18 February 1997 External T.I. 9639905 - ALIMONY AND MAINTENANCE 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.

Principal Issues:

Payment made to a child. Whether deductible as alimony or maintenance.

Position:

Not deductible in this particular instance.

Reasons:

The recipient spouse had no discretion since the payer spouse had a variance made to the judgement so that the payments would be made directly to the child.

XXXXXXXXXX                              	963990
		                               Jacques E. Grisé
Attention:  XXXXXXXXXX	                  (613)957-2059

February 18, 1997

Dear Sirs:

Re: Alimony or Maintenance Payments

This is in reply to your letter of December 2, 1996 requesting our views on the possible deduction of payments made to a child as alimony or maintenance.

You describe the situation where a lady obtained a divorce from her husband in 1993. A daughter of about 17 was left in the custody of the father. The lady was required to pay child support to the father until the daughter achieved the age of 19 years. She obtained a variance on the judgement to allow her to make the payments directly to her daughter.

Paragraphs 60(b) and (c) of the Income Tax Act permit a deduction in computing a taxpayer's income for a taxation year in respect of alimony and maintenance paid. Both paragraphs, in the situation you have described, require the alimony or maintenance payment to be made directly by the lady to her former husband.

Subsection 60.1(1) of the Income Tax Act provides, in part, that certain payments made to third parties, for example payments made to a child, shall be deemed to have been received by the former spouse. This deeming provision allows the payer to obtain a deduction for these payments where they otherwise meet the requirements of paragraph 60(b) or (c) of the Act. One of the requirements of both paragraphs is that the amount must be paid as an allowance to the former spouse. Subsection 56(12) of the Act states that an amount is not an allowance unless the former spouse has discretion as to the use of the amount. In the situation you describe, the former spouse has no such discretion since the lady paying the amounts obtained a variance on the judgement to allow her to make the payments directly to her daughter.

Subsection 60.1(2) of the Income Tax Act permits the payer to deduct payments made to a third party for the benefit of a former spouse or the child in the custody of the former spouse for specific expenses required to be paid pursuant to a judgment. Additionally, in order for the provision to apply, the order must specifically state that subsections 60.1(2) and 56.1(2) are to apply to the payments.

In view of the above, there seems to be no basis in the Income Tax Act that would permit a deduction for the payments described in the situation you have presented.

Yours truly,

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