9 February 2012 External T.I. 2011-0406701E5 - Taxability of 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.

Principal Issues: Are support payments taxable for recipient, where the separated couple reside in the same residence?

Position: Depends

Reasons: The definition of support amount must be fulfilled, which includes the determination as to whether the couple that continue to share the same residence will still meet the ITA requirement of living separate and part must also be fulfilled.

XXXXXXXXXX 

					2011-040670
					George A. Robertson, CMA	

February 9, 2012

Dear XXXXXXXXXX :

Re: Taxability of Spousal Support Payments

This is in response to your May 16, 2011 request on whether support payments you received are taxable, where you and your spouse remain living in the same residence. You also queried whether the amounts would be taxable after a separation agreement is completed.

In the situation described:

• you and your spouse have been separated since mid 2009 and continue to live in the same residence;
• your spouse has been paying you spousal support since January 2010;
• a separation agreement has yet to be completed.

Our comments:

Pursuant to subsection 56.1(4) of the Income Tax Act (the Act) an amount is a support amount if:

• the amount is payable to the recipient;
• the amount is payable as an allowance for the maintenance of the recipient, children of the recipient or both;
• the amount is payable on a periodic basis;
• the recipient has discretion as to the use of the amount; and
• where the recipient is the payer's current or former spouse or common-law partner, the amount is payable under an order of a competent tribunal or under a written agreement and the payer and recipient are living separate and apart because of the breakdown of their marriage or common-law partnership; or, where the recipient is the parent of a child of whom the payer is the natural parent, the amount is payable under an order of a competent tribunal in accordance with the laws of a province or territory.

Whether the payer and recipient are living separate and apart must be decided upon based on the facts in each case. The Canada Revenue Agency (CRA) previously discussed in Rulings document E2010-0377532M4 factors to be considered for the determination of whether spouses are living separate and apart while occupying the same residence. A copy of the cited document is enclosed for your convenience.

Generally, if the amount paid meets the definition of support amount the recipient of spousal support has an income inclusion under paragraph 56(1)(b) of the Act and the payer is entitled to a deduction under subsection 60(b) of the Act.

There is an exception to this general rule. Subsection 60.1(3) of the Act provides for amounts paid before a written agreement or order of a competent tribunal is made. Essentially, the subsection specifies that where a written agreement or order of a competent tribunal "made at any time in a taxation year" provides that amounts paid before that time and in the year or the preceding year are to be considered to have been paid and received under the written agreement or order, such prior-paid amounts are treated as having been paid pursuant to that written agreement or order.

While we trust that these comments will be of assistance, they are given in accordance with the practice referred to in paragraph 22 of Information Circular 70-6R5 and are not binding on the CRA in respect of any particular situation.

Yours truly,

Sharmini Ratnasingham
Assistant Director
Personal and Credit Section
Financial Industries Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

Encl.