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This translation was prepared by Tax Interpretations Inc. The CRA did not issue this document in the language in which it now appears, and is not responsible for any errors in its translation that might impact a reader’s understanding of it or the position(s) taken therein. See also the general Disclaimer below.
Principal Issues: [TaxInterpretations translation] Can Madame deduct in computing her income under paragraph 60(b) certain amounts paid to Monsieur?
Position: Yes, for the amounts paid other than the arrears since, according to the facts submitted, it appears that those amounts constituted the payment of support amounts within the meaning of subsection 56.1(4).
No, for the amount paid as arrears of support amounts.
Reasons: Legislative analysis and paragraph 22 of IT-530R.
May 25, 2011
XXXXXXXXXX Tax Services Office, Headquarters
Services to individuals and benefits Income Tax Rulings Directorate
Isabelle Landry, M.Fisc.
450-623-0193
Attention: XXXXXXXXXX
2011-039587
Retroactivity of support amounts
This is in response to your letter of January 27, 2011 in which you requested our comments regarding the qualification of certain amounts as a "support amount" as defined in subsection 56.1(4) of the Income Tax Act (the "Act") in the following particular situation.
Unless otherwise indicated, all statutory references herein are to the provisions of the Act.
You have provided to us a judgment rendered by XXXXXXXXXX on XXXXXXXXXX in the file of Ms. XXXXXXXXXX ("Madame") and of Mr. XXXXXXXXXX ("Monsieur") (the "Judgment"). Our understanding of the relevant facts contained in the Judgment is as follows:
1. On XXXXXXXXXX, a Special Registrar approved an interim agreement between Monsieur and Madame under which Madame undertook to pay Monsieur an amount of $XXXXXXXXXX on XXXXXXXXXX and an amount of $XXXXXXXXXX per month for the following months, the whole "without admission from either side of the reasons for payment". In accordance with that Interim Agreement, Madame paid to Monsieur a total amount of $XXXXXXXXXX, being $XXXXXXXXXX on XXXXXXXXXX and $XXXXXXXXXX for the months of XXXXXXXXXX to XXXXXXXXXX.
2. On XXXXXXXXXX, an interim order was made ordering in particular that Madame pay to Monsieur an amount of $XXXXXXXXXX per month. The qualification of that amount, whether as an advance of funds or as support amounts, was, however, reserved to the trial judge. In accordance with that interim order, Madame paid Monsieur a total amount of $XXXXXXXXXX, being $XXXXXXXXXX on XXXXXXXXXX and $XXXXXXXXXX for the months of XXXXXXXXXX to XXXXXXXXXX.
3. In the Judgment, the Court retroactively characterized, as support amounts to Monsieur, payments totaling $XXXXXXXXXX (being the total of $XXXXXXXXXX and $XXXXXXXXXX) and ordered that Madame pay an additional amount of $XXXXXXXXXX to Monsieur as arrears of support amounts for Monsieur. We understand that this amount was paid in XXXXXXXXXX by Madame to Monsieur.
You wish to know if the amounts paid by Madame and received by Monsieur in the present situation can qualify as "support amounts” as defined in paragraph 56.1(4) and consequently, if they must be included under paragraph 56(1)(b) in computing the income of Monsieur and deducted under paragraph 60(b) in computing the income of Madame for the relevant taxation years.
Subsection 56.1(4) defines "support amount" as 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, and the recipient is the spouse or common-law partner or former spouse or common-law partner of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage or common-law partnership and the amount is receivable under an order of a competent tribunal or under a written agreement or the payer is a legal parent of a child of the recipient and the amount is receivable under an order made by a competent tribunal in accordance with the laws of a province. A support amount for a spouse in respect of a particular taxation year is generally includible in computing the income of the recipient for the particular taxation year under paragraph 56(1)(b) and deductible in computing the payer's income under paragraph 60(b).
Whether an amount paid qualifies as a "support amount" for the purposes of subsection 56.1(4) is a question of fact. In fact, the tax treatment of an amount under the Act does not depend on how it is described but rather on its very nature. In this case, it appears that the payments totaling $XXXXXXXXXX as well as the payments totaling $XXXXXXXXXX that Madame paid to Monsieur from XXXXXXXXXX to XXXXXXXXXX satisfy the conditions in the definition of support amounts provided for in subsection 56.1(4) at the time they were paid and therefore those amounts are deductible by Madame and taxable to Monsieur.
By contrast, we are of the view that the additional amount of $XXXXXXXXXX paid by Madame to Monsieur in XXXXXXXXXX as arrears of support does not constitute an amount of support for the purposes of subsection 56.1(4) since it was not an amount payable or receivable as a periodic allowance. That amount is therefore neither deductible by Madame nor taxable to Monsieur. This position is consistent with the comments at the end of paragraph 22 of Interpretation Bulletin IT-530R, Support Payments.
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. 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 the taxpayer request a copy of this memorandum, you may provide the taxpayer with a severed copy as it appears in the Canada Revenue Agency's electronic library. They may request a severed copy using the Privacy Act criteria, which does not remove taxpayer identity. Requests for this latter version should be made by you to Madame Celine Charbonneau at (613) 957-2137. In such cases, a copy will be sent to you for delivery to the taxpayer.
We hope that these comments will be of assistance. If you would like additional information regarding the content of this document, do not hesitate to contact us.
Guy Goulet CA M. Fisc.
Manager
for the Director
Ontario Corporate Income Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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