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: A written agreement dated XXXXXXXXXX , requires the father of the children to pay $XXXXXXXXXX per month in child support. A divorce judgment dated XXXXXXXXXX , requires that the father pay child support of $XXXXXXXXXX per month in addition to $XXXXXXXXXX per month for additional expenses (child care, extracurricular activities) of the children. Pursuant to the Divorce Judgment, the mother has to pay $XXXXXXXXXX per month to the father for additional expenses (child care, extracurricular activities and medical and dental coverage premiums) of the children. The net amount paid for child support by the father is still $XXXXXXXXXX per month (XXXXXXXXXX ). The parents have joint custody of the three children. Has the amount of child support been varied? Is the Divorce Judgment considered to be a court order made after April 1997?
Position: Yes, the Divorce Judgment is considered to be a court order made after April 1997 and paragraph (a) of the definition of "commencement day" in subsection 56.1(4) applies. Whether the child support amount has been varied is not relevant since subparagraphs (b)(i) to (iv) of the definition of "commencement day" in subsection 56.1(4) of the Act do not apply to this particular situation.
Reasons: Paragraph (a) of the definition of "commencement day" in subsection 56.1(4) states that where an agreement or order is made after April 1997, the commencement day of the agreement or order is the day it is made. As the Divorce Judgment supersedes the pre-May 1997 written agreement, it is an order made after April 1997. In this particular case, subsections 56.1(3) and 60.1(3) do not apply. There is no indication from the wording of the court order that the written agreement is incorporated into the court order or that the payments made prior to the court order are deemed to be made pursuant to the court order.
September 23, 1998
Sally Mennie HEADQUARTERS
Problem Resolution G. Moore
Room 150 952-1506
Calgary Taxation Service Office
7-982389
Child Support Payments - Definition of "Commencement Day" in Subsection 56.1(4)
We are writing in reply to your memo of September 11, 1998, in which you asked for our opinion concerning whether there is a commencement day (as defined in subsection 56.1(4) of the Income Tax Act (the "Act")) for the Divorce Judgment XXXXXXXXXX
As we understand the situation, a written agreement (the "Agreement") dated XXXXXXXXXX, between the above-mentioned individuals, indicate that commencing XXXXXXXXXX was required to pay $XXXXXXXXXX per month per child (XXXXXXXXXX per month) in child support to XXXXXXXXXX. Paragraph XXXXXXXXXX of the Agreement indicates that the parties acknowledge and agree that the child support is intended to be deductible and taxable under the Income Tax Act and that in the event of a change in legislation, the tax deductibility of the child support is reduced or eliminated, the child support amount is reviewable by the parties and amended to an amount agreed upon by the parties or as determined by the court. Paragraph XXXXXXXXXX of the Agreement also indicates that the parties understand that the terms of the agreement with respect to support are subject to the approval of the court when the Divorce Judgment is granted. Paragraph XXXXXXXXXX of the Agreement states that both parents shall jointly share the parenting of the children and that the amounts of time the children spend residing with each parent shall be equal.
XXXXXXXXXX
According to the Divorce Judgment, the child support is payable on the first day of each month commencing on the first day of the month immediately following the granting of the Divorce Judgment. The Divorce Judgment also indicates that both parents have joint custody of the children and that the amounts of time the children spend residing with each parent shall be equal. There is no indication in the wording of the Divorce Judgment that the Agreement has been incorporated into the Judgment.
As you know, the basic thrust of the new child support provisions is to eliminate both the requirement to include child support in the custodial or recipient parent's income and the deduction available to payers of child support. Generally, the new rules apply to agreements or court orders made after April 1997. However, by virtue of the definition of "commencement day" in subsection 56.1(4) of the Act, the new rules apply to child support amounts paid under the terms of an agreement or order made before May 1997 if:
1. the parties both sign and file an election with the Department agreeing that the new tax rules will apply to the existing order or agreement after a specified date (no earlier than May 1, 1997),
2. the parties change the child support amounts payable to the recipient by amending the agreement or court order after April 1997,
3. another agreement or order is made after April 1997 and the effect of the subsequent agreement or order is to change the total child support amounts payable to the recipient by the payer, or
4. the order or agreement specifically provides that the new tax rules will apply after a specific date (no earlier than May 1, 1997).
For a court order made after April 1997, the "commencement day" would be the day the court order is made. Whether we would regard the Divorce Judgment as having been made after April 1997 would generally depend on the legal relationship between the Divorce Judgment and the Agreement. Based on a review of the information you have submitted to us, since the Divorce Judgment supersedes the Agreement, it is our view that the Divorce Judgment would be regarded as being an order made after April 1997 and paragraph (a) of the definition of "commencement day" in subsection 56.1(4) of the Act applies to the Divorce Judgment. The commencement day of the Divorce Judgment is XXXXXXXXXX, and accordingly, the new child support rules apply to child support amounts payable or receivable, as the case may be, under the Divorce Judgment on or after its commencement day. Pursuant to paragraphs 56(1)(b) and 60(b) of the Act, the effect of this is that it eliminates both the requirement to include child support amounts receivable after the commencement day of the court order in XXXXXXXXXX income and the deduction available to XXXXXXXXXX for child support payable after the commencement day of the Judgment. Whether the child support amount payable of $XXXXXXXXXX per month has been varied is not relevant since subparagraphs (b)(i) to (iv) of the definition of "commencement day" in subsection 56.1(4) of the Act are not applicable in this situation.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Department's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version or they may request a copy severed using the Privacy Act criteria which does not remove client identity. Requests for this latter version should be made by you to Jackie Page at 613 957-0682. The severed copy will be sent to you for delivery to the client.
We trust our reply will be of assistance in this matter.
J. Wilson
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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