17 September 2008 External T.I. 2008-0279101E5 F - Pension alimentaire - enfant majeur
Principal Issues: [TaxInterpretations translation] Are support payments that are paid directly to the adult child of the payer and the recipient deductible to the payer, to the extent that the court judgment provides for the payment of those amounts to the beneficiary?
Position: Taxable to the recipient and deductible to the payer.
Reasons: By virtue of subsection 56.1(1) of the Income Tax Act, we are of the view that the recipient is deemed to have received the support payments that were made to the child of the age of majority. At the same time, we believe that subsection 60.1(1) deems the amounts, paid by the payer to the adult child, paid to the recipient.
XXXXXXXXXX 2008-027910 Nancy Turgeon, CGA Le 17 septembre 2008
Dear Madam,
Subject: Application of subsections 56.1(1) and 60.1(1) of the Act
This is further to your email of May 15, 2008 in which you requested our opinion on the application of subsections 56.1(1) and 60.1(1) of the Income Tax Act (the "Act") to support payments for the purposes of applying paragraphs 56(1)(b) and 60(b).
Unless otherwise indicated, all legislative references herein are to the provisions of the Act.
More specifically, you indicated that a payer makes support payments directly to a child over the age of majority with the consent of the former spouse (the "recipient"). However, under the terms of the court judgment, these payments remain payable to the recipient. We have assumed that the support payments are not tax exempt and that the child was a minor at the time the judgment was rendered.
You therefore wish to know whether these payments are deductible to the payer and taxable to the recipient.
Our Comments
The situation you described appears to relate to an actual situation concerning a specific taxpayer. As explained in Information Circular 70-6R5, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope may be helpful to you. These comments may, however, under certain circumstances, not apply to your particular situation.
For the purposes of subsection 56(1)(b), the recipient of support payments will be required to include these payments in income to the extent that they are received. Similarly, the payer will be able to deduct these payments if they were paid to the recipient to the extent that they were living separate and apart at the time of the payment.
By virtue of subsection 56.1(1), we are of the view that the recipient is deemed to have received the support payments that were made to the child of the age of majority. At the same time, we believe that subsection 60.1(1) deems the amounts, paid by the payer to the child of the age of majority, to be paid to the recipient.
Thus, to the extent that the amounts paid by the payer represent "support" amounts under the definition of that term in subsection 56.1(4), we are of the view that the amounts are both deductible by the payer and taxable to the recipient.
These opinions do not constitute advance rulings and, as stated in paragraph 22 of Information Circular 70-6R5 of May 17, 2002, are not binding on us.
Best regards,
François Bordeleau, LL.B.
Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate.