DATE: August 19, 1986
TO- Toronto District Office FROM- Head Office Specialty Rulings Directorate D.S. Delorey (613) 957-2125
ATTENTION M. Behun, Supervisor Office Examination and T1 Adjustments 8th Floor East
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This is in reply to your memorandum of January 8, 1986 concerning the taxability Of certain "unallocated family support" payments being received by XXXX from her ex-spouse XXXX a resident of the U.S.
Pursuant to Part 6(b) of Article XVIII of the 1980 Canada-U.S. Income Tax Convention (the "U.S. Convention"), alimony and other similar amounts (including child support payments) paid by a resident of the U.S. to a resident of Canada, are exempt from Canadian taxes to the extent that the payments would be exempt from tax in the U.S. if the recipient were a resident thereof. In the Technical Explanation prepared by the U.S. Government and accepted by the Canadian Government, it is stated that the said part 6(b) will exempt from Canadian tax child support payments received by a resident of Canada from a resident of the U.S., to the extent that such payments would be excluded from taxable income under section 71(b) of the Internal Revenue Code:
A copy of the Marital Settlement Agreement forwarded with your memorandum has been reviewed
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For example, social security benefits are also a type of income referred to in Article XVIII of the U.S. Convention. However, because the exemption referred to in part 5(b) of Article XVIII relates to a Part 1 tax liability, the comments on page 2 of the Release dated September 11, 1984 (copy attached) correctly indicate that the exemption pertains only to social security benefits received after 1984.
The T1 Returns forwarded with your memorandum are returned herewith.
Chief Non-Resident, Business and Property Income Section Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch