26 June 1998 External T.I. 9805125 - SPOUSAL AND CHILD SUPPORT

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: Payments in respect of bonuses - Whether they can be regarded as being an “allowance payable ... on a periodic basis” for the purposes of the definition of “support amount” in subsection 56.1(4) of the Act.

Position: Generally, yes

Reasons: Consistent with 910295, Decision Summary 6122-4 and paragraph 9 of IT-118R3

XXXXXXXXXX 980512
M. Eisner

Attention: XXXXXXXXXX

June 26, 1998

Dear XXXXXXXXXX:

Re: Maintenance Payments

This is in reply to your letter of February 11, 1998, concerning the above-noted subject. We apologize for the delay in replying.

You have described a situation where an individual, commencing on XXXXXXXXXX, was required to pay $XXXXXXXXXX a month to his spouse pursuant to a court order that was issued on XXXXXXXXXX. In addition, the individual is required to pay his spouse XXXXXXXXXX of any employment bonus received by him. Most likely, a bonus will be paid to the individual on an annual basis, although it could be paid more frequently.

In relation to paragraph 60(b) of the Income Tax Act (the “Act”), you have asked us about the deductibility of a payment made by the individual to his spouse in respect of a bonus.

Our Comments

Since your request for a technical interpretation relates to a completed transaction, we will only provide you with the following general comments. Further assistance on the income tax consequences of the above situation, which involves a question of fact, should be sought from officials in the nearest Revenue Canada tax services office, by presentation of all the relevant facts and documentation.

Consistent with the comments made in paragraph 9 of Interpretation Bulletin IT-118R3 “Alimony and Maintenance”, the Department generally considers that where one individual is required to pay a part of his or her employment income received, including bonuses, to a recipient in accordance with a formula set out in a court order involving maintenance, it will be regarded as being an “allowance payable ... on a periodic basis” for the purposes of the definition of “support amount” in subsection 56.1(4) of the Income Tax Act. It follows that such a payment will be regarded as being a “support amount” where all the requirements within the definition of that term have been satisfied.

We trust that our comments will be of assistance, but caution you that they do not constitute an advance income tax ruling and, accordingly, are not binding on the Department with respect to any particular transaction.

Yours truly,

Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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