7 February 1997 Internal T.I. 9637297 - AMENDMENT TO PRE-FEB. 11, 1988 COURT ORDER

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:

whether amendment to maintenance order constitutes a "new" order

Position:

variance order merely increases quantum of monthly support required to be paid and is just an amendment to the original order (does not result in there being a new order). Gave consideration to the proposed changes to child support payments (which provides that where an agreement or court order is changed after April 30, 1997 to increase or decrease the amount of child support payable, the amounts will no longer be taxable to the recipient nor deductible by the payer) but concluded that the legislation is not stating or supporting that such changes constitute a "new" agreement. Merely, once a change is made to the amount of child support due, the new rules will apply as required under the legislation.

Reasons:

previous opinions (XXXXXXXXXX) on changes to contracts (see also Chitty on Contracts)

		February 7, 1997

	Winnipeg Tax Services Office	HEADQUARTERS
	Client Assistance Directorate			Sandra Short
(613) 957-8953
	Attention:  G. Teterenko
		963729

Amendment to pre- February 11, 1988 court order

This is in reply to your November 1, 1996, enquiry which asks whether a 1993 amendment to a pre-February 11, 1988, court order results in the old order continuing in an amended form or whether the amendment constitutes a new order. The original order relates to the provision of periodic maintenance payments to a former common-law partner and the 1993 variance order amends the amount of maintenance to be paid each month.

A deduction for maintenance payments to a former common-law partner, pursuant to orders made before 1993, is available only if the conditions of paragraph 60(c.1) are met. Periodic maintenance paid pursuant to an order made before February 11, 1988, in accordance with the laws of a province or territory by a competent tribunal, are only deductible if the parties have jointly elected in writing before the end of the year to have paragraphs 60(c.1) and 56(1)(c.1) apply to all amounts paid (assuming all other conditions have been satisfied). In the situation under review, the original order is dated 1986. There is no evidence of a written joint election (although the payor has deducted payments since 1989 and the recipient has included the amounts in income). The order was amended in 1993 solely to increase the monthly maintenance amount from $XXXXXXXXXX to $XXXXXXXXXX.

It is our view that the variation order does not so fundamentally alter the terms of the original order so as to render that original order void. The amendment merely increases the quantum of maintenance to be paid from that specified in the original order, so that the original order still exists, in altered form. As a result, we believe that the taxpayers are still governed by the provisions of paragraph 60(c.1), rather than paragraph 60(c).

We agree with your technical finding that if the amendment is merely the continuation of the pre-February 11, 1988, order in altered form, which we believe it is, then the parties are required to jointly elect in writing in order for the maintenance payments to be deductible by the payor (and included in the recipient's income). If no written election has been made to date, the parties may choose to do so at this time for payments made in 1997 and onward. Unfortunately, this election is not one contained in section 600 of the Regulations, which permits a taxpayer to apply to the Minister to make a late election under the provisions of subsection 220(3.2) of the Act. We suggest that you discuss this situation with the T1/T3 Processing Division (Individual Returns and Payments Processing Directorate) to determine whether there are any administrative guidelines to permit no reassessment when both parties have consistently reported and deducted the same amounts each year.

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

c.c.Michelle Desmarais-Markham,

Validation Section, T1/T3 Processing Division