19 February 1997 Ministerial Letter 9634728 - ASSIGNMENT OF RIGHT TO RECEIVE ALIMONY

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:

whether client can have an alimony or maintenance deduction for amounts paid to the province of Ontario. The ex-spouse has assigned all rights to alimony or maintenance as a condition for eligibility to collect social assistance.

Position:

No

Reasons:

Payments to the province are not paid on behalf of the former spouse nor for the benefit of the former spouse. Once assignment occurs, the province is no longer acting as agent for payor (the ex-spouse began to receive amounts based on need and as determined under the social assistance legislation)

MINISTER/DEPUTY MINISTER'S OFFICE 96-07026M
ADM'S OFFICE
RETURN TO 15TH FLOOR, ALBION TOWER

Feb. 19, 1997

XXXXXXXXXX

Dear XXXXXXXXXX:

I am writing in response to the correspondence of July 15, 1996, from XXXXXXXXXX, concerning the income tax affairs of your constituent, XXXXXXXXXX contacted your office when his XXXXXXXXXX income tax returns were reassessed to disallow an alimony or maintenance deduction in each of those years.

An alimony or maintenance deduction may only be allowed if certain conditions are met, including the condition that the payments be for the maintenance of the recipient, the recipient's children, or both. However, a payor cannot deduct alimony or maintenance payments if the spouse, or former spouse, has assigned the right to receive that alimony or maintenance to a province in order to secure social assistance benefits.

The Department's position resulted from the Tax Court of Canada decision, Bishop v. M.N.R., (93 DTC 333). The Tax Court had to decide if an amount paid by William Bishop to the Treasurer of Ontario in 1988 was deductible by him in computing his income and whether the amount should be included in Carol Bishop's income. Mr. Bishop paid arrears of support to the Ministry of Community and Social Services (MCSS) because that ministry started a garnishment proceeding against him for his failure to make support payments as required under the terms of the decree nisi. The right to support payments was assigned to the province by Carol Bishop at the time that she applied to receive social assistance. Mr. Bishop and the Treasurer of Ontario settled the garnishment proceedings whPn the MCSS agreed to withdraw the proceedings if Mr. Bishop paid the amount due. The Court found that the amount was not income to Carol Bishop because she neither actually received nor indirectly benefited from the payment. The Court also decided that the payment was not deductible by William Bishop because the payment to the MCSS was not paid on behalf of Carol Bishop, nor was it for her benefit under the decree nisi. Rather, the payment was made to discharge his indebtedness to the Ministry, which arose in consequence of the divorce order rather than under it, within the meaning of paragraph 60(b) of the Act.

XXXXXXXXXX situation is similar to that of Mr. Bishop's. His former spouse applied for social assistance from the Province of Ontario and the province required that she assign her right to receive support payments from her former spouse as a condition for eligibility to receive social assistance. The amount paid by the province to the former spouse was determined on the basis of need and was set in accordance with the province's social assistance legislation. The amounts paid by XXXXXXXXXX to the province under its Family Support Plan were deductible by him only until his ex-spouse assigned her right to such amounts. The province is not an agent for the former spouse in an assignment situation. The payments to the province by XXXXXXXXXX were not paid on behalf of his former spouse nor were they for her benefit, as found in the Bishop case.

A change to policy, which is the responsibility of the Department of Finance, would be required to allow XXXXXXXXXX deduction. I assure you that Finance officials have been apprised of this matter and have given it consideration.

I thank you for bringing this matter to my attention and I trust that this inforrnation will assist you in replying to your constituent.

Yours sincerely,

Jane Stewart, P.C., M.P.

Sandra Short
January 29, 1997
957-2136
Finalized 97-02-04 - DJ/lv