CRA respects the effect of a court order providing that a lump sum payment was in satisfaction of a retroactive periodic support obligation
A 2018 court order required retroactive child and spousal support payments to be made by an individual to a former spouse on a monthly basis for the period from 2013 until the date of the order but treated various payments previously made by the individual to the former spouse as being in satisfaction of this periodic obligation and also contemplated that such obligation would be satisfied in part by way of set-off against an obligation of the former spouse to pay an equalization amount to the individual respecting a division of matrimonial property.
After noting that s. 60.1(3) deemed payments made in the previous year and during 2018 up to the time of the order to be made pursuant to the order, so that such payments could potentially qualify for deduction under s. 60(b), CRA turned to the deductibility of amounts paid after the time of the order, and stated:
[W]here the lump-sum amount is paid pursuant to a court order that establishes a clear obligation to pay retroactive periodic maintenance for a specified period prior to the date of the court order … the lump-sum payment will not, in and of itself, change the nature of the underlying legal obligation of periodic maintenance payments and, if all other requirements are met, the lump-sum amount paid will be deductible to the payer according to the formula in paragraph 60(b) … .
CRA went on to indicate that the above principle would apply even though such lump sum payment of retroactive periodic support was made in part by way of set-off against an obligation of the support recipient to make an equalization payment.
Neal Armstrong. Summaries of 7 September 2022 Internal T.I. 2022-0931081I7 under s. 60.1(3), s. 60(b) and General Concepts – Effective Date.