Revenue Canada Taxation Head Office
N.M. Sheerin (613) 957-2135
Attention: XXXX
JAN 27 1987
Dear Sirs:
This is in reply to your letter of January 15, 1986, concerning the application of subsection 60.1(3) of the Income Tax Act (the Act). We apologize for the unavoidable delay in replying to you, but the questions you raised were under review by the Department.
You have described the following situation:
1. Mr. and Mrs. X were divorced in 1980. Pursuant to the decree of divorce, Mr. X was obliged to pay his former spouse $125.00 per month for her maintenance. All the requirements in paragraph 60(b) of the Act are satisfied so that Mr. X may deduct the $125.00 monthly payments in computing his income.
2. In 1985, Mr. X and his former spouse agreed that the $125.00 payments be increased to $200.00 per month. In 1986, Mr. X and his former spouse entered into a written agreement which purports to vary the decree of divorce in order to increase the monthly maintenance payments to $200.00 per month and provides that the $200.00 per month paid by Mr. X to his former spouse in 1985 and 1986 prior to the written agreement be considered as having been paid and received pursuant to the written agreement.
You have enquired whether the Department is of the view that:
a) The maintenance provisions in a decree of divorce may be amended for the purposes of the Act by an agreement in writing between the former spouses without the approval of the court; and
b) Subsection 60.1(3) is applicable to agreements that amend an existing separation agreement or decree of divorce.
In our view, a court order is not itself amended by a written agreement where the parties involved have not formally applied to the court to have the order varied. However, the parties may by written agreement obligate themselves to make the payments which the court order already requires or to modify the payments if they so wish and any payments made in accordance with the new agreement would be made "pursuant to ... a written agreement" within the meaning of subsection 60.1(3) of the Act.
Our replies to your questions are as follows:
a) For the purpose of the Income Tax Act, the Department will accept a written agreement which is intended to replace and/or vary the maintenance provisions of a divorce decree; and
b) Subsection 60.1(3) of the Act is applicable to a written agreement that replaces and amends the maintenance provisions in an existing court order or a previous separation agreement provided the amending document states that an amount of maintenance paid before the date of the new agreement, in the year or in the immediately preceding taxation year, is to be considered as having been paid and received pursuant thereto.
We trust these comments will be of assistance to you.
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch