Principal Issues: [TaxInterpretations translation] Can sums paid by Monsieur to Madame in XXXXXXXXXX and XXXXXXXXXX as an advance on the division of the family patrimony be deducted from his income, when a judgment issued in XXXXXXXXXX does not recognize the nature of those sums and indicates that they were used for maintenance purposes?
Position: No.
Reasons: The amounts paid do not satisfy the conditions of the definition of "maintenance", i.e., they were not paid pursuant to a written order or agreement. In addition, subsection 60.1(3) does not apply because the amounts were paid more than one year before the judgment recognizing them as support.
October 22, 2004
Jonquière Tax Centre Headquarters
Client Services N. Deslandes, CGA
(613) 957-8953
Attention: Ms. Martine Gautreau
2004-007979Spousal Support
This is in response to your fax of June 3, 2004, in which you requested our opinion on the above subject. We apologize for the delay in responding to your request.
THE FACTS:
1. XXXXXXXXXX ("Monsieur") and XXXXXXXXXX ("Madame") were married on XXXXXXXXXX under the regime of separation of property. From this union were born XXXXXXXXXX children who are now adults and independent.
2. The parties separated in XXXXXXXXXX.
3. On XXXXXXXXXX, a record of the hearing indicated that the Court ordered Monsieur to pay Madame interim support in the amount of $XXXXXXXXXX per month payable commencing XXXXXXXXXX.
4. A judgment on provisional measures was pronounced on XXXXXXXXXX giving custody of the youngest child to Madame and ordering Monsieur to pay the mortgage, taxes and insurance on the residence and to pay support to Madame and the child in the amount of $XXXXXXXXXX as of XXXXXXXXXX. Madame was also awarded a provision for expenses of $XXXXXXXXXX.
5. A divorce decree dated XXXXXXXXXX stated the following with respect to the division of the family patrimony. It stated that the wife will keep the family home, which has a divisible net worth of $XXXXXXXXXX. She will have to pay half of this amount to him. However, originally, the husband was to retain sole ownership of the family home. He had therefore considered paying certain sums to Madame as advances on the division of the family patrimony, although, as indicated in paragraph XXXXXXXXXX of the judgment, this matter had never been discussed with Madame and had not been the subject of an agreement with her. Monsieur made XXXXXXXXXX payments, i.e., XXXXXXXXXX. Monsieur attempted to argue that those amounts should be added to what Madame owed to him since she was to keep the family residence. However, the judgment only recognized $XXXXXXXXXX of the total amount as being related to the family patrimony, the balance, i.e. $XXXXXXXXXX being considered as having been used for maintenance purposes.
YOUR QUESTION:
You wish to know if the amount of $XXXXXXXXXX that Monsieur paid to Madame in XXXXXXXXXX and XXXXXXXXXX was deductible as support payments following the judgment of XXXXXXXXXX which confirmed that those payments were not advances on the family patrimony but rather sums used for support purposes.
OUR COMMENTS:
In order for an amount to be considered a "support amount" as defined in subsection 56.1(4) of the Income Tax Act (the "Act"), it must, inter alia, be an amount payable as an allowance on a periodic basis for the maintenance of the recipient or the recipient's child under an order of a competent tribunal or under a written agreement.
The facts before us raise a number of issues with respect to the definition of "support" as set out above. First of all, when the XXXXXXXXXX payments were made in XXXXXXXXXX, the intention of Monsieur was, according to the judgment of XXXXXXXXXX, to pay to Madame amounts representing advances on the division of the family patrimony since he believed that he would keep the family residence alone. Furthermore, we are of the opinion that arguments could be raised to the effect that the XXXXXXXXXX amounts do not constitute allowances on a periodic basis, i.e. sums paid at regular intervals in order to meet support obligations. Furthermore, even if the payments did qualify as periodic allowances, they still do not meet the definition of "support" since the amounts were not, at the time the payments were made, payable under an order of a competent tribunal or under a written agreement.
There is, however, an exception to the above. Although payments made prior to the date of a court order or written agreement cannot be considered to be payments made under an order or agreement, they may still qualify as support payments and be used in computing the amount that a payer may deduct pursuant to paragraph 60(b) if the language of subsection 60.1(3) is satisfied. That subsection provides that payments made in the year or in the preceding year under an order or written agreement that are otherwise allowable are deemed to have been paid and received under the order or agreement if the order or agreement provides that they are to be so considered.
In the situation presented, that subsection does not apply since such payments were made in XXXXXXXXXX and XXXXXXXXXX, i.e., more than one year before the XXXXXXXXXX judgment. Since the wording of subsection 60.1(3) has not been satisfied, we regret to inform you that the amounts paid by Monsieur are not deductible in computing his income for the years in question.
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, the CRA library version can be provided. Alternatively, the client may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Ms. Jackie Page at (819) 994-2898. A copy that has been severed in accordance with the Privacy Act will be sent to you for delivery to the client.
We hope that these comments are of assistance.
Best regards,
Ghislaine Landry, CGA
Manager
Individuals, Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate