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: Instead of making support payments to a former spouse, a taxpayer, at the request of the former spouse and his child, for the sake of convenience, made payments directly to his child since she was going to school in XXXXXXXXXX and the former spouse lived in XXXXXXXXXX . The taxpayer was denied a deduction for payments to his child as support payments.
Position: Question of fact. We do not have sufficient information to determine if all the requirements of the definition of "support amount" in subsection 56.1(4) of the Act are met in this case.
Reasons: See 982918, 9825917, 9134186, 9224985.
Once a child of a marriage reaches the age of majority, that child is no longer considered to be in the custody of the parent. Therefore, a payment made directly to an adult child cannot be said to be for the benefit of either the spouse or a child in the custody of the spouse. Accordingly, generally, amounts payable directly to an adult child would not be deductible pursuant to paragraph 60(b) of the Act.
XXXXXXXXXX 993045
G. Moore
December 16, 1999
Dear XXXXXXXXXX:
We are replying to your letter of November 11, 1999, regarding payments you made to your daughter for her education.
During 1998, you made support payments directly to your daughter for her education. This was agreed upon by your ex-wife and your daughter for convenience since your ex-wife was living in XXXXXXXXXX and your daughter was going to school in XXXXXXXXXX. You indicate that you were not allowed a deduction for support payments on your 1998 return.
The situation set out in your letter appears to relate to a specific tax situation which has already occurred. If a transaction has already occurred, the relevant facts and documentation should be submitted to your local tax services office for their views. Confirmation of the tax consequences of a proposed 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, dated December 30, 1996. We are, however, providing you with the following general comments.
Support Amounts
Pursuant to the definition of "support amount" in subsection 56.1(4) of the Income Tax Act (the "Act"), a "support amount" means 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. In addition, for an amount to qualify as a "support amount", the recipient has to be the spouse or former spouse of the payer, the recipient and payer have to be living separate and apart because of the breakdown of their marriage, and the amount has to be receivable under an order of a competent tribunal or under a written agreement. Alternatively, pursuant to the definition of "support amount", the payer has to be the natural parent of a child of the recipient and the amount has to be receivable under an order made by a competent tribunal in accordance with the laws of a province.
Where a court order or written agreement (or any variation thereof) provides for the payment of an amount by a taxpayer to a person or for the benefit of the person, children in the person's custody or both the person and those children, subsection 60.1(1) of the Act provides that payments or amounts payable are deemed to be payable to and receivable by or paid to and received by, as the case may be, the person (i.e. the recipient spouse or former spouse). This deeming provision enables the payer to obtain a deduction under paragraph 60(b) of the Act, provided the payments otherwise qualify, and ensures that third party payments are taken into consideration in determining the amount the payer may deduct under paragraph 60(b) of the Act. In order for subsection 60.1(1) of the Act to apply to payments made directly to a child, since they are not being made to a former spouse, the payments must be for the benefit of the former spouse, the child in her custody or both the former spouse and the child. It is our view that once a child of a marriage reaches the age of majority, that child is generally no longer considered to be in the custody of the parent. Therefore, a payment made directly to an adult child generally cannot be said to be for the benefit of either the spouse or a child in the custody of the spouse. Accordingly, it is our view that generally, amounts payable directly to an adult child would not be deductible pursuant to paragraph 60(b) of the Act.
It is not clear from your letter whether the child had reached the age of majority. In addition, as we do not have a copy of the court order or written agreement between you and your former spouse, we cannot comment on whether the requirements of the definition of "support amount" are met in this case, or even if this is a court order or written agreement that has a "commencement day" (i.e., child support payments made pursuant to a court order or written agreement made after April 1997 are generally non-deductible and non-taxable). If a child had reached the age of majority at the time the payments were made to him or her, any such payments made would generally not qualify as a "support amount", and would not be deductible on the payer's income tax return as a support amount.
Tuition Tax Credit and Education Tax Credit
If a student is unmarried in the year, or if the student is married but the student's spouse claims neither a personal tax credit for the student under section 118 of the Act nor a tax credit under section 118.8 of the Act for any of the student's unused tax credits, the student's combined education and tuition tax credits for the year may be transferred to and claimed as a tax credit under section 118.9 of the Act by the student's parent or grandparent. Paragraph 19 of IT-516R2, Tuition Tax Credit, (copy enclosed) and IT-515R2, Education Tax Credit, (copy enclosed) contain more information on this subject.
We trust our reply will be of assistance to you. If you require further assistance, you should address your enquiry to the XXXXXXXXXX Taxation Service Office.
Yours truly,
J. Wilson.
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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