January 2019 Newsletter

Spousal support payments were “periodic” and therefore deductible

Spousal support payments are deductible for the payer of the support if certain conditions are met. For example, the payments must be made pursuant to a court order or written agreement, and normally they must be made “on a periodic basis”.

In the recent Ross case, the taxpayer made payments to his former spouse. Although most of the conditions for deductibility were met, the CRA denied the deduction on the grounds that the taxpayer’s payments were not made on a periodic basis.

The taxpayer made five instalments payments to his former spouse: a lump sum of $20,000 on the signing of their separation agreement in November 2015; the transfer of a car (a payment-in-kind) worth $20,000 in December 2015; and three further payments in December 2016 of $4,000, $3,000 and $3,000. Apparently, the reason the payments were all made near the end of the years, rather than throughout the years, was because Mr. Ross did seasonal work as a lobster fisherman. His income generally peaked in the fall and early winter.

On appeal to the Tax Court of Canada, the Tax Court judge held that the CRA misapplied the meaning of “periodic basis” to the facts. There were a series of payments made over two years as set out in the separation agreement, and therefore could qualify as being periodic.

Last modified on January 15, 2019 12:00 am
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