In a June 21, 2017 Tax Court of Canada case (Lawson vs. H.M.Q., 2015-3474(IT)I), at issue was whether the wholly dependent credit could be claimed where only one party was providing a cheque which represented the net of each party’s child support liability.Where both parties are required to pay, either may claim the credit (Subsection 118(5.1)). At issue was whether the agreement, in fact, created two obligations to pay or just one.
In a June 21, 2017 Tax Court of Canada case (Lawson vs. H.M.Q., 2015-3474(IT)I), at issue was whether the wholly dependent credit could be claimed where only one party was providing a cheque which represented the net of each party’s child support liability.Where both parties are required to pay, either may claim the credit (Subsection 118(5.1)). At issue was whether the agreement, in fact, created two obligations to pay or just one.
Taxpayer wins
While the Court expressed concern that minor wording differences in an agreement could cause a credit to be available or not, the Court determined that in this situation there truly was an obligation on each person’s part. As such, the credit was allowed.
Specifically, the Court noted: “..where a separated couple rely on CRA commentary suggesting there can be one cheque for convenience sake, where the couple draft their agreement with the intention to create mutual requirements to pay, where the net payment is not based solely on the Guidelines but represents an obligation of one side to make payments towards travel expenses of the other and where a subsequent written agreement is accepted by the CRA while not altering the prior agreed-upon arrangement, I am prepared to interpret the separation agreement as creating two obligations and not simply a means of calculating one support payment.”
The Court also gave particular credence to minutes of the settlement that stated precisely the gross amount that each party should pay. For specific excerpts from the settlement agreement, see the Ruling.
