child support guidelines tax implications

Transcription

CHILD SUPPORT GUIDELINES
TAX IMPLICATIONS
These materials were prepared by Kenneth Brodt of Kraus MacDonald Pederson, Regina, Saskatchewan .
for the Saskatchewan Legal Education Society Inc. seminar, Child Support Guidelines Update, May, 1998.
/
)
TABLE OF CONTENTS
I.
Introduction
I
II.
Summary of Changes
I
III.
Amendments to the Income Tax Act
I
IV.
Important Definitions:
V.
)
A.
"Child Support Amount"
2
B.
"Commencement Day"
3
C.
"Support Amount"
4
Transitional Issues:
A.
Deficiency in Payments
B.
.
4
Pre-May 1997 Agreements and Orders
..
5
C.
Post-April 1997 Agreements and Orders
.
5
D.
Post-April 1997 Supplementary Payments
.
7
VI.
Conclusion
7
VII.
Appendix One: Amendments to the Income Tax Act
8
VIII.
Appendix Two: Interpretation Bulletin IT-118R3
20
IX.
Appendix Three: Revenue Canada Questions and Answers
27
- 1-
I.
INTRODUCTION
It has now been one year since the implementation of the Federal Child Support Guidelines and
corresponding changes to the tax treatment of new child support agreements and orders. This paper
is intended to highlight the major changes in the tax treatment of child support with a particular
focus on the transitional provisions encountered most often by family law practitioners and judges.
Readers are advised to consult a tax expert, the Income Tax Act and Explanatory Notes and not to
rely solely on this paper which is intended only to be an overview of the tax changes.
II.
SUMMARY OF CHANGES
The Income Tax Act was amended by S.C. 1997, c. 25 in early 1997 as part of the implementation
of the new tax rules governing child support payments.
For most child support agreements or orders made after April 1997, the payer is no longer entitled
to deduct the child support payments from their taxable income and the recipient is no longer
required to include the child support payments in their taxable income.
For most child support agreements or orders made prior to May 1997, the payer will continue to be
entitled to deduct t~e child support payments from their taxable income and the recipient will still
be required to include the child support payments in their taxable income.
III.
AMENDMENTS TO THE INCOME TAX ACT
As set out above, the tax treatment of child support payments now generally depends upon the date
upon which a child support agreement or order is made. In order to facilitate the dual tax treatment
of child support, sections 56, 56.1, 60 and 60.1 of the Income Tax Act were amended to provide that
-2-
the old (deduction / inclusion) tax treatment was retained for pre-May 1997 agreements and orders
and so that the new (non-deduction / non-inclusion) tax treatment could be implemented for postApril 1997 agreements and orders. Attached hereto and marked as Appendix One are the relevant
amendments to the Income Tax Act.
IV.
IMPORTANT DEFINITIONS:
A.
"CHILD SUPPORT AMOUNT"
Section 56.1(4) of the Act defines "child support amount" to mean any support amount that is not
identified in the agreement or order under which it is receivable as being solely for the support of
a recipient who is a spouse or former spouse of the payer or who is a parent of a child of whom the
payer is a natural parent.
This definition is very important because the new tax rules apply only to child support. Spousal
support remains deductible from the payer's income and is required to be included in the recipient's
income. The effect of this definition is that, under all post-April 1997 agreements or orders, all
support that is not specifically identified as spousal support is deemed to be child support and cannot
be deducted from the payer's income and is not required to be included in the recipient's income.
In addition, it is important to distinguish between child and spousal support under new agreements
or orders to allow the parties to determine their respective income deductions and inclusions from
spousal support payments where there is a deficiency in payments when both child and spousal
support were payable (see Transitional Issues: Deficiency in Payments, page).
Presumably, the definition of"child support amount" would have the effect of rendering payments
to third parties non-deductible unless the agreement or order specifically stated that such payments
were identified as being solely for spousal support.
-3-
B.
"COMMENCEMENT DAY"
"Commencement day" is defined in section 56.1(4) of the Act as any time of an agreement or order
(a)
where the agreement or order is made after April 1997, the day it is made; and
(b)
where the agreement or order is made before May 1997, the day, if any, that is after
April 1997 and is the earliest of
(i)
the day specified as the commencement day ofthe agreement or order by the
payer and recipient under the agreement or order in a joint election filed with
the Minister in prescribed form and manner,
(ii)
where the agreement or order is varied after April 1997 to change the child
support amounts payable to the recipient, the day on which the first payment
of the varied amount is required to be made,
(iii)
where a subsequent agreement or order is made after April 1997, the effect
ofwhich is to change the total child support amounts payable to the recipient
by the payer, the commencement day ofthe first such subsequent agreement
or order, and
(iv)
the day specified in the agreement or order, or any variation thereof, as the
commencement day of the agreement or order for the purposes of this Act.
Amended sections 60(b) and 56(1)(b) provide that any child support payment made pursuant to an
agreement or order with a "commencement day" after April 1997 will not be deducted from the
payer's income norrequired to be included in the recipient's income. Pre-May 1997 agreements or
orders do not have a "commencement date" and, therefore, child support payments made pursuant
to such agreements or order retain the deduction / inclusion tax treatment, unless: (i) the parties file
a joint election providing that the new tax rules will apply; (ii) the agreement or order is varied after
April 1997 altering the amount of child support payable; (iii) a new agreement or order is made after
April 1997; or (iv) the pre-May 1997 agreement or order specifies a day after Apri11997 that the
new tax rules will apply.
-4-
c.
"SUPPORT AMOUNT"
Section 56.1(4) of the Act defines "support amount" to mean an amount payable or receivable as
an allowance on a periodic basis for the maintenance of the recipient, children of the recipient or
both the recipient and children of the recipient, if the recipient has discretion as to the use of the
amount, and
(a)
the recipient is the spouse or former spouse of the payer, the recipient and payer are
living separate and apart because of the breakdown oftheir marriage and the amount
is receivable under an order of a competent tribunal or under a written agreement; or
(b)
the payer is a natural parent of a child of the recipient and the amount is receivable
under an order made by a competent tribunal in accordance with the law of a
province.
The significance of the definition of "support amount" is that it specifically provides that the new
tax rules apply to child support payments made pursuant to a post-April agreement or order
providing support for the benefit of a child in situations where the payer and recipient may never
have been "spouses". The extension of the tax rules to include child support payments made in
paternity suits permits consistency oftreatment under Provincial Family Maintenance Legislation.
v.
TRANSITIONAL ISSUES:
A.
DEFICIENCY IN PAYMENTS
The amended sections 60(b) and 56(1)(b) of the Act contain a formula whereby a payer in not
entitled to deduct and a recipient is not required to include child or spousal support payments until
an accounting of all non-deductible / non-inclusion child support payments has been made. These
provisions are relevant where there are spousal support arrears; or, in circumstances where there are
child support arrears under a pre-May 1997 agreement or order and it is necessary to establish the
"commencement day" of the post-April 1997 agreement or order.
-5-
The following example may best illustrate how the ordering formula works:
A court order dated October 31, 1997 provides that the payer is required to make monthly
child support payments of$I,OOO ($12,000/ year) and monthly spousal support payments
of$500 ($6,000/ year). In 1998 the payer pays a total of$15,000.
For income tax purposes, the payer will be deemed to have paid the entire $12,000 child
support and only $3,000 towards spousal support.
B.
PRE-MAY 1997 AGREEMENTS AND ORDERS
The definition of "commencement day" found in section 56.1(4) of the Act provides that there will
be a "commencement day" where the amount of child support payable pursuant to the pre-May 1997
agreement or order is varied after April 1997. Presumably, the only permissible changes in the
amount of child support payable under pre-May 1997 agreement or order must have been built into
the agreement or order in the form of an adjustment clause if the parties wish to retain the old tax
treatment. If the amount ofchild support payable under a pre-May 1997 agreement or order changes,
and such change was not contemplated or fixed by a formula in the agreement or order the new tax
rules will apply.
c.
POST-APRIL 1997 AGREEMENTS AND ORDERS
The definition of "commencement day" found in section 56.1(4) of the Act provides that the
"commencement day" for agreements or orders made after April 1997 will be the date that the
agreement or order is made. However, amended section 56.1(3) ofthe Act provides that agreements
or orders made after April 1997 may be backdated where there were child support payments made
)
prior to May 1997.
-6-
Section 56.1(3) provides that for the purposes of this section and section 56, where 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,
(a)
the amount is deemed to have been received thereunder; and
(b)
the agreement or order is deemed, except for the purpose of this subsection, to have
been made on the day on which the first such amount was received, except that,
where the agreement or order is made after April 1997 and varies a child support
amount payable to the recipient from the last such amount received by the recipient
from the last such amount received by the recipient before May 1997, each varied
amount of child support received under the agreement or order is deemed to have
been receivable under an agreement or order the commencement day of which is the
day on which the first paYment of the varied amount is required to be made.
The effect of the prior paYments provisions is that an agreement or order, that is made after April
1997 but before January 1999, may be deemed to have been made prior to May 1997 (thereby
retaining the old tax rules) provided that: (1) the parties separated before May 1997; (2) one or more
child support paYments were made before May 1997; and (3) that the said pre-May 1997 paYment
is to be considered to have been paid and received in accordance with the agreement or order. In
order to maintain the parties entitlement to the old tax rules (deduction / inclusion) the written
agreement or order must provide that ongoing child support paYments will remain at the same
amount as the pre-May 1997 child support paYment.
It should be remembered that in order for parties to qualify for the old tax treatment, pre-May 1997
child support paYments had to have been made on a periodic basis pursuant to an order or written
agreement. Attached hereto and marked as Appendix Two is Interpretation Bulletin IT-118R3,
December 21, 1990, Alimony and Maintenance, which sets out the conditions under which alimony
and maintenance are deductible.
-7-
)
D.
POST-APRIL 1997 SUPPLEMENTARY PAYMENTS
It is not uncommon for parties who failed to revise their pre-May 1997 child support agreements and
orders to enquire whether they can lawfully "top-up" the amount of child support that they are
currently paying with a non-deduction / non-inclusion supplementary payment.
Section 245 of the Income Tax Act contains the General Anti-Avoidance Rule and the payer should
be warned that if Revenue Canada were to discover the supplementary payments, that they may
consider the purpose of the transaction to be an avoidance transaction.
VI.
CONCLUSION
For the most part, the changes to the tax treatment of child support payments are relatively
straightforward. The most difficult issues that we must face concerning the taxation of child support
involves the transitional provisions and their varied interpretations. Attached hereto and marked as
Appendix Three is a copy of a letter dated August 20, 1997 from Revenue Canada containing a
number of questions and responses involving transitional issues.
If you are uncertain as to how Revenue Canada is likely to treat child support payments in a given
situation, it may be advisable to include an adjustment clause in your agreement or order to allow
for changes if the anticipated tax treatment is not received.
APPENDIX ONE
j
12
45-46 ELlz. II
Income Tax. /996
20(1 )(gg) and 81 (I )(r) and (s) of the
Income Tax Act, chapter 148 of the
Revised Statutes of Canada, 1952, and
the provisions of the Income Tax
Application Rules relating to income S
from the operation of new mines,
81( 1)r) et s) de la Loi de I'impot SlIr Ie
rel'tllU,
chapitre 148 des Statuts revi-
ses du Canada de 1952, et des disposi-
tions des Rigles concernant I' application' de l'imp8t sur Ie revenu qui 5
conceme Ie revenu provenant de I'exploitation de nouvelles mines,
(2) Clause 53(2)(c)(l)(B) of the Act is
(2) La division 53(2)c)(I)(B) de la m~me
replaced by the following:
101 est rempla~par ee qui suit·:
(B) paragraphs 12(1)(0) and (z.5),
(B) des alin6as 12(1)0) et z.5), 18(1)m) 10
18(1)(m) and 20(l)(v.I), section 31,10
et 20(1)v.l), de I'article 31, du parasubsection 40(2), section 55 and subgraphe 40(2), de I'article 55 et des
sections 69(65 and (7) of this Act and
paragraphes 69(6) et (7) de la pl'6sente
paragraphs 20(l)c8g) and 81(1)(r) and
loi et des alin6as 20(1)8g) et 81(1)r) et
(s) of the IncoIM Tax Act, chapter 148
s) de la /Ai de "imp8t sur Ie revenu.15
of the Revised Statutes of Canada. 15
chapitrc 148. des Statuts revis6s du
1952, and
Canada de 1952,
(3) Subsections (1) and. (2) apply for the
purpose of computing the a~usted cost
base of property after 1996.
I
Suppon
,)
(3) Les paragrapites (1) et· (2) s'appllquent au calcu1 du prix de base rajust6 d'un
bien apres 1996.
20
8. (1) Paragraphs 56(1)(6) and (c) of the 20 8. (1) Les 1l1in6as 56(1)6) et c) de la m~me
Act are replaced by tbe following:
101 sont rempla~ par ~ qui suit:
(b) the total of all amounts each of which is
b) Ie total,des montants rcpr6sentant chacon
an amount detennined by the fonnula
Ie r6sultat du calcul suivant :
A-(B+C)
A-(B+C)
2S
where
2S o~ :
A is the iotal of all amounts each of which
A rcpr6sente Ie total des montants repr6is a support amount received after 1996
sentant chacun one pension alimentaire
and before the end of the year by the
que Ie contribuable a fC9ue ap~s 1996
taxpayer from a particular person where
et avant la fm de l'ann6e d'one personne30
the taxpayer and the particular person 30
donn6e dont it vivait s6pf4'6 aU moment
were living separate and apart at the
de la r&:eption de la pension,
time the amount was received,
B Ie total des montants 'repr6sentant. chaB is the total of all amounts each of which
cun une pension alimentaire pour CDis a child support amount that became
fants que la persOnne donn6e 6tait tenue35
receivable by the taxpayer from the 35
de verser au contribuable aux· tennes
particular person under an agreement or
d'un accord ou 'd'une ordonnance l la
order on or after its commencement day
date d'ex6cution ou post6rieurcment et
and before the end ,of the year in respect
avant la fm de l'ann6e relativement l
of a period that began after its comune p6riode ayant commenc6 ap~s4O
mencement day, and
40
cette date,
C is the total of aU amounts each of which
C Ie total des montants representant chais a support amount received after 1996
cun une pension alimentaire que Ie
by the taxpayer from the particular
contribuable a re~ue de la personne
person and included in the taxpayer's
donn= apres 1996 et qu'it a incluse45
income for a preceding taxation year:
4S
dans son revenu pour une ann6e d'imposidon ant~rieure;
1996-97
Impot sur Ie re\'enu, 1996
13
)
(2) L'alinea 56(I)d.2) de la meme 101 est
(2) Paragraph 56(I)(d.2) of the Act Is
modifie par adjonctlon, apres Ie sous-alinea
amended by striking out the word "or" at
the end of subparagraph (I), by adding the
(II), de ce qui suit:
word "or" at the end of subparagraph (II)
(iii) a ete fait dans Ie cadre d'un regime
and by adding the following after subpara- 5
de participation· differee aux benefices 5
graph (Ii):
par un fiduciaire du regime en vue
d'acheter la rente pour un beneficiaire du
(iii) made pursuant to or under a deferred
regime;
profit sharing plan by a trustee under the
plan to purchase the annuity for a beneficiary under the plan;
10
Support
(3) Subsectlan 56(12) of the Act is re(3) Le paragraphe 56(12) de la meme 101
pealed.
est abroge.
10
(4) Subsections (1) and· (3) apply to
(4) Les paragraphes (l)et (3) s'appllquent aux montants ~us apm .1996.
amounts received after 1996.
(5) Subsection (2) applies to the 1996 and 15 (5) I.e' paragraphe (2)· s'appllque aux
subsequent taxation years.
annees d'imposition 1996 et sulvantes.
9. (I) Subsection 56.1(1) of the Act is
9. (1) Le paragraphe 56.1(1) de la m~me 15
101 est rempla~ par ce qui suit:
56.1 (I) For the purposes of paragraph
56.1· (I) Pour l'application de l'a1inea
56(l)(b) and subsection 118(5), where an 20 56(l)b) et du paragraphe 118(5), dans Ie cas o~
order or agreement, or any variation thereof,
une ordonnance.ou un accord, au une modifiprovides for the payment of an amount to a
cation s'y rapportant, prevoit Ie paiement d'un20
taxpayer or for the benefit of the taxpayer,· montant l un contribuable ou l son profit, ..
children in the taxpayer's custody or both the
des enfants confies 1 sa gardc ou lla fois au
taxpayer and those children, the amount or 2S contribuable et l ccs wants, Ie montant ou
any part thereof
une partie de celui-ci cst repu~ :
(a) when payable, is deemed to be payable
a)une fois payable, ~tre payable au contri-2S
to and receivable by the taxpayer; and
buable et l recevoir Par lui;
(b) when paid, is deemed to have been paid
b) une fois paye, avoir e~ paye au contrito and received by the taxpayer.
30 buable et ~ par lui.
(2) The portion of subsection 56.1(2) of
the Act before the formula is replaced by
the following:
~I
)
(2) I.e passage du .paragraphe 56.1(2) de
m~me ·101 priddant Ia formule est30
rempla~ par ce qui su.1t :
Ia
(2) For .the purposes of section 56, this
(2) Pour I'application de l'article56, du
section and subsection 118(5), the amount 35 present article et du paragraphe 118(5), Ie
determined by the formula
resultat du calcul suivant :
(3) The description of A In subsection
56.1(2) of the Act is replaced by the followIng:
Pension
a1imentalre
(3) L'element A de fa formule figurant au35
paragraphe 56.1(2) de fa m~me 101 est
rempfa~ par ce qui suit:
A is the total of all amounts each of which is 40 A represente Ie total des montants represenan amount (other than an amount that is
tant chacun un montant (sauf celul qui consotherwise a support amount) that became
titue par ailleurs une pension a1imentaire)40
payable by a person in a taxation year, under
qui cst devenu payable par une persoMe au
an order of a competent tribunal or under a
cours d'une annee d'imposition, aux tennes
written agreement, in respect of an expense 45
de I'ordonnance d'un tribunal competent ou
(other than an expenditure in respect of a
d'un accord 6crit, au titre d'une depense
self-contained domestic establishment in
(sauf la depense relative" un 6tablissement45
Entente
Illcome Tax. 1996
14
which the person resides or an expenditure
for the acquisition of tangible propeny that
is not an expenditure on account of a medicalor education expense or in respect of the
acquisition, improvement or maintenance S
of a self-contained domestic establishment
in which the taxpayer described in paragraph (a) or (b) resides) incurred in the year
or the preceding taxation year for the maintenance of a taxpayer, children in the tax- 10
payer's custody or both the taxpayer and
those children, where the taxpayer is
(a) the person's spouse or fonner spouse,
or
(b) where the amount became payable 15
under an order made by a competent
tribunal in accordance with the laws of a
province. an individual who is the parent
of a child of whom the person is a natural
parent,
20
and
45-46 ELiz. 11
domestique autonome que la personne habite ou une depense pour I'acquisition de
biens corporels qui n'est pas une depense au
titre de frais medicaux ou d'etudes ni une
depense en vue de I'acquisition, de I'ame- 5
lioration ou de I'entretien d'un etablissement domestique autonome que Ie contribuable vise aux alineas a) ou b) habite) engagee au cours de I'annee ou de I'annee
d'imposition precedente pour subvenir aux 10
besoins d'un contribuable, d'enfants
conties 1 sa garde ou Ala fois du contribuable et de ces enfants, dans Ie cas ou Ie contribuableest:
a) Ie conjoint ou I'ancien conjoint de la 15
personne,
b) si Ie montant est devenu payable en
vertu de l'ordonnancc d'un tribunal competent rendue enconfonnite avec les lois
d'une province, un particulier qui est le20
~re ou la mere d'un enfant dont la
personne est Ie ~re naturel ou la mere
naturelle;
(4) I.e passage du paragraphe 56.1(2) de
tbe Act after the description ofB Is replaced
la m@meJol sulvant 1'~I~ment Best rempla-25
by the following:
ce par ce qui suit:
is, where the order or wriucn agreement, as the 25 est ~pute, lorsque l'ordonnance ou I'accord
case may be. provides that this subsection and
~t p~voit que Ie p~nt paragraphe et Ie pasubsection 6O~1(2) shall apply to any amount ' ragraphe 60.1(2) s'appliquent 1 un montant
paid or payable thereunder, deemed to be an
paye ou payable 1 leur titre, atre un montant30
amount payable to and receivable by the tax- , payable au contribuable et 1 recevoir par lui a
payer as an allowance on a periodic basis, and 30 titre d'allocation periodique, qu'il peut utilithe taxpayer is deemed to have discretion as to
ser a dis=tion...
the use of that amount.
sa
Prior
payments
)
(5) Subsection 56.1(3) of the Act Is re·
placed by the following:
remplac~ par ce qui suit:
(3) For the purposes of this section and 35
section 56, where 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 40
have been paid and received thereunder,
(ti) the amount is deemed to have been
received thereunder: and
(3). Pour l'application du present article et
de I'article 56, lorsqu'un accord ecrit ou
I'ordonnance d'un tribunal competent, etabli
1 un moment d'une annee d'imposition,
prevoit qu'un montant re~u avant ce moment40
et au cours de I'annee ou de I'annee d'imposition precedente cst considere comme paye et
re~u au titre de I'accord ou de I'ordonnance,
les presomptio,ns suivantes s'appliquent :
(b) the agreement or order is deemed,
except for the purpose of this subsection, to 45
~) Ie m~ntant est rep~te avoir ete re~u au45
(5) I.e paragraphe 56.1(3) de la meme est
tItre de I accord ou de I ordonnance;
35
Paiemenls
anl~rieurs
1996-97
lmpot sur Ie re\'enu, 1996
have been made on the day on which the
first such amount was received, except that,
where the agreement or order is made after
April 1997 and varies a· child support
amount payable to the recipient from the 5
last such amount received by the recipient
before May 1997, each varied amount of
child support received under the.agreement
or order is deemed to have been receivable
under an agreement or order the com- 10
mencement day of which is the day on
which the fIrSt payment of the varied
amount is required to be made.
(6) Section 56.1 of the Act is amended by
adding the following after subsection (3):
15
DefaniliOlll
"cblId
IUJIPOI1
1IllOUIll"
cptlllitHl
oIl1MlII4IItr
ptJW .tt/QlfU •
-IIlCIIl cia)'"
celt
uJCIIlitHl •
15
b) I'accord ou I'ordonnance est repute, sauf
pour l'application du present paragraphe,
avoir ete etabli Ie jour ou un tel montant est
~u pour la premiere fois. Toutefois,
lorsque I'accord ou I'ordonnance est etabli 5
ap~s avril 1997 et modifie un montant de
pension a1imentaire pour enfants payable
au beneficiaire par rapport au demier
semblable montant qu'U a ~u avant mai
1997, chaque montant modifi~. de pension 10
a1imentaire pour enfants ~u aux termes de
l'accord ou de I'ordonnance est repute avoir
ete l recevoir aux termes d'un accord au
d'une ordonnance dont la date d'execution
correspond au jour ou Ie montant modifie 15
est l verser pour la premiere fois.
(6) L'artlde 56.1 de Ia m@me 101 est
par adJonctlon, apm Ie paragraphe (3), de ce qui suit:
modlfi~
(4) The defmitions in this subsection apply
(4) Les defmitions qui suivent s'appliquent20
in this section and section 56.
au present article et ll'article 56.
"child support amount" means any support «date d'execution» Quant l un accord ou une
amount that is not identified in the agreeordonnance :
ment or order under which it is receivable as 20
a) si I'accord ou I'ordonnance est etabli
being solely for the support of a recipient
apres avril 1997, la date de son etablisse-25
who is a spouse or fanner spOuse of the
ment;
payer or who is a parent of a child of whom
b) si I'accord ou I'ordonnance est etabli
the payer is i natural parent.
avant mai 1997, Ie premier en date des
"commencement day" at any time of an 2S
jours suivants, posterieur l avril 1997 :
agreement or order means
(i) Ie jour precise par Ie payeur et Ie30
(a) where the agreement or order is made
beneficiaire aux termes de I'accord au
after April 1997, the day it is made; and
de l'ordonnance dans un choix
conjoint presente au ministre sur Ie
(b) where the agreement or order is made
formulaire et selon les modalites presbefore May 1997, the day, if any, that is 30
crits,
35
after April 1997 and is the earliest of
(ii) si l'accord ou I'ordonnance fait
(i) the day specified as the commencel'objet d'une modification apres avril
ment day of the agreement or order by
1997 touchant Ie montant de la pension
the payer and recipient under the
a1imentaire pour enfants qui est payaagreement or order in a joint election 35
ble au beneficiaire, Ie jour OU le40
filed with the Minister in prescribed
form and manner,
montant modifie est l verser pour la
premiere fois,
(ii) where the agreement or order is
(iii) si un accord ou une ordonnance
varied after April 1997 to change the
child support amounts payable to the 40
subsequent est etabli apres avril 1997
recipient, the day on which the first
et a pour effet de changer Ie total des45
payment of the varied amount is
montants de pension alimentaire pour
required to be made,
~fJnilions
.. c\Ile
d'exkulion •
U
commtllC,·
",e"'''''
1
16
"suppon
amounl"
.~n.dnn
olimtn,oj·
n·
Income Tax. 1996
45-46 ELiz. II
(iii) where a subsequent agreement or
enfants qui sont payables au benetiorder is made after April 1997, the
ciaire par Ie payeur. la date d'execution du premier semblable accord ou
effect of which is to change the total
child support amounts payable to the
de la premiere semblable ordonnance.
recipient by the payer. the commence- 5
(iv) Ie jour precise dans I'accord ou 5
ment day of the first such subsequent
I'ordonnance, ou dans toute modification s'y rapportant, pour I'application
agreement or order, and
(iv) the day specified in the agreement
de la presente loi.
or order, or any variation thereof, as
« pension alimentaire » Montant payable ou a
•pensill'.l
the commencement day of the agree;- 10 recevoir a titre d'allocation ¢riOdique pour I0 ~;::;:;:~:re.
ment or order for the purposes of thiS
subvenir aux besoins du beneficiaire, d'enomolln,"
Act.
fants de celui-ci ou a la fois du benefici~re
"support amount" means an amount payable
et de ces enfants, sl Ie beneficiaire peut utiUser Ie montant A sa discretion et, selon Ie
or receivable as an allowance on a periodic
basis for the maintenance of the recipient, 15 cas:
15
children of the recipient or both the recipia) Ie b6neficiaire est Ie conjoint ou
I'ancien conjoint du payeur et vit separe
ent and children of the recipient, if the recipient has discretion as to' the use of the
de celui-ci pour cause d'echec de leur
amount, and
mariage et Ie montant est· A recevoir aux
(a) the recipient is the spouse or former 20
termes de I'ordonnance d'un tribunal20
com¢tent ou d'un accord ecrit;
spouse of the payer, the recipient and
payer are living separate and apart beb) Ie payeur est Ie ~re naturel au la mere
cause of the breakdown of their marriage
naturelle d'un enfant du beneficiaire et Ie
and the amount is receivable under an
montant est A recevoir aux termes de
I'ordonnance d'un tribunal com¢tent25
order of a competent tribunal or under a 25
written agreement; or
rendue en conformite avec les lois d'une
(b) the payer is a natural parent of a child
province..
of the recipient and, the amount is receiv«pension a1iJnentaire pour enfants» Pension
« pension
able under an order made by a competent
a1imentaire qui, d'ap~s I'accord au I'ortribunal in accordance with the laws of a 30 donnance aux termes duquel elle est Arece-30 ~n~-:;:.
province,
voir, n'est pas destinee uniquement Asubves:Pport
nir aux besoins d'un beneficiaire qui est soit
omDlln,"
Ie conjoint au I'ancien conjoint du payeur,
soit Ie ~re au la mere d'un enfant dont Ie
payeur est Ie ~re naturel au la mere natu- 35
relle. . .
;:enllire
. './
(7) Subsections (1) to (5) apply to amounts
received after 1996.
(7) Les paragraphes (1) a (5) s'appllquent
aux montants re~us apres 1996.
(8) Subsection (6) applies after 1996,
except that a support amount, as defined in 35
subsection 56.1(4) of the Act, as enacted by
subsection (6), does not include an amount
that if paid and received would, but for this
Act, not be included in computing the
income of the recipient of the amount.
40
(8) Le paragraphe (6) s'appllque a campter de 1997. Toutefois, est exclu de la40
pension allmentaire, au sens du paragraphe
56.1(4) de la meme loi, edicte par Ie
paragraphe (6), Ie montant. qui, s'iI etalt
paye et re~u, ne seralt pas Inclus, si ce
n'etalt la presente 101, dans ·Ie calcul du 45
revenu du beneficiaire.
10. (1) Paragraphs 60(b) and fe) of the Act
are replaced by the following:
10. (1) Les allneas 60b) et c) de la meme
loi sont remr;»laces par ce qui suit:
lmpor sur Ie revenu, 1996
1996-97
Suppon
Ie total des montants representant chacun
Ie resultat du calcul suivant :
the total of all amounts each of which is
an amount detennined by the fonnula
b)
(b)
A- (B
17
~C)
Pension
alimentaire
A- (B +C)
where
A is the total of all amounts each of which 5
is a support amount paid after 1996 and
before the end of the year by the
taxpayer to a particular person, where
the taxpayer and the particular person
were living separate and apart at the 10
time the amount was paid,
B is the total of all amounts each of which
is a child support amount that became
payable by the taxpayer to the particular
person under an agreement or order on 15
or after its commencement day and
before the end of the year in respect of
a period that began after its commencementday, and
C is the total of all amounts each of which 20
is a support amount paid by the taxpayer
to the particular person after 1.996 and
deductible in computing the taxpayer's
income for a preceding taxation year;
OU:
A represente Ie total des montants repre- 5
sentant chacun une pension alimentaire
que Ie contribuable a payee apres 1996
et avant la fm de I'annee it une personne
donnee dont il vivait sepa¢ au moment .
du paiement,
10
B· Ie total des montants representant chacun une pension alimentaire pour enfants qui est devenue payable par Ie
contribuable it la personne donnee aux
tennes d'un accord ou d'une ordonnan-15
ce it la date d'ex6cution ou post6rieurement et avant la fm de I'annee relativement 1 une ¢riode ayant commence
apres cette date,
C Ie total des montants representant cha-20
cun une pension alimentaire que Ie
contribuable a· payee 1 la personne
donnee apres 1996 et qui est d~uctible
dans Ie caIcul de son revenu pour une
annee d'imposition anterieure;
25
(2) Subsection (1) applies to amounts 25 (2) Le paragraphe (1) s'applique aux
received after 1996.
montants ~us apr~ 1996.
11. (1) Subsection 60.1(1) of the Act is
Support
11. (1) Le paragraphe 60.1(1) de la meme
101 est remplac~ par ce qui suit :
60.1 (l) For the purposes of paragraph 6O(b)
60.1 (I) Pour I'application de I'alinea 6Ob) 30
•
and subsection 118(5), where an order or 30 et du paragraphe 118(5), dans Ie cas ou une
agreement, of any variation thereof, provides ordonnance ou-un accord, ou une modification
for the payment of an amount by a taxpayer to s'y rapportant, prevoit Ie paiement d'un
a person or for the benefit of the person, .montant par un contribuable 1 une personne
children in the person's custody or both the ou 1 son profit, 1 des enfants canfies it sa garde 35
person and those children, the amount or any 35 ou 1 la fois 1 la personne et 1 ces enfants, Ie
part thereof
montant ou une partie de celui-ci est repute :
(0) when payable, is deemed to be payable
0) une fois payable, etre payable 1 la
to and receivable by that person; and
personne et it recevoirpar eUe;
(b) when paid, is deemed to have been paid
b) une fois paye, avoir ete paye 1 la40
to and received by that person.
40 perSonne et re~u par eUe.
the Act before the formula Is replaced by
the following:
(2) Le passage du paragraphe 60.1(2) de
la meme 101 precedant la formule est
remplace par ce qui suit:
P~ion.
ahmcnwre
II/('ome Tax. /996
18
Apn:cnlcnl
(2) For the purposes of section 60, this
section and subsection 118(5). the amount
determined by the formula
45-46 ELlZ, II
(2) Pour I'application de I'article 60, du
present article et du panlgraphe 118(5). Ie
resultat du calcul suivant :
(3) L'element A de la formule figurant au
(3) The description of A in subsection
60.1(2) of the Act is replaced by the follow- 5 paragraphe 60.1(2) de la meme loi est 5
ing:
remplace par ce qui suit :
A is the total of all amounts each of which is
A represente Ie total des montants representant chacun un montant (sauf celui qui consan amount (other than an amount that is
titue par ailleurs une pension..alimentaire)
otherwise a support amount) that became
qui est devenu payable par un contribuable 10
payable by a taxpayer in a taxation year, un- 10
. au cours d'une annee d'imposition, aux terder an order of a competent tribunal or unmes de I'ordonnance d 'un tribunal compeder a written agreement, in respect of an extent ou d'un accord ~rit, au titre d'une depense (other than an expenditure in respect
of a self-contained domestic establishment
pense (sauf la depense. relative Aun etablisin which the taxpayer resides or an expendi- IS
sement domestique autonome que Ie contri-15
ture for the acquisition of tangible property
buable habite au une depense pour I'acquithat is not an expenditure on account of a
sition de biens corporels qui n'est paS une
medical or education expense or in respect
depense au titre de frais medicaux au d'etuof the acquisition, improvement or maintedes ni une depense en we de I'acquisition,
de I'amelioration au de I'entretien d'un eta-20
nance of a self-contained domestic estab- 20
lishment in which the person described in
blissement domestique autonome que la
personne visee aox alineas a) au b) habite)
paragraph (a) or (b) resides) incurred in the
year or ~e preceding taxation year for the
engagee au cours de I'annee ou de I'annee
maintenance of a person, children in the
d'imposition precedente pour subvenir aux
person's custody or both the person and 25
besoins d'une personne, d'enfants confies A25
those children, where the person is
sa garde ou Ala fois de la personne et de ces
enfants,
dans Ie cas ou la personne est :
(a) the taxpayer's spouse or former
spouse, or
a) Ie conjoint ou I'ancien conjoint du
contribuable,
'(b) where the· amount became payable
under an order made by a competent 30
tribunal in accordance with the laws of a
province,an individual who is a parent of
a child of whom the taxpayer is a natural
parent,
and·
the Act after the description of B is replaced
by the following:
35
b) si Ie montant est devenu payable en30
vertu de I'ordonnance d'un tribunal competent rendue en conformite avec les lois
d'une province, un particulier qui est Ie
~re ou la m~re d'un enfant dont Ie
contribuable est Ie ¢re naturel ou la35
m~re naturelle;
(4) Le passage du paragraphe 60.1(2) de
18 m~me loi suivant I'element Best remplace par ce qui suit :
is, where the order or written agreement, as the
est repute, lo~ue I'ordonnance ou l'accord40
case may be, provides that this subsection. and 40 ~rit prevoit que Ie present paragraphe et Ie pasubsection 56.1(2) shall apply to any amount
ragraphe 56.1(2) s'appliquent A un montant
paye ou payable A leur titre, etre un montant
paid or payable thereunder, deemed to be an
amount payable by the taxpayer to that person
payable par Ie contribuable Acelte personne et
and receivable by that person as an allowance
a recevoir par celle-ci A titre d'allocation pe-45
on a periodic basis, and that person is deemed 45 riodique, que celte personne peut utiliser a sa
to have discretion as to the use of that amount.
discretion.
(5) Subsection 60.1(3) of the Act Is reo
placed by the foll9wing:
(5) Le paragraphe 60.1(3) de la meme est
remplace par ce qui suit:
Enlenlc
1996-97
PrillI'
JlII)'nlenls
/mpot sur Ie rel'eml, /996
(3) Pour I'application du present article et
(3) For the purposes of this section and
de I'article 60, lorsqu'un accord ecrit ou
section 60, where a written agreement or order
I'ordonnance d'un tribunal competent. etabli
of a competent tribunal made at any time in a
a un moment d'une annee d'imposition,
taxation year provides that an amount paid
before that time and in the year or the 5 prevoil qu'u~ montant paye avant ce moment 5
et au cours de I'annee ou de I'annee d'imposipreceding taxation year is to be considered to
tion precedente est considere comme paye et
have been paid and received thereunder,
reyu
au titre de I'accord ou de I'ordonnance,
(a) the amount is deemed to have been paid
les
presomptions
suivantes s'appliquent :
thereunder; and
(b) the agreement, or order is deemed, 10
except for the purpose of this subsection, to
have been made on the day. on which the
first such amount was paid, except that,
where the agreement or order is made after
April 1997 and varies a child support 15
amount payable to the recipient from the
last such amount paid to the recipient before
May 1997, each varied amount of child
supPort paid under the agreement or order
is deemed to have been payable under an 20
agreement or order the commencement day
of which is the day on which the first
payment of the varied amount is required to
be made.
Definitions
Paiemenl.
anll!ricurs
a) Ie montant est repute avoir ete paye au 10
titre de I'accord ou de I'ordonnance;
b) I'accord ou I'ordonnance est repute, sauf
pour I'application du pr6&ent paragraphe,
avoir ete etabli Ie jour ob un, tel montant est
paye pour la premi~re foist Toutefois,15
lorsque I'accord ou I'ordonnance est etabli
ap~ avril 1997 et modifie un'montant de
pension a1imentaire pour enfants payable
au ~neficiaire par rapport' au demier
~mblable montant qui lui a ete paye avant20
mai 1997, chaque montant modifie de
pension a1imentaire pour enfants paye aux
tennes de I'accord ou de I'ordonnance est
r6pute avoir ete payable aux tennes d'un
accord'ou d'une ordonnance dont la date25
d'exCcution correspond au jour ob Ie mantant modifie est 1 verser pour la premiere
foist
(6) Section 60.1 or the Act Is amended by 2S (6) VarUde 6C).1 de Ia m~me 101 est
adding the rollowlng after subsection (3):
'modlfi~ par adJonctlon, ap~ Ie paragra- 30
phe (3), de ce qui suit:
(4) The defmitions in subsection 56.1(4)
(4) Les defmitions figurant au paragraphe
apply in this section and section 60.
56.1(4) s'appliquent au present article et a
I'article 60.
(7) Subsections (1) to (5) apply to amounts
(7) Les paragraphes (1) a (5) s'appliquent35
paid after 1996.
30, aux montants paya ap~ 1996,
(8) SubseCtion (6) applies after 1996.
(8) I.e paragraphe (6) s'applique a compterde 1997.
12. (1) Paragraph 63(1)(1) or the Act Is
12. (1) L'alin~ 63(1lf) de la m~me 101 est
replaced by th~ rollowing:
remplac~'par ce qui suit:
40
(I) the total of all amounts each of which is
an amount that is deducted, in respect of the 35
taxpayer's eligible children for the year,
under this section in computing the income
for the year of an individual (other than the
taxpayer) to whom subsection (2) applies
for the year.
'40
19
f) Ie total des montants representant chacun
un montant dCduit en vertu du present
article, ll'egard des enfants admissibles du
contribuable pour I'annee, dans Ie calcul du
revenu pour I'annee d'un particulier, autre45
que Ie contribuable, a qui Ie paragraphe (2)
s'applique pour I'annee.
Dl!finitions
20
l
II/come Ta.\'. 1996
45-46 ELlz. II
(2) Le sous-alinea 63(2)b)(ilil de la meme
loi est remplace par ce qui suit:
(iii) un etudiant qui frequente un etablis(iii) a student in attendance at a designated educational institution (as defined
sement d'enseignement agree au sens du
paragraphe 118.6(1) ou une ecole secon- 5
in subsection 118.6(1» or a secondary 5
daire et y est inscrit A un programme
school and enrolled in a program of the
d'une duree d'au moins trois semaines
institution or school of not less than' 3
consecutives, aux cours ou aux travaux
consecutive weeks duration that provides
duquel chaque etudiant doit ~onsacrer au
that each student in the program spend
moins dix heures par semaine, selon ce 10
not less than 10 hours per week on 10
que prevoit Ie programme,
courses or work'in the program,
(2) Subparagraph 63(2)(b)(iii) of the Act
is replaced by the following:
Expenses
while II
sc:hool
Amount
deduclible
)
(3) Section 63 of the Act Is amended by
adding the following after subsection (2.1):
(3) L'article'63 de la m~me 101 est moditie
par adjonctlon, apm Ie paragraphe (2.1),
de ce qui suit :
(2.2) There may be deducted in computing
a taxpayer's income for a taxation year such 15
part of the amount determined under subsection (2.3) as the taxpayer claims, where
(a) the taxpayer is, at any tinie in the year,
a student in attendance at a designated
educational institution (as dermed in sub- 20
section 118.6(1» or a secondary school and
enrolled in a program of the institution or
school of not less than 3 consecutive weeks
duration that provides that each student in
the program spend not less than 10 hours per 2S
week on courses or work in the program;
(b) there is no supporting person of in
eligible child of the taxpayer for the year or
the income of the taxpayer for the year
exceeds the income for the year of a 30
supporting person of the child (on the
assumption that both incomes are computed
without reference to this section and paragraphs 6O(~.1) and (w»; and
(c) a prescribed form containing prescribed 35
information is filed with the taxpayer's
return of income (other tluln a return filed
under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4» for
the year.
40
(2.2) Un monWlt ne depassant pas Ie 15
montall;t determine selon Ie paragraphe (2.3)
est deductible dans Ie calcul du revenu d'un
contribuable pour une an,n6e d'impositlon si
les conditions suivantes sont reunies :
a) Ie contribuable est, au cours de l'ann6e,20
un etudiant qui (r6quente un etablissement
d'enseignement agr66 au sens dti paragraphe 118.6(1) ou une ecole secondaire et y
cst inscrit l un programme d'une duree d'au
moins trois semaines consecutives, aux 25
cours ou aux travaux duquel chaque etudiant doit consacrer au moins dix heures par
semaine, selon ce que prevoit Ie programme;
b) il n'existe pas de persoMe assumant les30
frais d'entretien d'un enfant admissible du
contribuable pour l'ann6e ou Ie revenu du
contribuable pour l'ann6e depasse ce)ui de
la peI'SC;)Me assumant les frais d'entretien
de l'enfant pour l'ann6e, Asupposer que les35
deux revenus sont calcul6s compte non tenu
du present article et des alineas 6Od) et w);
c) Ie formulaiie prescrit contenant les
renseignem~nts preserits accompagne la
declaration de revenu du contribuable pour40
I'annee, A l'exclusion de celie produite ou
deposee en application des paragraphes
70(2) ou 104(23), de I'alinea 128(2)e) ou du
paragraphe 150(4).
(2.3) For the purpose of subsection (2.2),
the amount determined in respect of a taxpayer for a taxation year is the least of
~pe~~
Iu 1l1li
(2.3) Pour I'application du paragraphe45 Monta~11
' .
•
~duCllhe
(2.2), Ie montant determme quant A un contnbuable pour une annee d'imposition correspond au moins eleve des montants suivants :
1996-97
/mp6t sur Ie revenu. /996
21
(a) the amount by which the total of all
amounts, each of which is an ,amount paid
as or on account of child care expenses
incurred for services rendered in the year in
respect of an eligible child of the taxpayer, 5
exceeds the amount that is deductible under
subsection (1) in computing the taxpayer's
income for the year,
a) I'excedent du total des montants representant chacun un montant paye au titre des
frais de garde d'enfants engages pour des
services rendus au cours de I'annee a
I'egard d'un enfant admissible du contri- 5
buable sur Ie montant qui est deductible en
application du paragraphe (1) dans Ie calcul
du revenu du contribuable pour I'annee;
(b) 2/3 of the taxpayer's income for the year
b) les deux tiers du revenu du contribuable
computed without reference to this section 10
and paragraphs 6O(v.l) and (w),
pour l'ann6e calcule compte'non tenu du 10
present article et des alineas 60\'.1) et w);
(c) the amount determined by the formula
c) Ie resultat du calcul su.ivant :
(A+B)xC
(A+B)xC
where
OU:
A is the product obtained when $150 is 15
multiplied by the number of eligible
children of the taxpayer for the year
each of whom is
A represente Ie produit de la multiplica-15
tion de 150 $ par Ie nombre d'enfants
admissibles du contribuable pour I'annee dont chacun est:
(i) under 7 years of age at the end of the
20
year, or
(i) soit Age de moins de sept ans a la fin
20
de I'ann6e,
(ii) a person in respect of whom an
amount may be deducted under section
118.3 in computing a taxpayer's' tax
payable under'this Part for the year,
(ii) soit une personne
l'egard de
laquelle un montant peut ctre deduit en
application de l'article 118.3 dans Ie
calcul de l'impOt payable par uo
contribuable pour l'ann6e en vertu de25
la pr6sente partie,
a
B is the product obtainCd when $90 is 25
multiplied by the number of the taxpayer's eligible children for the year (other
than those referred to in the description
of A), and
C is
B Ie produit de la multiplication de 90 $
par Ie nombre d'enfants admissibles du
contribuable pour l'ann6e (autres que
ceux vises l'element A),
30
a
30
Ji) where there is a supporting person
of an eligible child of the taxpayer for
the year, the number of weeks, in the
year, in which both the taxpayer and
the .supporting person. were students 35
described in paragraph (2.2)(0), and
(ii) in any other case, the number of
weeks, in the year, in which the
taxpayer was a student described in
40
paragraph (2.2)(0),
(d) the amount by which the total calculated
under subparagraph (1)(e)(ii) in respect of
eligible children of the taxpayer for the year
exceeds the amount that is deductible under
subsection (1) in computing the taxpayer's 45
income for the year, and
C:
(i) s'il existe une personne assumant
les frais d'entretien d'uo enfant admissible du contribuable pour l'annee. Ie
nombre de semaines de l'ann6e au35
cours desquelles Ie contribuable et
cette personne etaient des etudiants
vises l'alinea (2.2)a),
a
(ii) sinon, Ie nombre de semaines de
l'ann6e au cours desquelles Ie contri-40
buable etait un etudiant· vise A I'alinea
(2.2)0);
d) I'excedent du total calcule selon Ie
sous-alinea (1)e)(ii) A I'egard d'enfants
admissibles du contribuable pour l'annee45
sur Ie montant qui est deductible en applica-
.,..,
I
Incollle
_.:.
f.
Tax. 1996
(e) where there is a supporting person of an
eligible child of the taxpayer for the year.
the amount by which the amount calculated
under paragraph (2)(b) for the year in
respect of the taxpayer exceeds 2/3 of the 5
taxpayer's earned income for the year.
45-46 Euz. II
tion du paragraphe ( I) dans Ie calcul de son
revenu pour I'annee;
e) s'il existe une personne assumant les frais
d'entretien d'un enfant admissible du
contribuable pour I'annee, I'excedent du 5
montant calcule selon I'alinea (2)b) pour
I'annee a I'egard du contribuable sur les
deux tiers de son revenu gagne pour I'annee.
(4) Paragraph (a) of the· definition "child
(4) L'alinea a) de la definition de «frais 10
care expense" in subsection 63(3) of the Act
de garde d'enfants », au paragraphe 63(3)
is amended by striking out the word "or" at
de la meme loi, est modifiee par adjonction,
the end of subparagraph (ill), by replacing 10 apres Ie sous-alinea (iv), de ce qui suit:
the word "and" at the end of subparagraph
(v) frequenter un etablissement d'en(iv) with the word. "or~' a~d by adding the
seignement agree au sens du paragra-15
following after subparagraph (iv):
phe 118.6( I) ou une ecole secondaire
ou it est inscrit a un programme d'une
(v) to attend a designated educational
institution (as defined in subsection 15
dur6e d'au moins trois semaines
118.6(1» or a secondary school, where
consecutives, aux cours ou aux travaux
the taxpayer is enrolled in a ·program of
duquel chaque 6tudiant doit consacrer20
the institution or school of not less than
au moins dix heures par semaine, selon
3 consecutive weeks duration that
ce que prevoit Ie programme;
provides that each student in the 20
program spend not less than 10 hours
per week on courses or work in the
program, and
\
,;
/
(5) Paragraph (c) of the definition "eligi(5) La definition de « enfant admissible »,
ble child" in subsection 63(3) of the Act is 25 au paragraphe 63(3) de la meme loi, est
remplacee par ce qui suit:
25
(c) is under 16 years of age, or
«enfant admissible» Quant a une annee
d'imposition, enfant d'un contribuable ou
du conjoint de celui-ci ou enfant a la charge
d'un contribuable ou de ce conjoint et dont
Ie revenu pour l'annee ne depasse pas le30
montant applicable pour l'annee selon l'alinea 118(1)c), si, a un moment quelconque
de l'annee, l'enfant est soit age de moins de
16 ans, soit a la charge du contribuable ou
du conjoint de celui-ci et a une infinnite 35
mentale ou physique.
« enfant
admissible -
"di.~;b'r
C:I,ild"
(6) The portion of the definition "sup(6) Le passage de la definition de «perporting person" in subsection 63(3) of the
sonne assumant les frais d'entretien», au
Act before paragraph (~) is replaced by the 30 paragraphe 63(3) de la meme loi, precCdant
following:
.
I'alinea a) est remplace par ce qui suit:
40
"supponing
person"
Ie
')t',..~("",t
".U",,,,,,,, Ic'.(
1;"/;.\
(I'('III""I;rll
)
III
"supporting person" 'of an eligible child of a
taxpayer for a taxation year means a person,
other than the taxpayer, who is
«personne assumant les frais d'entretien»
«perwnne
assumanl les
Quant a I'enfant admissible d'un contribuafruis
ble pour une annee d'imposition. personne.
d'enlrelien.
•. .\Up/JtlI'Ii",t:
autre que Ie contribuable, qui cst, selon Ie
,,,.,...,,,,"
cas:
45
1996-97
Canadian
exploration
expenses to
flow.through
shareholder
ch.25
Impot Sill" Ie I"el'ellll. 1996
(7) Subsections (1) to (5) apply to the 1996
and subsequent taxation years.
(7) Les paragraphes (1) a (5) s'apptiquent
aux annees d'imposition 1996 et suivantes.
(8) Subsection (6) applies to the 1983 and
subsequent taxation years.
(8) Le paragraphe (6) s'applique aux
annees d'imposition 1983 et suivantes.
13. (1) Subsections 66(10) to (10.3) of the
Act are repealed.
13. (l) Les paragraphes 66( 10)
la meme loi sont abroges.
(2) The portion of subsection 66(12.6) of
the Act before paragraph (e) is replaced by
the following:
(2) Le passage du paragraphe 66(12.6) de
la meme loi precedant I'atinea e) est remplace par ce qui suit:
..
(12.6) Where a person gave consideration
under an agreement to a corporation for the
issue of a flow-through share of the corporation and, in the period that begins on the day
the agreement was made and ends 24 months
after the end of the month that includes that
day, the corporation incurred Canadian exploration expenses. the corporation may. after it
complies with subsection (12.68) in respect of
the share and before March of the first
calendar year that begins after the period,
renounce, effective on the day on which the
renunciation is made or on an earlier day set
out in the form prescribed for the purposes of
subsection (12.7), to the person in respect of
the share the amount, if any, by which the parl
of those expenses that was incurred on or
before the effective. date of the renunciation
(which part is in this subsection referred to as
the "specified expenses") exceeds the total of
(12.6) Lorsque, conformement a une
convention, une personne paie une action
accreditive a lasociete qui I'emet en sa faveur
et que In societe engage des frais d'exploration
au Canada au cours de la periode commen~ant
a la date de conclusion de la convention et se
tenninant 24 mois' apres la fin du mois qui
comprend cette date, la societe peut, en ce qui
concerne cette action. apres s'etre conformee
au paragraphe (12.68), renoncer en faveur de
cette personne, avant mars de la premiere
annee civile commen~ant. apres cette periode,
a I'excedent eventuel de la partie de ces frais
(appelee « frais determines» au present paragraphe) qui a ete engagee au plus tard a la date
ou la renonciation prend effet savoir Ie
jour ou la renonciation est faite ou, s'il est
anterieu.., Ie jour de prise d'effet precise dans
Ie formulaire requis par Ie paragraphe
(12.7) - , sur Ie total des montants suivants :
(a) the assistance that the corporation has
received, is entitled to receive or can
reasonably be expected to receive at any
time, and that can reasonably be related to
the specified expenses or to Canadian
exploration activities to which the specified
expenses relate (other than assistance that
can reasonably be related to expenses
referred to in paragraph (h) or (b. I»,
a titre d'aide que la societe
a re~u, est en droit de recevoir ou peut
raisonnablement s'attendre a rec~voir a un
moment donne et qu'i! est raisonnable de
rattacher aux frais determines ou a des
activites d'exploration au Canada s'y rapportant, a I'exclusion des montants a titre
d'aide qu'i! est raisonnable de rattacher aux
frais vises aux alineas h) ou h.I);
(h) all specified expenses that are pre-
scribed Canadian exploration and development overhead expenses of the corporation,
h) ceux des frais determines qui constituent
des frais generaux d'exploration et d'amenagement au Canada de la societe vises par
reglement;
(3) Subsection 66(12.6) of the Act is
amended by adding the following after
paragraph (b):
(3) Le paragraphe 66(12.6) de la meme loi
est modifie par adjonction, apres I'alinea
b), de ce qui suit:
(b. I) all specified expenses each of which is
a cost of, or for the use of, seismic data
b.l) ceux des frais determines qui representent Ie coOt ou .Ie coOt d'utilisation de
donnees sismiques, selon Ie cas:
23
a (10.3) de
a
a) tout montant
Renoncialion
~ des fraix
d'exploralion
en faveur de
I'aclionnaire
,
t
APPENDIX TWO
Alimony and Maintenance
page 1
10.:
Interpretation Bulletin IT-118R3
Date published:
December 21, 1990
Subject:
Reference:
Paragraphs 60(b), (c), and (c.l) (also sections 56.1 and 60.1, subsections
56(12) and 118(5), and paragraphs 56(1)(b), (c) and (c.1) and 212(1)(f).
Application
This bulletin replaces and cancels Interpretation Bulletin IT-118R2 dated March 22, 1985.
Summary
This bulletin discusses the deductibility of alimony and maintenance payments and the specific criteria that must be
satisfied in order for such payments to qualify for a deduction. A payer of alimony or maintenance is pennitted a
deduction for periodic payments made as an allowance pursuant to a decree, order, judgment or written agreement
for the maintenance of the recipient, children of the recipient or both. If the payer is pennitted a deduction for the
payment of alimony or maintenance, the payer's spouse, fonner spouse or fonner common-law partner is generally
required to include the amount in income.
Discussion and Interpretation
1. Any amount deductible by a taxpayer (the payer) under paragraph 60(b), (c) or (c. 1) as alimony or
1l3intenance is required to be included in the income of the taxpayer's spouse, fonner spouse or fonner
~mmon-Iaw partner (who may be referred to as the recipient) as the case may be, under paragraph 56(1)(b), (c) or
(c. 1). Only the rules from the payer's perspective are discussed herein but the reader must be aware that whenever
the payer is entitled to an income deduction the recipient has a corresponding income inclusion (except as noted in 8
below).
Alimony Payments
2. A payer may deduct payments made to a spouse or fonner spouse under paragraph 60(b) if all the following
requirements are met:
(a)
the amount is paid as alimony or other allowance (see 6 to 10 below for the meaning of
"allowance") for the maintenance of the spouse or fonner spouse, children of the
marriage, or both;
(b)
the spouses or fonner spouses are living apart at the time the payment is made and
throughout the remainder of the year and were separated pursuant to a divorce, judicial
separation, or written separation agreement;
(c)
the amount is paid pursuant to a decree, order, or judgment of a competent tribunal or
pursuant to a written agreement; and
(d)
the amount is payable on a periodic basis (see 12 to 14 below for the meaning of
"periodic payments").
,;faintenance Payments
page 2
3. A payer may deduct payments made to a separated spouse under paragraph 60(c) if all the following
requirements are met:
(a)
the amount is paid as an allowance (see 6 to 10 below) for the maintenance of the
spouse, children ofthe spouse, or both;
(b)
the spouses are living apart at the time the payment is made and throughout the
remainder ofthe year;
(c)
the amount is paid pursuant to an order of a competent tribunal; and
(d)
the amount is payable on a periodic basis (see 12 to 14 below).
Payments to Former Common-Law Partners
4. A payer may deduct payments made to a former common-law partner by virtue of paragraph 60(c.1) if all the
following requirements are met:
(a)
the amount is paid as an allowance (see 6 to 10 below) for the maintenance of the
recipient, children ofthe recipient, or both;
(b)
the recipient and the payer are living apart at the time the payment is made and
throughout the remainder ofthe year;
(c)
the amount is payable on a periodic basis (see 12 to 14 below);
(d)
the amount is paid pursuant to an order made after February 10, 1988 in accordance
with the laws of a province or territory (see note below for special application to Ontario
orders) by a competent tribunal (or before February 11, 1988 provided the parties have
jointly elected in writing before the end of the year that paragraphs 60(c.l) and
56(l)(c.1) will apply to all such amounts paid); and
(e)
the amount is paid by an individual of the opposite sex who, before the date ofthe order,
cohabited with the recipient in a conjugal relationship, or is the natural parent of a child
ofthe recipient.
Note: The criteria in (d) above will be met ifthe amount is paid pursuant to an order made after December 11, 1979
.in accordance with the laws of Ontario by a competent tribunal (or earlier provided the parties have jointly elected
in writing before the end ofthe year that paragraphs 60(c.l) and 56(1)(c.l) will apply to all such amounts paid).
Court Orders and Written Agreements.
--
A court order is a decree, order or judgment made by a court or other competent tribunal. Nothing less than a
concrete pronouncement, decree or direction of a tribunal empowered to make an order will constitute an order as
required by paragraphs 60(b), (c) and (c. 1). A written separation agreement is a written document under which a
person agrees to make regular payments to maintain his or her spouse or former spouse, children ofthe marriage, or
both. The agreement must be duly signed and dated by both parties and must specifically state that the parties have
agreed to live separate and apart from one another. Informal writings such as correspondence and memoranda
between a husband and a wife, or between their respective solicitors, will not be considered a valid written
separation agreement.
page 3
MEANING OF ALLOWANCE
) 6. For the purposes of paragraphs 60(b), (c) and (c. 1) (as discussed in 2 to 4 above) an allowance is a specified
sum of money which has been established in advance of payment by the court or the parties as being the required
payment to be made by the payer to a spouse, former spouse or former common-law partner for the maintenance of
the recipient, or a child of the recipient or both. A key factor in determining whether a payment is an allowance is
whether the recipient has discretion as to the use ofthe amount (see 7 below).
Discretion as to the Use ofthe Amount
7. Prior to March 28, 1986 - Prior to the Supreme Court of Canada decision in Jean Paul Gagnon v. The Queen
[1986] 1 CTC 410, 86 DTC 6179, payments made to a recipient for "earmarked expenses" (i.e. where the recipient
has no discretion as to the use of the payments) were not considered to be allowances and thus were not deductible
by the payer (except as provided by subsection 60.1(2) - see 18 below). This is referred to as the pre-Gagnon
definition of allowance.
March 28, 1986 - December 31, 1987 - The Gagnon decision had the effect of broadening the meaning of
allowance to encompass amounts for particular items which the recipient could dispose of for his or her benefit,
notwithstanding restrictions imposed as to the manner of disposing of them ("Gagnon definition of allowance"). For
example, the Gagnon decision allowed amounts paid directly to the recipient for mortgage payments, property
taxes, utilities, medical expenses, etc. to be deductible to the payer as an allowance that was otherwise deductible
under paragraph 60(b), (c) or (c. 1). The Gagnon definition of allowance applies to court orders or written
agreements entered into or last amended after the time ofthis decision (March 27, 1986) and before 1988.
For 1988 and Subsequent Years - Subsection 56(12) specifically provides that for court orders or written
agreements entered into after 1987 the pre-Gagnon definition of allowance will apply.
)
/ 8. Subsection 56(12) provides special rules for the 1986 and 1987 taxation years to payments made pursuant to
orders made before the Gagnon decision. For these payments, the Gagnon definition of allowance applies, entitling
the payer to claim a deduction of the maintenance type payments discussed in 6 above under paragraph 60(b), (c),
or (c. 1). However, a corresponding amount is not required to be included in the income of the recipient under
paragraph 56(1)(b), (c), or (c.1) for the 1986 and 1987 taxation years.
Amount Subject to Adjustment
9. A specified sum of money that is subject to adjustment in accordance with some reasonable formula or index
'(e.g. a percentage of payer's income or the cost of living index) may qualify as an allowance even though the exact
future amounts payable are not specified in the order or agreement.
Offset of Amount Payable
10. A taxpayer may be required by a court order or written agreement to pay an allowance for alimony or
maintenance, and also to sell the family residence to the recipient with payment for the residence to be effected by a
partial or full offset of the allowance payable for an applicable period of time. In such cases, the amount which
would otherwise be deductible in computing the taxpayer's income (and included in computing the recipient's
income) for such allowance is the gross amount ofthe allowance with no adjustment for the amount of offset.
Payments Made Prior to Date of Order or Agreement
11. Although payments made prior to the date of a decree, order, judgment or written separation agreement cannot
)
page 4
be considered to be paid "pursuant to" it, they may nevertheless qualify for deduction under paragraph 60(b), (c) or
(c. 1). Subsection 60.1(3) provides that such payments made in the year of the order or agreement or in the
immediately preceding year that otherwise qualify are deemed to be paid pursuant to the order or agreement where
the document provides that they are to be so considered.
PAYMENTS ON A PERIODIC BASIS
12. In order for amounts to be deductible to the payer under paragraph 60(b), (c) or (c. 1) they must be payable on
a periodic basis for the maintenance ofthe recipient and/or a child ofthe recipient. The December 21, 1989 Federal
Court of Appeal decision in McKimmon v. The Queen 89 DTC 6088 listed the criteria that should be considered in
making the distinction between periodic payments made as an allowance for maintenance which are deductible
under paragraph 60(b), (c) or (c.l) and payments made as instalments of a lump or capital sum which are not
deductible. Some ofthe more important criteria are:
(a)
Length of periods at which payments are made - Amounts paid weekly or monthly are
easily characterized as allowances for maintenance. Where the payments are at longer
intervals the issue becomes less clear. If payments are made at intervals of greater than
one year it is unlikely that the payment will qualify as an allowance for maintenance.
(b)
Whether payments are for an indefinite period or fixed term - An allowance for
maintenance will more commonly provide for its continuance either for an indefinite
period or to some event (such as the coming of age of a child) which will cause a
material change in the needs of the recipient. Sums payable over a fixed term, on the
other hand, may be more readily seen as being of a capital nature.
(c)
Amount of payments relative to the income and living standards of both the payer and
recipient - Where payments are in excess of an amount sufficient to maintain the
recipient and/or children in the style to which they were accustomed prior to the
breakdown of the marriage or common-law union, they will not likely be viewed as an
allowance for maintenance. The chance of such amounts qualifying as an allowance for
maintenance is even less likely where the payments are made over a short period oftime.
Where the payment is no greater than required to maintain the recipient's standard of
living it is more likely to qualify as an allowance for maintenance.
(d)
Whether the payments purport to release the payer from any future obligations to pay
maintenance - If there is such a release the payments will normally not be considered an
allowance for maintenance.
13. An amount paid as a single lump sum will generally not qualify as being payable on a periodic basis and
hence not be deductible. For example,
(a)
a lump sum payment made in place of several periodic payments not yet due but imposed
under a court order or agreement, and
(b)
an amount paid pursuant to an order or agreement requiring that a payment be made in
respect of a period prior to the date ofthat order or agreement,
would not qualify as periodic payments. However, a lump sum paid in a taxation year is regarded as qualifying as a
periodic payment where it can be identified as being the payment of amounts payable periodically that were due
page 5
after the date of the order and had fallen into arrears.
I
. 14. An amount paid pursuant to a court order or agreement which requires a taxpayer to pay a periodic allowance
for only part of the year may still qualify as "periodic". For example, a monthly allowance for the maintenance ofa
child of the marriage is not disqualified because it is not required to be paid for two months of the year when the
child is residing with the paying taxpayer.
PAYMENTS TO THIRD PARTIES
Subsection 60.1(1) deals with periodic payments made pursuant to a decree, court order, judgment or written
agreement to, or for the benefit of the payer's spouse or former spouse and/or the children in the custody of such
person. The payments are deemed, for the purposes of paragraphs 60(b), (c) and (c. 1), to be paid by the payer and
received by the payer's spouse or former spouse. This deeming provision allows the payer to obtain a deduction for
these payments where they otherwise meet the requirements of paragraph 60(b), (c) or (c.l) (e.g. the comments in 6
to 10 above regarding the meaning of an allowance will have to be satisfied). Subsection 60.1 (1) is also applicable
to third party payments made on behalf of a former common-law partner or children in the custody of such
individual if paid pursuant to an order made in accordance with the laws of Ontario after 1985 or an order made in
accordance with the laws of any other province or territory after February 10, 1988.
16. As noted in 15 above, even though subsection 60.1(1) deems the payment to be paid to and received by the
recipient, the payment must still be an "allowance" in order to be deductible. Third party payments, made in
compliance with a court order or separation agreement, for specific living expenses of the recipient (or the children
in the recipient's custody) such as medical, rent or mortgage expenses will not be deductible to the payer if the
payments are in addition to any maintenance allowance specified in the order or agreement. This is because the
recipient does not have discretion as to the use of the amount (see note below). Such third party payments would
) only be deductible if the amount is deducted from the maintenance otherwise payable with the express or implied
concurrence ofthe recipient. To illustrate this distinction consider the following examples:
Example 1
Separation Agreement A requires a husband to pay $1,200 a month to his wife as an allowance for the maintenance
ofthe wife and children and also to pay $300 a month directly to a private school attended by the children in respect
oftheir fees.
Under Agreement A, the monthly amount of $300 paid directly to the school does not qualify as an allowance
.because the wife does not have any discretion as to the use of the amount and the amount is in addition to the
spousal maintenance payment specified in the agreement (see note below).
Example 2
Separation agreement Brequires a husband to pay $1,500 a month to his wife as a maintenance allowance. This
agreement provides that, initially, payment of this amount will consist of $1,200 paid directly to the wife and $300
paid directly to a private school attended by the children in respect oftheir fees, but that the wife may, at any time,
change this arrangement and require that the entire $1,500 be paid directly to her to do with as she wishes.
Under Agreement B the $300 paid directly to the school is considered to be an allowance because the amount has
been deducted from the amount of maintenance otherwise payable with the express concurrence of the wife. The
wife is considered to have discretion as to its use, i.e. she can change the arrangement to make the entire $1,500
payable to her.
)
page 6
Note: The third party payment referred to in example 1 above would be deductible to the payor if made pursuant
to a court order or written agreement entered into or last amended after March 27, 1986 (Gagnon decision) and
before 1988 - see 7 above.
17. It may be that a court considers it necessary, under the particular circumstances of a separation or divorce, to
order that payments be made directly to the court for forwarding to the ultimate recipient spouse. These are
normally not "earmarked" expenses (as discussed in 16 above) but rather general maintenance allowances and
under subsection 60.1(1) are deemed to be paid to the recipient spouse.
18. Subsection 60.1(2) permits the payer to deduct payments made either
(a)-directlKto a spouse or former spouse or
(b)
to a third party for the benefit of such person or the children in their custody, for specific
expenses that are required to be paid pursuant to a decree, court order, judgment or
written agreement. This is achieved by deeming the payments to be paid and received by
the spouse or former spouse of the payer as an allowance payable on a periodic basis.
Subsection 60.1(2) will also permit a deduction for such payments made on behalf of a
former common-law partner or children in the custody of such person if paid pursuant to
an order made in accordance with the laws of Ontario after 1985, or an order in
accordance with the laws of any other province or territory after February 10, 1988.
An exception to the rules in subsection 60.1(2) provides that the following amounts are specifically excluded from
its application (and are thus not deductible):
(a)
expenditures on a "self-contained domestic establishment" ("dwelling") as defined in
subsection 248(1), in which the payer resides,
(b)
expenditures on tangible property unless the expenditure is on account of the following
deductible expenses:
(i) a medical or educational expense or an expense incurred for the maintenance of the
dwelling in which the spouse or former spouse resides (including mortgage allowance
(6 to 10 above) and must be periodic (12 to 14 above). On the other hand, if all the
requirements in subsection 60.1(2) have been satisfied as noted in 18 above, the
payment is automatically deemed to be received by the spouse, former spouse or
former common-law partner as an allowance payable on a periodic basis. Therefore,
it is much easier for a third party payment to qualify under 60.1(2) as long as it is
specified in the agreement or order that the parties intend the payments to be governed
by subsections 60.1(2) and 56.1(2).
OTHER COMMENTS
Personal Exemptions and Tax Credits
20. Applicable for 1988 and subsequent taxation years, in the year in which a separation or divorce occurs, a
taxpayer may claim either maintenance payments as deductions under paragraph 60(b), (c) or (e.1) in computing
income or those tax credits under 118(1) to which the taxpayer would otherwise be entitled. However, in years
subsequent to the separation or divorce, if the taxpayer is entitled to a deduction under paragraph 60(b), (c) or
I
i
page 7
(c. I), he or she cannot claim the married tax credit under paragraph 118(1)(a) or claim the dependant tax credit
under paragraph 118(1)(d) in that year. For taxation years before 1988 the same restrictions apply except that,
instead of the married and dependant tax credits, personal exemptions were claimed under paragraphs 109(1)(a)
and (d) respectively. (For a further discussion of personal tax credits see the current version ofIT-513 for 1988 and
subsequent taxation years and, for personal exemptions, the current version of IT-191 for taxation years prior to
1988.)
Payments Made After Death of Recipient
21. Where payments continue to be made after the death of the payee they are not deductible by the payer whether
they are made to the estate, the children, or anyone else. However, if not entitled to a deduction under paragraph
60(b), (c) or (c. 1) in the year, the payer may be entitled to a dependant tax credit for a child in that year pursuant to
the provisions of subsection 118(1). Also, if custody of the child reverts to the payer on the death of the spouse,
former spouse or former common-law partner, there may be entitlement to a deduction for child care expenses in
accordance with the provisions of section 63.
Non-Resident Recipients
22. Alimony and maintenance allowance payments made to a non-resident spouse, former spouse or former
common-law partner, are subject to non-resident tax in accordance with paragraph 212(l)(f) of the Act. That
paragraph is considered to apply only to those payments which, if the recipient were a resident, would be required
to be included in income under paragraph 56(1)(b), (c) or (c.l) ofthe Act., subject to any overriding effect ofa tax
agreement or convention with the country of residence of the recipient (see the current version of Information
Circular 76-12, Applicable Rate of Part XIII Tax on Amounts Paid or Credited to Persons in Treaty Countries).
23. Where a resident taxpayer is required, by a decree, order, judgment, or agreement, to remit the full amount of
)the alimony or maintenance allowance to a non-resident payee and to be responsible for payment ofthe non-resident
tax, it will be necessary to compute the gross amount on which tax is to be levied and the tax payable by applying
the following formula in which the tax rate percentage is expressed as a·whole number.
Tax payable =
tax rate
x
payment
100 minus tax rate
For example, if the rate is 15% and the payment is $850, the computation is 15/85 x $850 = $150 and the gross
amount, which is deductible from income provided the payment otherwise qualifies under paragraph 60(b), (c) or
(c.l), is $850 plus $150, or $1,000. The amount of tax withheld must be remitted to the Receiver General in
accordance with guidelines provided in Part II of the current version of Information Circular 77-16, Non-Resident
Income Tax.
- 27-
)
APPENDIX THREE
Responses to New Child Support Rules
Questions from the Department of Justice
- letter dated August 20, 1997
Questions:
1.
Is a court order made under The Reciprocal Enforcement ofSupport Orders Act which varies
the arrears accumulated prior to May 1, 1997 to be treated as a new order under the present
tax rules or as falling under the old tax rules of deduction/inclusion?
Department's Comments
It is our general view that a court order that only deals with the accumulated arrears and not
the amount payable on a periodic basis, would not constitute a new order for the purposes
of paragraph (a) of the definition of "commencement day" in subsection 56.1(4) of the
Income Tax Act. It is also our view that a lump sum payment to obtain a release from a
liability imposed by an order in respect of arrears of maintenance payable is normally nondeductible and non-taxable. In this regard, the comments in paragraph 13 of IT-118R3
Alimony and Maintenance, are still relevant. Further, if there are periodic payments of
continuing child support under a pre-May 1, 1997 order, they will continue to be deductible
by the payer and subject to tax in the hands of the recipient.
2.
In the above mentioned situation, how does Revenue Canada require the order to read to
ensure that the tax rules are clear?
We do not have any guidelines on how the court order should be worded. The tax
consequences ofa court order are determined by reference to its terms in light of the Act and
relevant jurisprudence, as well as any other information that is relevant.
3.
How will Revenue Canada and support payers know when payments of current support are
all paid up and arrears payments can be claimed for the tax deduction?
- 28-
The response to this question requires an assumption that "current support" referred to is the
child support payable under the new rules and "arrears payments" refers to unpaid child
support under the old rules.
Under the new tax rules, that is, for agreements or court orders entered into after April 1997,
or pre-May, 1997 agreements or orders where the parties have jointly elected to have the new
tax rules apply, only spousal is eligible to be claimed as a deduction and then only when all
required child support payments have been made. In that context, Revenue Canada has
established a registry for new agreements or orders that call for spousal support only or ones
that call for both spousal and child support. Court orders or agreements that require child
support only are not required to be registered since child support under the new rules is
neither deductible by the payer nor included in the recipient's income.
The payer who has made potentially deductible arrears payments as well as current payments
will know by reference to his or her agreement or court order and its provisions for child
support, as to whether sufficient payments have been made to cover the current portion of
support. Revenue Canada, in the course of its verification program will have access to the
registry data when reviewing any claims for alimony and maintenance.
4.
An order or agreement that does not clearly differentiate spousal and child support is to be
treated as all child support. Is this intended even if the order is above the child support
guidelines amount and there is no mention of special expenses?
Based on the wording in the definition of "child support amount" in subsection 56.1(4) of
the Act, any support amount that is not identified in the agreement as being solely for a
recipient who is a spouse of the payer or who is a parent of a child of whom the payer is a
natural parent, will be considered to be for child support.
5.
In the above-mentioned situation would Revenue Canada accept an affidavit filedjointIy by
the parties to at least resolve this issue in consent orders?
It is our view, even if the two parties prepare an affidavit indicating that their intention was
not as set out in the court order, it would not affect the response in 4 above.
6.
Would Revenue Canada allow for a clerk ofthe court to affidavit or file endorsement from
court orders to prove the original intent of the parties in this situation?
- 29-
,
)
Consistent with the comments in 5 above, that action would not affect the response to 4
above.
7.
Payments to a third party will be presumed to be child support unless clearly identified as
spousal support. How will Revenue Canada know in these cases that a child is even
involved?
In reviewing any payer's claim for spousal support on his or her income tax return, reference
will be made to agreements or court orders in force at the time of the payments. New or
amended agreements or court orders entered into after April 30, 1997, or existing ones where
both parties have jointly elected to move to the new rules will be entered on Revenue
Canada's registry. Whether a child exists for whom support payments are required under the
agreement or court order should be evident from those documents.
8.
Where a provisional child support order was made in Province A before May 1, 1997, which
did not specify tax treatment and was confirmed in Province B after May 1, 1997 with
payment dates to start after May 1, 1997, do the new tax rules apply?
It is our general view that a court order is considered to have been made for the purposes of
the child support legislation on the day it commences to have legal force and effect. On the
basis that this day occurs after April, 1997 (being the "commencement day" as defined in
subsection 56.1(4) of the Act in respect of the order), the new tax rules would apply to
payments made in respect of a period that began after that day.
9.
Where a provisional support order was made in Province A before May 1, 1997 which did
not specify
treatment and was confirmed in Province B after May 1, 1997 with payment
dates to start as of the date ofthe provisional order (ie. before May 1, 1997), do the new tax
rules apply?
tax
Similar to 8 above, it is our view that there would be a commencement date after April 1997,
when the order has legal force and effect. The result is that the new rules would apply.
Under the formula in paragraph 56(1)(b) of the Act, only payments made in respect of a
period oftime that began after that day are excluded from income pursuant to the calculation
in "B".
In order to provide more definitive comments on other payments, the circumstances of a
particular factual situation would have to be reviewed.
- 30-
10.
Where a provisional order was made in Province A before May 1, 1997 which specified that
the order was made under the old rules and was confirmed in Province B after May 1, 1997
with paYment dates to start after May 1, 1997, do the new tax rules apply?
Based on reasoning set out in 8 above, there would be a commencement date after April 30,
1997 with the result that the new tax rules would apply to paYments made in respect of a
period of time that began after that day.
Question 11 is a duplicate of question 10.
12.
In a situation where an agreement or a court order is drafted (unsigned) by the end of
December 1998 with a least one paYment having been received prior to May 1, 1997 which
paYment is subsequently recognized in a court order or agreement, would the old tax
treatment of deduction/inclusion apply?
Since the agreement or court order will have legal force and effect after 1998, it is our view
that the old rules would not be applied pursuant to the provisions of subsections 56.1 (3) and
60.1 (3) ofthe Act even though there was a paYment made before May 1, 1997. In order for
the old rules to apply, the agreement or court order would have to be made before the end of
1998.
13.
Would a voluntary paYment made prior to May 1, 1997 qualify as the one paYment or would
this one paYment need to be made as a result of a documented consent between the two
parties?
It is the Department's view that the prior paYment provisions of subsections 56.1(3) and
60.1(3) of the Act could apply with respect to a voluntary paYment.
14.
If a judge makes an order effective on a date prior to May 1, 1997 and a paYment is made
covering a period prior to May 1, 1997 but is actually paid after May 1, 1997, would the old
tax treatment of deduction/inclusion still apply?
- 31 Department's Comments
On the basis that the order commenced to have legal force and effect on the day that it was
rendered (ie. after April 1997), it is our general view that the new rules would apply to
payments made in respect of a period of time that began after that day. As in 9, the
circumstances of a particular factual situation would have to be reviewed before more
definitive comments could be provided.
15.
Can you confirm whether or not a court order made by a judge before May 1, 1997 but issued
after May 1, 1997 is eligible for the old tax treatment?
The application of the old rules or the new rules in respect of the order would depend on
whether the order commenced to have legal force and effect (ie. when it was rendered) prior
to May 1997 or after April 1997. In order to determine this, each factual situation would
have to be carefully reviewed.
16.
In a situation where an existing consent order, separation agreement or family court order
made prior to May 1, 1997 and for which a payment has been received is then included in
a divorce judgment constitute a new order making this case ineligible for the old tax
treatment?
The issue is whether the divorce judgment can be considered to be an order made after April
1997 for the purposes of paragraph (a) of the definition of "commencement day" in
subsection 56.1(4) of the Act.
Whether we would regard the divorce judgment as having being made after April 1997 would
generally depend on the legal relationship between the divorce judgment and the consent
order, sepa~ation agreement or family court order. If the divorce judgment supersedes the
consent order, separation agreement or family court order that was made in respect ofsupport
on an interim basis, it is our view that the divorce judgment would be regarded as being an
order made after April 1997.
In the case of questions 17, 18, and 20 to 22, we have provided comments on the answers provided
to us and have provided a replacement for 19.
17.
)
Will the deduction for spousal and child support be allowed if all child support (that is
subject to the new rules) for the current year has been paid, but child and spousal support
arrears from previous years are outstanding?
- 32Answer - That depends on whether the support arrears were accumulated under the old or the
new rules. If all child support payable under the new rules is paid, Revenue Canada will
allow the deduction for other support payments (child support under the old rules or spousal
support).
We agree with the answer.
18.
Will it make a difference if the arrears are accumulated under an order dated prior to May
1, 19977
Answer - As long as child support subject to the new tax rules is paid in full, a payer can get
a deduction for child or spousal support under the old rules. If child support arrears were
subject to the new rules, they must be paid in full before any deduction for other support can
be made.
19.
Will Revenue Canada track child support arrears for this purpose?
The "purpose" mentioned in the question refers to the allowance as a deduction of spousal
support, or child support arrears under an old pre-May 1, 1997 agreement or order, only
when current child support has been fully paid up.
In reviewi~g claims for spousal support, or child support arrears arising from pre-May 1,
1997 agreements or orders. Revenue Canada must be satisfied that all child support
payments under the new agreement or order are fully paid. The onus is placed on the
individual to show that he or she is entitled to claim for alimony or maintenance. Reference
will be made to previously registered agreements and orders.
20.
Example 1: Under an order made after May 1, Tom is required to pay Mary $10,000 yearly
in child support and $5,000 yearly in spousal support. In 1998, Tom pays only $6,000; he
is therefore not allowed to make a deduction for spousal support for that year. However, in
1999, he pays Mary $12,000. Will Tom be allowed to deduct $2,000 as a spousal support
payment from his 1999 income despite the fact that he still owes Mary $4,000 in child
support from 1998?
- 33 -
Answer - Assuming that the order is not deemed to have been made earlier (ie. pre-May
payments - subsection 60.1 (3) of the Act), Tom cannot deduct any amount for spousal
support until he has paid all child support due under the new rules (1997, 1998, ...)
21.
Example 2: Under an order made in 1990, Tom was required to pay Mary $10,000 yearly in
child support and $5,000 yearly in spousal support. As of May 1, 1997 Tom owed $8,000
in arrears. On May 15, 1997, Tom and Mary elect to bring the existing child support order
under the new tax treatment. In 1998, Tom pays $15,000. Will Tom be allowed to deduct
$5,000 as spousal support payment from his 1998 income despite the fact that he still owes
Mary $8,000 in child support from previous years?
Answer - Assuming Tom paid all child support owing under the new rules in 1997 and that
the $8,000 in arrears was accumulated under the old rules. Tom can deduct the $5,000 as
spousal support or as child support under the old rules.
22.
Would a 1996 order that provides for an increase in child support as of September 1, 1997
to cover, for example, school expenses, come under the new tax treatment when the amount
to be paid under the order changes in accordance with the stated provisions?
Answer - No, if the mechanism is built into the order, there is no commencement date.
Consequently, if an order made on June 1, 1996 provides for child support in the amount of
$600 starting September 1, 1997, these payments continue under the old rules.
23.
What evaluation is Revenue Canada planning to assess the impact on taxation revenue and
the related impact for provinces and territories?
Revenue Canada does not currently have any plans to make such an evaluation.

child support guidelines tax implications

Transcription

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