Annual lump sum spousal support was deductible
In order for spousal support payments to be deductible for the payer, the payments must normally be payable on a periodic basis (there are other requirements). A lump sum is often not deductible.
In the recent Ken Blue case, the taxpayer and his spouse agreed that the taxpayer would pay her $1,000 per month of spousal support for five years. They subsequently agreed that the taxpayer could pay her a lump sum of $12,000 at the end of each year in full satisfaction of the original amounts. The taxpayer attempted to deduct the $12,000 payment in the year at issue. The CRA denied the deduction on the grounds that the $12,000 annual lump sums were not periodic in nature but rather in the nature of a capital non-deductible lump sum.
On appeal to the Tax Court of Canada, the Court sided with the taxpayer and allowed the deduction. Even though each annual payment effectively released the taxpayer from paying the originally agreed-upon $1,000 per month, the Court felt that, after examining the “true nature” of the payments, they were periodic in nature and otherwise fulfilled the criteria of deductible support payments.