The CRA was asked about the deductibility of support payments paid to a former spouse where the taxpayer made unscheduled catch–up payments. The taxpayer was making monthly support payments under the terms of an agreement, but each monthly payment was for less than what was required under the agreement. Throughout the year the taxpayer would make more than one unscheduled lump-sum payment so that by the end of the year he would have met the requirements of the agreement. Since the payments were lump-sum catch-up payments, it was unclear if they met the deductibility test.
The CRA noted that the term “support amount” is defined in the Income Tax Act and must meet the following conditions:
• The amount is payable or receivable as an allowance on a periodic basis.
• The amount is for the maintenance of the recipient, the children of the recipient, or both.
• The recipient has discretion as to how the amount is used.
• The recipient is the payer’s current or former spouse or common-law partner, the recipient and the payer are living separate and apart because
of a breakdown of their relationship, and the amount is receivable under an order of a competent tribunal or under a written agreement, or if the
recipient is the parent of a child of whom the payer is also the parent, the amount is receivable under an order of a competent tribunal within the laws of a province or territory.
The CRA also stated that in this case the lump-sum payments were not periodic payments paid under an agreement, but were lump-sum payments representing periodic payments that had fallen into arrears. As such, the lump-sum payments would qualify as support payments and, if other conditions were met, would qualify for the support payment deduction.
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