SPOUSAL SUPPORT OR PROPERTY SETTLEMENT?

In a February 16, 2015 Tax Court of Canada case (Cathryn McBride vs. H.M.Q., 2014-2631(IT)I)), the taxpayer had been assessed tax on monthly payments on the basis that they were spousal support.

Taxpayer loses
Even though the Order listed the payments as non-taxable, the Court determined that they were actually monthly support payments instead of equalization payments. The payments met all the requirements of taxable support payments (Paragraph 56(1)(b) and Subsection 56.1(4)). Neither the parties nor the Courts could dictate the taxability of these payments – their tax status was governed by the Income Tax Act.

For further information see VTN Monthly Tax Update Seminar, Issue No. 404