Principal Issues: [TaxInterpretations translation]
Does an order made after April 1997 have a commencement day within the meaning of subsection 56.1(4) of the Act? If not, was the amount of child support changed by the order?
Position:
Yes, the order has a commencement day within the meaning of subsection 56.1(4). It is not necessary to consider whether the amount of child support was changed by the order.
Reasons:
Subsection 56.1(4) provides, with respect to an order made after April 1997, that the commencement day attributable to the order is the day on which the order is made. The text of the order issued in XXXXXXXXXX did not incorporate the provisions of the XXXXXXXXXX agreement. Consequently, the previous agreement was replaced by the order and no longer had any legal effect or value once the order had been made.
July 5, 2000
Jonquière Tax Centre Headquarters
Client Services Patrick Massicotte
(613) 957-9232
Attention: Mr. Robin Plourde
File # 2000-002497Request for technical interpretation: subsection 56.1(4) of the Income Tax Act
This is in response to your request of May 9, 2000 for our opinion on the above subject.
FACTS
The essential elements of the documents submitted are as follows:
1. A first written separation agreement was entered into on XXXXXXXXXX between XXXXXXXXXX;
2. The agreement provides for the division of matrimonial property, custody of the XXXXXXXXXX children and the obligation to support the spouse and children. It provided for total support of $XXXXXXXXXX per month to be paid XXXXXXXXXX. That amount was to be increased each year by an amount reflecting the increase in the cost of living published by Statistics Canada for the previous year;
3. The parties acknowledged that XXXXXXXXXX% of this amount, i.e. $XXXXXXXXXX per month, was payable solely to support XXXXXXXXXX. The other XXXXXXXXXX%, i.e. $XXXXXXXXXX per month, was to provide for the needs of XXXXXXXXXX of their children for whom Madame would have custody;
4. It is provided that an additional sum of $XXXXXXXXXX per year would be required to be paid by XXXXXXXXXX for the maintenance of the XXXXXXXXXX child in the event that he decided to live with XXXXXXXXXX;
5. An interim order was issued by a court on XXXXXXXXXX providing, among other things, that XXXXXXXXXX shall pay to Ms. Lévesque an amount of $XXXXXXXXXX per month for the support of XXXXXXXXXX and XXXXXXXXXX of their children, commencing on XXXXXXXXXX. There was no provision for that amount to be increased thereafter on the basis of any index;
6. The order also provided that XXXXXXXXXX would pay XXXXXXXXXX the amount of $XXXXXXXXXXX per month for the support of their XXXXXXXXXX child, beginning on XXXXXXXXXX.
QUESTION
You are asking us whether the interim order made on XXXXXXXXXX for the purposes of paragraphs 56(1)(b) and 60(b) of the Income Tax Act (the “Act”) gave rise to a commencement day within the meaning of subsection 56.1(4).
OUR COMMENTS
Paragraph 56(1)(b) provides that the amount of a support payment must be included in a taxpayer's income, except to the extent that it is child support paid under an agreement or order on or after its commencement day. Similarly, paragraph 60(b) provides that a support amount may be deducted unless it is a child support amount that became payable on or after its commencement day.
The expression “commencement day” is defined in subsection 56.1(4) and applies to paragraph 60(b) by virtue of subsection 60.1(4). Paragraph 56(1)(b), paragraph 60(b) and subsections 56.1(4) and 60.1(4) apply to amounts received after 1996.
Commencement day
Paragraph (a) of the definition of “commencement day” in subsection 56.1(4) states that the commencement day of an order made after April 1997 is “the day it is made”.)
Based on the documentation submitted, we are of the view that a commencement day is attributable to the interim order issued in the situation described above and that it corresponds to the date on which the order was made, i.e. XXXXXXXXXX. Consequently, any child support payments made after that date will be subject to the new support rules.
In this case, although the court relied on the XXXXXXXXXX agreement to establish the support obligations of XXXXXXXXXX towards XXXXXXXXXX and their children, we are of the view that the provisions of the XXXXXXXXXX order clearly replaced those in the previous agreement so that the child support amounts were payable under the order and not under the previous agreement. In our view, the order of XXXXXXXXXX meant that the provisions of the agreement of XXXXXXXXXX relating to XXXXXXXXXX's support obligation were no longer applicable.
Consequently, there is no need to consider whether any changes have been made to the amount of child support payable under the XXXXXXXXXX agreement for the purposes of paragraph (b) of the definition, since it is not applicable to the case under review.
Under the definition of “child support amount” in subsection 56.1(4), all of the amounts paid by XXXXXXXXXX under the XXXXXXXXXX Order constitute child support amounts since none of the amounts were solely for the support of XXXXXXXXXX. Payments made by XXXXXXXXXX after the commencement day, i.e. after XXXXXXXXXX, constitute child support amounts and are therefore not taxable to XXXXXXXXXX nor deductible to XXXXXXXXXX under paragraphs 56(1)(b) and 60(b) respectively.
For your information, a copy of this memorandum will be severed using the Access to Information Act and will be available in the Legislative Access Database (LAD) located on the mainframe of the Canada Customs and Revenue Agency. 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 Legislative Access Bank 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 (613) 957-0682. A copy that has been severed in accordance with the Privacy Act will be sent to you for delivery to the client.
We hope you find these comments helpful. Should you require any additional information regarding this matter, please do not hesitate to contact us.
Best regards,
Ghislain Martineau
Acting Manager
Business and Individuals Section
Business and Publications Division
Income Tax Rulings Directorate