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:
Under a separation agreement former spouse agreed to pay taxpayer one-half of any dividends (net after his taxes) he received from his corporation of which she is not a shareholder. Taxpayer asked us to rule that should she receive the gross amount, that she be taxed and not the former spouse as her marginal rate of tax is lower than his.
Position:
The matter on which she asked us to rule is not a subject for an advance income tax ruling.
Reasons:
There is no proposed transaction as the agreement requiring the former spouse to pay amounts was signed years ago. The dividends in question are received by the former spouse and are, therefore, taxable in his hands.
964155
XXXXXXXXXX A.M. Brake
January 10, 1997
Dear XXXXXXXXXX:
Re: Advance Income Tax Ruling Request
This is in reply to your letter of November 7, 1996, and is further to a recent telephone conversation relating to your request for an advance income tax ruling concerning the taxability of money paid to you by your former spouse which you have said is not alimony or maintenance.
We understand that the payment represents a portion of dividends received by him from a corporation of which you are not a shareholder. The amount in question is net after the taxes which he is required to pay, since he is the shareholder and the dividends are taxable in his hands. You asked whether the amounts in question could be taxed in your hands rather than his as your marginal rate of tax is lower than that of your former spouse.
As confirmed in our telephone conversation, the dividends are received by your former spouse and it is he who is responsible for the tax thereon. We also advised you informally that the matter on which you have asked us to rule is not a subject for an advance income tax ruling.
Your deposit will be refunded under separate cover. Should you wish to pursue this matter further, you should contact your Tax Service Office and have a representative review the separation agreement.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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