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:
1- Whether the old rules apply to a permanent order made after April 1997 in the same terms as an interim order made before May 1997.
2- Whether the old rules apply if payments are made pursuant to an interim order made before May 1997.
3- Can subsections 56.1(3) and 60.1(3) apply to a permanent order made after April 1997 with respect to amounts paid pursuant to an interim order made before May 1997?
Position:
1- No
2- Yes
3- Yes
Reasons:
1- It seems sufficiently clear from section 15.1 of the Divorce Act that an order made pursuant to subsection 15.1(1) of the Act replaces an interim order made under subsection 15.1(2) of the Act. Accordingly, a permanent order is a new order that comes into existence on the day it is made. The new rules apply to such a permanent order made after April 1997.
2- Since an interim order made before May 1997 would not have a "commencement day" the old rules will apply.
3- Subsections 56.1(3) and 60.1(3) refer to an amount paid and received before a certain time. This is a very broad statement, which is not only restricted to voluntary payments.
972951
XXXXXXXXXX J.E. Grisé
Attention: XXXXXXXXXX
December 22, 1997
Dear Sirs:
Re: Child Support Court Orders
This is in reply to your letter of November 6, 1997 concerning whether child support amounts paid pursuant to a permanent child support order made after April, 1997 in the same terms as an interim order made before May, 1997 would entitle the payer party to a tax deduction and require the recipient party to include the amounts in income (the old rules).
An interim support order under subsection 15.1(2) of the Divorce Act is made after a legal proceeding has started and operates "pending the determination" of the application for support under subsection 15.1(1) of that Act. Since an interim order terminates when the final determination is made at trial by the making an order pursuant to subsection 15.1(1) of the Divorce Act (permanent order), we are of the opinion that the permanent order would have, for purposes of sections 56, 56.1, 60 and 60.1 of the Income Tax Act, a "commencement day" of the day the permanent order was made. Thus, the child support amounts paid, pursuant to a permanent order made after April, 1997, by the payer party would not be deductible and the recipient party would not have to include the amounts received in income (the new rules).
Child support amounts paid and received pursuant to an interim order made before May, 1997 would be subject to the old rules until, if ever, there is a commencement day pursuant to paragraph (b) of the definition of "commencement day" in subsection 56.1(4) of the Income Tax Act, such as where the parties elect to have the new rules apply or certain terms of the order are varied.
In our view, subsections 56.1(3) and 60.1(3) of the Income Tax Act may apply to a permanent order where the order provides that an amount paid and received, before the date of the order and in the year or the preceding taxation year, pursuant to an interim order is considered to have been paid and received under the permanent order.
Paragraphs 56.1(3)(b) and 60.1(3)(b) of the Income Tax Act generally provide, in the situation you presented as "Precedent 2", that the permanent order will be deemed to have been made on the day on which the first amount was paid and received pursuant to the interim order in the period beginning with the start of the taxation year preceding the date of the permanent order and ending immediately before the date of the permanent order. Since paragraphs 56.1(3)(b) and 60.1(3)(b) of the Act are only applicable to amounts paid and received after 1996, a permanent order made in 1997 will be deemed to have been made on the day on which the first amount was paid and received pursuant to the interim order in 1997. In situations where there are no amounts paid and received in 1997 pursuant to an interim order (e.g., amounts paid and received in 1996 only), the permanent order could not be deemed to be made before the day it was made. Accordingly, a permanent order would not necessarily be deemed to be made the day on which the first amount under an interim order was paid and received as suggested in your "Precedent 2".
Yours truly,
John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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