CRA taken to court after denying spousal support payments as tax deductible

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CRA taken to court after denying spousal support payments as tax deductible — via financialpost

This advertisement has not loaded yet, but your article continues below.If, on the other hand, the order or agreement is solely for the support of children, the payments are neither taxable to the recipient nor tax deductible to the payor, so there is no need to register the agreement with the CRA.

The case involved a taxpayer who got married in 2006, and legally separated on Dec. 8, 2010. In March 2011, the couple entered a separation agreement, signed by both parties. The couple chose to prepare the separation agreement on their own without using lawyers. In the section dealing with spousal support, the agreement stated: “Party 1 shall pay spousal support to party 2 in the amount of $3,500 monthly commencing Dec 8/10 and ending Dec 8/14.

The judge reviewed the 2011 separation agreement and called it “flawed from the outset.” He noted the signatures of the spouses were not witnessed, and there was a handwritten clause at the bottom of the contract stating the agreement was “subject to approval by legal counsel.” There was no indication such approval was ever obtained.Article content

The taxpayer took the position that the March 2011 separation agreement, despite not being properly updated after 2014, constituted an agreement in writing under which he made support payments in 2018.

 

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