Revenue Canada Taxation Head Office
N.R. Mitchell (613) 957-2139
MAY 12 1986
Dear Sirs:
Re: Support Payments to Third Parties
This is in reply to your letter of January 17, 1986, concerning the types or purposes of expenses for which a deduction may be claimed under subsection 60.1(2) of the Income Tax Act (the "Act"). We regret the unavoidable delay in replying.
You ask if the deduction provided for under subsection 60.1(2) of the Act is limited to payments made for medical or educational purposes or for the acquisition, improvement or maintenance of a home owned and occupied by the recipient. The situation with which you are particularly interested involves the following facts. A husband and wife are separated and their separation agreement provides that the husband is to pay support to the wife. The wife also owns a life insurance policy on the life of the husband so that she will receive a death benefit to replace the support payments should the husband die. The husband is required to pay the life insurance premiums under the terms of the separation agreement. Your specific question is, if the husband pays these life insurance premiums directly to the insurance company and provided the separation agreement stipulates the following tax treatment, would these payments be deductible by the husband pursuant to subsection 60.1(2) of the Act and be included in the income of the wife under subsection 56.1(2) of the Act.
It is our opinion that the term "maintenance" need not be restricted to medical, educational or shelter expenses. As we see it, the payment of insurance premiums in the manner you have indicated would appear to be in the nature of "maintenance" and to be eligible for deduction by the husband pursuant to subsection 60.1(2) of the Act, provided the wife actually owns the policy in question and provided further that all of the other requirements of the subsection are met. In such a case, the amount of these premiums would be included in the income of the wife as provided by subsection 56.1(2) of the Act.
The foregoing represents our opinion of the law as it applies generally, but this is not a ruling and, accordingly, it is not binding upon the Department.
Yours truly,
for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch