Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether a court order is “made” before May 1997 or after April 1997, for purposes of the definition of “commencement day” in subsection 56.4(1).
Position TAKEN:
After April 1997.
Reasons FOR POSITION TAKEN:
Generally, an order is “made” when the order is rendered. A review of the court order submitted indicates that it is dated and issued XXXXXXXXXX , consented to by the legal representatives of both parties in XXXXXXXXXX , and provides for child support payments commencing XXXXXXXXXX . Accordingly, the court order was made after April 1997 and, there is no basis for concluding that it was made before May 1997. As a result, the court order has a “commencement day” and is subject to the new child support rules. The fact that the case may have been heard by the court before May 1997 is not relevant. The definition of “commencement day” refers specifically to the day “the agreement or order is made” which, in our view, is different from (not necessarily the same as) the day a case is heard by a court.
April 16, 1999
Saskatoon Tax Services Office HEADQUARTERS Individual Enquiries - Client Services M. Azzi 957-8972 Attention: Myrene Mollison 7-990741
Child Support
This is in reply to your memo of April 7, 1999, wherein you requested our views, on an urgent basis, regarding the deductibility of child support payments made by XXXXXXXXXX.
We understand that under a XXXXXXXXXX court order (the “First Order”), XXXXXXXXXX was required to pay child support in the amount of $XXXXXXXXXX per month per child, for each of two children, to XXXXXXXXXX. On XXXXXXXXXX, a second court order (the “Second Order”) was issued, under which XXXXXXXXXX was ordered to pay child support, commencing XXXXXXXXXX, in the amount of $XXXXXXXXXX per month per child, except for the months of XXXXXXXXXX, for which the child support payable would be $XXXXXXXXXX per month per child.
You indicate that XXXXXXXXXX legal representative argues that the child support payments made in 1998 fall under the old rules. In this regard, the representative feels that the Second Order was made before May 1997 because the issue was heard by the court and a consent order was reached prior to May 1, 1997. Alternatively, it is argued that the old rules apply as, in the representative’s view, the Second Order is varying the First Order, but not changing the child support.
Our Comments
As you know, child support payments made pursuant to a written agreement or court order that has a “commencement day”, as defined in subsection 56.1(4) of the Income Tax Act, are subject to the new rules and, as such, are not deductible by the payer and are not required to be included in the income of the recipient. Child support payments made pursuant to an agreement or order that has no “commencement day” will, generally, be subject to the old rules. Paragraph (a) of the definition of “commencement day” states that an agreement or order made after April 1997 will have a “commencement day” on the day the agreement or order is made. Paragraph (b) of the definition provides for a “commencement day” in respect of an agreement or order made before May 1997, and applies in certain specific situations, such as where the parties elect to have the new rules apply or certain terms of the agreement or order are changed.
Generally a court order would be considered to be “made” when the order is rendered. The definition of “commencement day” refers specifically to the day “the agreement or order is made” which, in our view, is different from (not necessarily the same as) the day a case is heard by a court, unless the matter is decided on the bench. In this regard, it is our understanding that if a judgement is made on the bench but the court order is issued at a subsequent date, the court order would generally be worded in a manner that would clearly indicate the date upon which the judgement was rendered.
A review of the Second Order indicates that it is dated and issued XXXXXXXXXX, consented to by the legal representatives of both parties in XXXXXXXXXX, and provides for child support payments commencing XXXXXXXXXX. Accordingly, in our view, the Second Order was made after April 1997 and, there is no basis for concluding that it was made before May 1997. As a result, the Second Order has a “commencement day” and is subject to the new child support rules. XXXXXXXXXX,
It appears that the alternative argument raised by XXXXXXXXXX legal representative is referring to the application of subparagraph (b)(ii) of the definition of “commencement day”. Whether this subparagraph applies in the present circumstances depends, inter alia, on the legal relationship that exists between the two court orders. In our view, this subparagraph does not apply, as the Second Order does not vary the First Order, but rather it supersedes the First Order. There is no indication in the Second Order that it is varying the First Order, or that the First Order remains effective after the making of the Second Order. Even if it could be argued that the Second Order was varying the First Order (which, again, we do not accept), the variation would nonetheless result in the application of the new child support rules, as it would, in our view, change the child support amounts payable. That is, by reducing the child support payable for the months of XXXXXXXXXX, the variation would “change the child support amounts payable” within subparagraph (b)(ii) of the definition of “commencement day”.
We trust that these comments will be of assistance.
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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