15 June 1998 Internal T.I. 9812307 - VARIATION OF 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: Whether a post-April 1997 court order that deals with a variation of accumulated arrears (from $100 to $50 monthly) and a variation of a monthly child support amount payable would constitute a new order for the purposes of paragraph (b) of the definition of “commencement day” in subsection 56.1(4).

Position: The variation of arrears relates to a child support amount payable on a periodic basis pursuant to a pre-May 1997 order and accordingly, the variation of arrears would not be subject to the new rules. A post-April 1997 order that provides for a variation in the $500 monthly child support payable would fall under the new rules.

Reasons: The post-April 1997 order varies the monthly accumulated arrears payments but the arrears are based on the child support amount payable on a periodic basis pursuant to a pre-May 1997 order.

		June 15, 1998

	Jim Simpson	HEADQUARTERS
	Client Services Division	G. Moore
	Winnipeg Tax Services Office	952-1506

7-981230

Child Support Payment Arrears - Paragraph 60(b)

We are writing in reply to your memo of May 8, 1998, in which you asked for our opinion concerning whether child support payments that have fallen into arrears will be subject to the new child support provisions if an order made after April 1997 recognizes a change in the payment of the arrears.

As we understand the situation, a 1995 judgment orders XXXXXXXXXX to pay $XXXXXXXXXX towards arrears of approximately $XXXXXXXXXX in addition to providing monthly periodic child support payments of $XXXXXXXXXX. XXXXXXXXXX is seeking a variation to the 1995 order with respect to reducing the monthly arrears payment from $XXXXXXXXXX to $XXXXXXXXXX. The new order will also be seeking a variation of the monthly child support of $XXXXXXXXXX. XXXXXXXXXX representative is enquiring whether a variation of the arrears in a court order made after April 1997 would result in the arrears payments being subject to the new child support rules. He recognizes that the new monthly child support payments would be subject to the new rules.

Our Comments

It is our general view that a court order that deals with both a variation of accumulated arrears and the monthly $XXXXXXXXXX child support amount payable on a periodic basis would constitute a variation of an order for the purposes of paragraph (b) of the definition of “commencement day” in subsection 56.1(4) of the Income Tax Act (“the Act”). However, the reference in paragraph (b) of that definition to the agreement or order is a reference to an agreement or order otherwise described in variable “B” in paragraph 56(1)(b) or 60(b) of the Act, as the case may be. Variable “B” pertains to the child support amount that became receivable or payable, as the case may be, under an agreement or order on or after its “commencement day”. The monthly $XXXXXXXXXX arrears payments, that will be recognized by the court in an order made after April 1997, would not be considered, in and by themselves, to be a child support amount that became payable by XXXXXXXXXX under the post-April 1997 court order, but rather would represent an amount in respect of periodic support payments that became payable by XXXXXXXXXX under the 1995 court order, that had fallen into arrears.

“Support amount” is defined in subsection 56.1(4) of the Act to mean an amount payable or receivable as an allowance on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and children of the recipient, if the recipient has discretion as to the use of the amount ... . According to Black’s Law Dictionary, Sixth edition, “payable” means justly due; legally enforceable. A sum of money is said to be payable when a person is under the obligation to pay it. The subtlety in the wording of these paragraphs distinguishes between paid and payable. The amount paid does not necessarily have to be paid periodically as long as the allowance provided for in the order or agreement is an allowance payable on a periodic basis. Consequently, an amount may still be considered to be payable on a periodic basis even when the payment is made late. It is our general view that the paying of pre-May 1997 arrears in this manner would be deductible/taxable as the payments related to the periodic payments ordered by the court before May 1, 1997.

For your information, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Department’s mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at (613) 957-0682. The severed copy will be sent to you for delivery to the client.

We trust our reply will be of assistance in this matter.

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

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