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: A consent order dated XXXXXXXXXX , requires the father of the child to pay $XXXXXXXXXX per month in child support but this amount may be varied annually as of January 1st of each year, based on the father’s annual employment income for the preceding year. The child support payable for each successive year is to be calculated on the father’s annual income based on a table annexed to the court order. A court order dated XXXXXXXXXX , orders the father to pay “support” of $XXXXXXXXXX per month . A payment order was issued to the father’s employer and payments are to be made directly to the Family Court. A court order dated XXXXXXXXXX , replaces paragraph 1 of the XXXXXXXXXX order such that the amount of the child support amount payable is not specified in the order but the payer’s employer is ordered to withhold an amount determined in accordance with the formula in the court order dated XXXXXXXXXX , and direct the payment to the Family Court.
Does the XXXXXXXXXX court order or the court order dated XXXXXXXXXX , have a “commencement day” as defined in subsection 56.1(4) of the Act?
Position:
No, neither the order dated XXXXXXXXXX , or the order dated XXXXXXXXXX , would be considered to have a “commencement day” as defined in subsection 56.1(4) of the Act.
Reasons: Since paragraph 1 of the XXXXXXXXXX court order has been replaced and now refers to the formula in the XXXXXXXXXX order, the XXXXXXXXXX order is a payment order and would not be considered to be a court order made after XXXXXXXXXX , for purposes of paragraph (a) of the definition of “commencement day” in subsection 56.1(4) of the Act because the XXXXXXXXXX court order still has legal force and effect with respect to the determination of the quantum of child support amounts payable for future years.
The new order dated XXXXXXXXXX , is not an order made after XXXXXXXXXX for purposes of the definition of “commencement day” in subsection 56.1(4) of the Act since the court order dated XXXXXXXXXX , still has legal force and effect with respect to the amount of child support amounts payable and receivable and has not been superseded by the XXXXXXXXXX order, as it now reads. The order dated XXXXXXXXXX replaces paragraph 1 of the XXXXXXXXXX court order such that the amount of the child support payment to be withheld by the employer and directed to the Family Court is no longer specified. The XXXXXXXXXX court order refers to the formula established by the XXXXXXXXXX court order. The XXXXXXXXXX court order also states that, other than to change the logistics of payment, it was not the intention of the court to put child support in issue or in any way do anything to change the treatment of child support for either XXXXXXXXXX . Accordingly, paragraph (a) of the definition of “commencement day” in subsection 56.1(4) of the Act would not apply to theXXXXXXXXXX or XXXXXXXXXX orders. Subparagraph (b)(ii) of the definition of “commencement day” does not apply since the XXXXXXXXXX order has not been varied after XXXXXXXXXX to change the child support amounts payable. In addition, subparagraph (b)(iii) of the definition of “commencement day” does not apply since the effect of the subsequent order dated XXXXXXXXXX , as amended by the XXXXXXXXXX court order, is not to change the total child support amounts payable.
November 30, 1998
Saint John Taxation Service Office HEADQUARTERS
W. R.D. McLean G. Moore
Team Coordinator 952-1506
Client Services
7-982854
Child Support Payments - Definition of “Commencement Day” in Subsection 56.1(4)
We are writing in reply to your memo of October 27, 1998, in which you asked for our opinion concerning whether there is a commencement day (as defined in subsection 56.1(4) of the Income Tax Act (the “Act”)) for the court orders dated XXXXXXXXXX, and XXXXXXXXXX, between XXXXXXXXXX.
As we understand the situation, a consent order dated XXXXXXXXXX, between the above-mentioned individuals, indicates that XXXXXXXXXX is required to pay $XXXXXXXXXX per month for child support for one child to XXXXXXXXXX. The child support was based on XXXXXXXXXX annual income of $XXXXXXXXXX. The consent order provides that the child support payment shall be varied annually on January 1 of each successive year and the amount of child support payable for each successive year is to be calculated on XXXXXXXXXX annual income for the preceding year using a table annexed to the consent order. The consent order also stipulates that the child support payments shall be taxable and deductible under the provisions of the Income Tax Act.
A court order dated XXXXXXXXXX, requires XXXXXXXXXX to pay support of $XXXXXXXXXX per month to XXXXXXXXXX. The order also stipulates that a payment order is to be issued to XXXXXXXXXX employer and that all payments are to be made to the Family Court. The court order requires that XXXXXXXXXX is to provide XXXXXXXXXX with a copy of his income tax return for each year. As indicated in our memo of September 24, 1998, to you, it is our view that since there is a mechanism built into theXXXXXXXXXX order that provides for automatic increases in child support, there would not be a commencement day as long as the child support amounts to be paid under the order change in accordance with its stated provisions. If this is the case, the automatic changes to child support amounts to be paid would not be considered to be a variation for purposes of paragraph (b)(ii) of the definition of “commencement day” in subsection 56.1(4) of the Act and would generally continue under the old rules.
We had also indicated in our memo of September 24, 1998, that since the court order dated XXXXXXXXXX, supersedes the consent order dated XXXXXXXXXX, it is our view that the court order dated XXXXXXXXXX , would be regarded as being an order made after April 1997 and paragraph (a) of the definition of “commencement day” in subsection 56.1(4) of the Act applies.
XXXXXXXXXX has subsequently gone back to court and obtained a new court order dated XXXXXXXXXX. The XXXXXXXXXX order revokes and replaces paragraph 1 of the XXXXXXXXXX order such that there is no reference to the quantum of child support payable but instead there is a reference to payment in an amount determined by the formula established by the court order dated XXXXXXXXXX. The XXXXXXXXXX court order also states that other than the logistics of payment (i.e. the payer’s employer was ordered to make the child support payment directly to the Family Court) it was not the intention of the court or the parties to put child support in issue or in any way to do anything to change the tax treatment of child support for either the recipient or the payer.
Based on a review of the information you have provided, the court order dated XXXXXXXXXX replaces paragraph 1 of the XXXXXXXXXX court order such that the amount of the child support payment to be withheld by XXXXXXXXXX employer and directed to the Family Court is no longer specified. Paragraph 1 of the XXXXXXXXXX order has been replaced such that it refers to the formula established by the XXXXXXXXXX court order. The XXXXXXXXXX court order also states that, other than to change the logistics of payment, it was not the intention of the court to put child support in issue or in any way do anything to change the treatment of child support for either XXXXXXXXXX. Accordingly, it is our view that paragraph (a) of the definition of “commencement day” in subsection 56.1(4) of the Act would not apply to the XXXXXXXXXX court order since the court order dated XXXXXXXXXX, still has legal force and effect with respect to the child support amounts payable. In addition, it is also our view that subparagraph (b)(ii) of the definition of “commencement day” does not apply since the XXXXXXXXXX order has not been varied after April 1997 to change the child support amounts payable. The XXXXXXXXXX court order as amended by the XXXXXXXXXX order, (i.e. with new paragraph 1) is only a payment order and does not change the child support amounts payable. In addition, it is our view that subparagraph (b)(iii) of the definition of “commencement day” does not apply since the effect of the subsequent order dated XXXXXXXXXX, as amended by the XXXXXXXXXX court order, is not to change the total child support amounts payable pursuant to the XXXXXXXXXX order.
In summary, given the revocation and replacement of paragraph 1 of the XXXXXXXXXX court order by the XXXXXXXXXX court order, any child support amounts payable and receivable made pursuant to the XXXXXXXXXX court order would be subject to the old rules (i.e. taxation/deductibility of child support amounts).
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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