22 October 1997 External T.I. 9712525 - CHILD SUPPORT AGREEMENT

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

General overview of the coming-into-force provisions relating to child support.

Position:

Basically confirmed that the information contained in an article was correct.

Reasons:

The article reflected the legislation.

971252
XXXXXXXXXX Jacques E. Grisé
(613)957-2059

October 22, 1997

Dear XXXXXXXXXX:

Re: Child Support Agreements

This is in reply to your letter of May 7, 1997 requesting our opinion on a portion of an article which appeared in the Financial Post on May 2, 1997, regarding child support payments.

The portion of the article that you are concerned with relates to the coming-into-force provision of the new tax rules that make child support payments non-deductible by the payer and not required to be included in income by the recipient (the new rules). Where the new rules do not apply, child support payments are generally deductible by the payer and required to be included in the income of the recipient (the old rules). The new rules normally apply to all child support amounts that became payable on or after the "commencement day" (defined by subsection 56.1(4) of the Income Tax Act) of an agreement or order. Usually, the commencement day of an agreement or order made after April 1997 is the day the agreement or order is made. Subsection 60.1(3) of the Income Tax Act provides for an exception to the commencement day of certain agreements or orders made after April 1997. The exception is dealt with in the Financial Post article and is of particular interest to you.

For payments made after 1996, subsection 60.1(3) of the Act provides that payments made in the year of the order or agreement or in the preceding year are deemed to be paid under the order or agreement if specific provision is made that they be so considered. In addition, for purposes of determining the tax treatment of child support payments made under the order or agreement, subsection 60.1(3) of the Act deems the order or agreement to be made on the day on which the first payment deemed to be paid under the order or agreement was made. If the first payment of such an agreement is made prior to May 1997, the old rules will apply to the child support payments unless there is a commencement day pursuant to paragraph (b) of the definition of "commencement day" in subsection 56.1(4) of the Act, such as where the parties elect to have the new rules apply or certain terms of the agreement or order are changed.

The article stipulates that it is possible to structure an agreement under the old rules until the end of 1998. This is as a result of subsection 60.1(3) of the Act only applying to a payment made in the year of the order or agreement or in the previous year. Accordingly, for purposes of subsection 60.1(3) of the Act amounts paid after 1996 and before May 1997 in respect of an order or agreement made after April 1997 or in 1998 could still be made subject to the old rules.

Furthermore, if an order or agreement is made after April 1997 and it varies a child support amount payable to the recipient from the last such amount paid to the recipient before May 1997, subsection 60.1(3) deems the order or agreement to have a commencement day which is the day on which the first payment of the varied amount is required to be made.

Subsection 56.1(3) of the Act mirrors the subsection 60.1(3) of the Act provisions from the recipient's position.

The question as to whether or not a payment between two parties is a child support payment is one of fact which can only determined by reviewing the evidence in support of a particular payment.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch