A resident of France was awarded compensatory allowances by order of the applicable French court on her divorce from her husband, consisting of a lump sum (payable in two instalments separated by a year) and a life annuity payable on a monthly basis. She became a resident of Canada. Withholding tax was levied by the French tax authorities on the life annuity but not on any portion of the lump sum.
CRA found that the lump sum was not includible in her income being a capital sum that was intended to “equalize the resources of the two spouses following the dissolution of the marriage,” but that the life annuity was includible in her income as a support amount as it was for support, she had full discretion as to the use of the funds, it was payable periodically, pursuant to an order of a court of competent jurisdiction and the payee and payor were living separate and apart due to marriage breakdown.