the age of majority would not be considered to be in the custody of either parent. Thus payments made on behalf of such a child would not be deductible as alimony or maintenance.

Joint custody is, in essence, an arrangement whereby parents who are living separate and apart continue to share the same duties, rights and responsibilities and input with respect to their children as cohabiting parents. In the situation where custody of the children is shared by means of alternating periods of residence with each parent, the children are considered to be in the custody of whichever parent has physical care and control of them at a particular point in time. Accordingly it is our view that payments made for the maintenance of a child who is in the physical custody of the spouse required to make the payments would not be deductible under paragraph 60(b) or (c) of the Act even though the court order or agreement may specify that 56.1(2) and 60.1(2) of the Act is to apply to the payments made thereunder and that the spouses are to have joint custody of the children.

We trust our comments will be of assistance to you.

Yours truly,

J.A. Szeszycki
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch