24 April 1998 External T.I. 9805525 - CHILD SUPPORT 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:

Are the support payments subject to the new child support rules given that the written agreement came into force after May 1, 1997?

Position:

This is a factual determination. We can only provide general comments. We do not have a copy of the written agreement and we do not know when the agreement was made. We only know that it came into force on July 31, 1997.

Reasons: See 9719345. When an agreement or order, made after April 1997, varies a child support amount payable pursuant to a pre-May 1997 order, the day on which the first payment is required to be made is considered to be the “commencement day” and the new order falls under the new child support rules.

XXXXXXXXXX 980552
G. Moore

April 24, 1998

Dear XXXXXXXXXX:

Re: Child Support Payments

I am replying to your letter of February 13, 1998, addressed to Mr. George Thomson, Deputy Minister, Department of Justice, in which you requested a ruling regarding child support payments. Mr. Thomson forwarded a copy of your letter to Mr. Roy Shultis, Director General, Income Tax Rulings and Interpretations Directorate.

In your letter, you indicate that you and your ex-spouse entered into an agreement this year to vary the amount of child support payments. The agreement was filed with the Family Court and came into force on July 31,1997. The agreement varies the child support payments required to be made under an agreement made in 1993. As part of the variation, you and your ex-spouse agreed that you would continue to claim a deduction for the child support payments and she would continue to include them in her income.

You have requested that the Department of Justice issue a ruling confirming that the July 31,1997 written agreement will not be considered to be a court order made after April 1997 for purposes of the new child support rules. You are requesting that you continue to be allowed to deduct monthly amounts (pursuant to the “old rules” wherein a payer of alimony or maintenance is entitled to a deduction for periodic payments made as an allowance under a court order or written agreement and the recipient is required to include such payments in income) required to be paid pursuant to the new written agreement.

We are unable to provide an advance income tax ruling since the transaction was completed with the issuance of the new agreement that came into force on July 31, 1997. In addition, as we do not have a copy of the 1993 and 1997 written agreements, we can only offer the following general comments.

Our Comments

As you know, the basic thrust of the new child support provisions is to eliminate both the requirement to include child support in the custodial or recipient parent’s income and the deduction available to payers of child support. Generally, the new rules apply to agreements or court orders made on or after May 1, 1997. However, by virtue of the definition of “commencement day” in subsection 56.1(4) of the Income Tax Act (the “Act”), the new rules apply to child support amounts paid under the terms of an agreement or order made before May 1, 1997, if:

1. the parties both sign and file an election with the Department agreeing that the new tax rules will apply to the existing order or agreement after a specified date (no earlier than May 1, 1997),

2. the parties change the child support amounts payable to the recipient by amending the agreement or court order after April 1997,

3. another agreement or order is made after April 1997 and the effect of the subsequent agreement or order is to change the total child support amounts payable to the recipient by the payer, or

4. the order or agreement specifically provides that the new tax rules will apply after a specific date (no earlier than May 1, 1997).

Based on a review of the situation you have described to us, we cannot determine if the new child support provisions apply to the new agreement. You have indicated that the new agreement, which varies the amount of child support payments, came into force on July 31, 1997; however, you have not indicated whether you and your ex-spouse entered into the new agreement after April 1997. If the agreement was entered into after April 1997, it would appear that the new child support rules would likely apply to the new agreement since it would be an agreement made after April 1997. The effect of this would be to eliminate both the requirement to include child support in your ex-wife’s income and the deduction available to you for child support.

I trust my comments will be of assistance to you. Please note that these comments represent our opinion of the law as it applies generally and, as stated in Information Circular 70-6R3, are not binding on the Department.

Yours truly,

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

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