Principal Issues: [TaxInterpretations translation]
Is a written confirmation in which a former spouse acknowledges receiving payments of $XXXXXXXXXX per month a written agreement for the purposes of subsections 56.2(3) and 60.1(3) of the Act?
Position: No
Reasons: According to the jurisprudence, a written agreement must set out, among other things, the legal obligations of both parties to each other.
July 5, 2000
Jonquière Tax Centre Headquarters 2251 René-Lévesque Blvd. Nancy Deslandes Jonquière, Quebec
Attention: Mr. Robin Plourde 2000-002548
Document confirming amounts paid to a former spouse
This is in response to your fax dated May 11, 2000, in which you requested our opinion regarding the application of subsections 56.1(3) and 60.1(3) of the Income Tax Act (the “Act”) in the following circumstances.
You presented us with a situation in which a recipient receives amounts from her former spouse, following a marital separation, for the welfare of her children. The two spouses reached an amicable agreement on the terms of payment. There was therefore no judgment or written legal document setting out the amounts of support to be paid by either party.
However, on XXXXXXXXXX, both parties signed a document confirming that Madame had received $XXXXXXXXXX per month from the payer since XXXXXXXXXX. The payer wishes to deduct those payments as alimony.
Your Questions:
1. Do subsections 56.1(3) and 60.1(3) apply respectively to the recipient and the payer in this situation?
2. If the above subsections do not apply, could a written statement in the document signed by both parties specifying that the amounts paid or paid prior to signature are to be considered paid pursuant to same document ensure that subsections 56.1(3) and 60.1(3) apply?
Our Comments:
The preamble to subsections 56.1(3) and 60.1(3) requires that a written agreement or order of a competent tribunal made at any time in a taxation year provides that an amount received before that time and in the year or the preceding taxation year is to be considered to have been paid and received thereunder.
Thus, in the situation you presented, there was no court order. We must therefore determine whether the payments were made under a written agreement that provided that any amount paid before that time was paid under that same agreement.
In Morneau v. The Queen, [1997] I.C.J. No. 193 (Q.L.), Lamarre Proulx J. stated the following at paragraph 10:
“It must be understood that deduction by one spouse means inclusion by the other. The parties must clearly express their agreement and Parliament requires that this expression be made by means of a private writing between the parties or by a Court order.”
Furthermore, in Hodson v. The Queen, 87 DTC 5113, Strayer J., while sitting in the Federal Court, Trial Division, stated the following at page 5114:
The intention of Parliament as expressed in paragraph 60(b) is quite clear: either there must be a court order requiring such payments or else there must be a “written agreement” requiring them. If Parliament had intended to permit such deductions to be made on the basis of oral agreements or implied agreements or in respect of purely voluntary payments it would have said so. Having used the words “written agreement” it has clearly excluded other less formal arrangements.
(emphasis added)
In addition, Dussault J. defined a written agreement as follows in Ton-That v MNR (Docket: 90-560 (IT)) (TCC):
“Written separation agreement - refers precisely to what the words suggest, namely a written agreement whereby persons establish of a common accord certain terms of their separation, including their financial obligations toward each other and toward any children they may have.”
In the situation you have presented, the recipient confirmed that she received the said amounts for the benefit of her children. However, no obligation arises from this confirmation. If the payer stopped the payments, the beneficiary would have no recourse against the payer.
The document presented by the taxpayer does not, in our opinion, represent a written agreement establishing obligations. Consequently, the amounts paid are not deductible for the payer or taxable for the recipient.
As for your second question, a reference to a provision of the Act in a written document does not mean that the provision automatically applies. The circumstances surrounding the document must also comply with the provisions of the Act in question. Thus, in the present case, even if the preamble to subsections 56.1(3) and 60.1(3) were incorporated into a document such as the one you have submitted to us, those subsections would still not apply because the document is not a written agreement as defined above.
We hope you find these comments useful.
Ghislain Martineau
Acting Manager
Individuals and Corporate Section
Business and Publications Division
Income Tax Rulings Directorate
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