10 February 1999 External T.I. 9900035 - 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:

A pre-May 1997 written agreement requires that a specified amount is required to be paid as child support. A post-April 1997 court order is issued which requires the payer to pay the same amount of child support to the recipient as required under the pre-May 1997 written agreement. The court order supersedes the written agreement. Is the court order considered to be a court order made after April 1997 with the result that it falls within the definition of “commencement day” in subsection 56.1(4) of the Act.

Position: Yes.

Reasons:

The court order is considered to have been “made” after April 1997 which is the day it was rendered or commenced to have legal force and effect..

XXXXXXXXXX 990003
M. Eisner
Attention: XXXXXXXXXX

February 10, 1999

Dear Sir:

Re: Child Support

This is in reply to your letter of December 29, 1998, concerning the above subject.

The information you provided us relates to a specific proposed transaction. As mentioned in a telephone conversation between (Eisner/ XXXXXXXXXX), confirmation of the tax consequences of such a transaction will only be provided in response to a request for an advance income tax ruling. The procedures for requesting an advance income tax ruling are set out in Information Circular 70-6R3,”Advance Income Tax Rulings”. However, we have proceeded to provide you with general comments.

With respect to a hypothetical situation, two individuals (“Individual A” and “Individual B”) separated prior to May 1, 1997. Individual A paid Individual B child support pursuant to the terms of a written separation agreement. The child support is deductible under paragraph 60(b) of the Income Tax Act (the “Act”) by Individual A and is required to be included in the income of Individual B under paragraph 56(1)(b) of the Act. After April 30, 1997, a divorce order is issued that supersedes the separation agreement. The order includes the relevant terms of the separation agreement that related to the “child support amount”, as defined in subsection 56.1(4) of the Act, that was being paid up to the time that the order became effective. Individual A, under the order, will be required to continue to pay Individual B the same amount under the order.

Under the new regime, payments of child support amounts under an agreement or court order are not deductible by the payer. The new regime applies to an agreement or court order if the agreement or court order has a “commencement day” which is defined in subsection 56.1(4) of the Act.

With respect to the above circumstances, paragraph (a) of the definition of “commencement day” in subsection 56.1(4) of the Act provides that the commencement day of an agreement or order is “the day that it is made”. In relation to paragraph (a), it is our view that, since the court order supersedes the separation agreement, the court order would have a commencement day. It is also our view that the court order is considered to have been made when it has been rendered or commences to have legal force and effect.

We trust that these comments will be of assistance to you.

Yours truly,

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

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