25 January 2005 External T.I. 2004-0093341E5 - Deductibility of Child Support Payments

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Whether child support payments, payable under a 1991 separation agreement, to a spouse after the child has attained the age of 18 will remain deductible?

Position: Question of fact, but likely yes.

Reasons: The 1991 separation agreement provides that a monthly amount will be paid to the former spouse for the maintenance, benefit, and support of their daughter for so long as the daughter remains a child of the marriage within the meaning of the Divorce Act. As it appears that there is no agreement or order to the effect that the daughter is no longer a child of the marriage, it appears that the child support payments will remain deductible based on the facts provided.

		2004-009334
XXXXXXXXXX 	Karen Power, CA
(613) 957-8953
January 25, 2005

Dear XXXXXXXXXX:

Re: Child Support Payments

We are writing in reply to your letter requesting our views on whether child support payments to your spouse after your daughter has attained the age of 18 (the age of majority in Ontario) will remain deductible.

You have provided us with a copy of your separation agreement, which is dated XXXXXXXXX , 1991. Article XXXXXXXXXX of the agreement provides that you are required to pay a monthly amount to your spouse for the maintenance, benefit, and support of your daughter "for so long as she remains a child of the marriage within the meaning of the Divorce Act". You indicate that your daughter will turn 18 at the end of February 2005, and she will graduate from high school in June and go to university in the fall of 2005.

It is our understanding that you and your spouse have not jointly elected to have the child support payments payable on and after a specified date be not taxable and not deductible. In addition, we have assumed that the 1991 agreement is still in effect (i.e. it has not been superseded by any other agreement or order (including a divorce order)), it has not been varied and there have been no subsequent orders or agreements relating to child support. If there are any other orders, agreements or variations our response may differ.

Our Comments

The particular circumstances in your letter on which you have asked for our views involve factual situations concerning specific taxpayers. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. If your situation involves a completed transaction, you should submit all relevant facts and documentation to the appropriate tax services office for their views. However, we are prepared to offer the following general comments, which may be of assistance.

Paragraph 60(b) of the Income Tax Act (the "Act") provides the formula for determining the amount a payer may deduct for support amounts paid in a taxation year. The formula is A - (B + C)

where:

A. is the total of all support amounts paid after 1996 and before the end of the year by the payer to the recipient, where the payer and the recipient were living separate and apart at the time the support amount was paid;

B. is the total of all child support amounts payable by the payer to the recipient under an order or agreement on and after its commencement day and before the end of the year, for a period that began on or after its commencement day; and

C. is the total of all support amounts paid by the payer to the recipient after 1996 that were deductible in computing the payer's income for a preceding year.

If the court order or written agreement does not have a "commencement day" as defined in subsection 56.1(4) of the Act, the effects of the formula in paragraph 60(b) are to render the support amounts paid under the order or agreement deductible by the payer. It is our understanding based on the information provided that your separation agreement has no "commencement day" (for further information on the term commencement day, see paragraphs 7 and 8 of Interpretation Bulletin IT-530R at www.cra-arc.gc.ca/formspubs/type/menu-e.html).

Consequently, in order for an amount to be deductible under paragraph 60(b) of the Act, it must, inter alia, meet the definition of "support amount" in subsection 56.1(4) of the Act. A "support amount" is defined in that subsection as 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 common-law partner or former spouse or common-law partner of the payer, the recipient and payer are living separate and apart because of the breakdown of their marriage or common-law partnership 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 laws of a province.

Thus it is necessary to determine whether amounts paid to your spouse for the maintenance of your daughter after she has reached 18 years of age are payable under your separation agreement (i.e. Article XXXXXXXXXX noted above). This determination is dependent on whether your daughter is a "child of the marriage" as defined in the Divorce Act of Canada. A "child of the marriage" is defined in the Divorce Act of Canada in part as: "a child of two spouses or former spouses who, at the material time,...is...under their charge but unable, by reason of illness, disability or other cause, to withdraw from their charge or to obtain the necessaries of life."

As observed in the case of Colbert v. The Queen, 2004 DTC 3300, at page 3309, determining whether a child is a "child of the marriage" is not an easy task:

"However, the issue of whether one remains "a child of the marriage" in accordance with the Divorce Act can be a tricky issue to resolve and will - in most cases, barring consent - require a decision by a competent tribunal.

[...]

In Kovarik, supra [2001 DTC 3716], Judge Bowman expressed the opinion the Divorce Act does not support unilateral cessation of child support payments once a "child of the marriage" as defined therein reaches the age of majority. A review of jurisprudence tends to support the view that to accomplish that end, the law requires either an agreement between the spouses or an order of a court of competent jurisdiction....It is apparent the courts will consider many factors in order to determine whether a child remains "a child of the marriage" within the definition (see: Van de Pol v. Van de Pol, (1996) 179 A.R. 221; (1996) 20 R.F.L. (4th) 178 and Kushnir v. Kushnir, (2001) 21 R.F.L. (5th) 90)."

Accordingly, in our view, whether a child is a "child of the marriage", as defined in the Divorce Act of Canada, is a question of fact that can only be resolved by a further agreement or court order to that effect. As it appears that there is no agreement or order to the effect that your daughter is no longer a child of the marriage, and based on the above facts and assumptions, it appears that the child support payments that you will continue to make to your spouse under the terms of your separation agreement will remain deductible by you.

Yours truly,

Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch