Here is a clause in my Court Order:
"The sum of $XX,XXX, payable on or before MMM-DD-YYYY. This Amount shall be included in the Applicant's income and shall be deducted from the Respondent's income for income tax purposes pursuant to sub-sections....of the Income Tax Act."
"The Respondent shall indemnify and save the Applicant harmless with respect to any income tax that she is obligated to pay as a result of the spousal support payment of $XX,XXX as set out in section (above)."
"The Applicant and Respondent shall exchange any supporting documentation necessary to substantiate the tax amount owing by the Respondent to the Applicant"
I am the respondent and have paid the amount as per the Court Order and have claimed it as a deduction, which the CRA accepted.
We are now having a dispute as to the actual tax amount owing to my ex (Applicant):
She claims that as a result of the lump sum payment, it increased her overall taxable income that pushed her into a higher tax bracket, and therefore I owe all her tax owing amount for 2018. She sent me her tax return without the lump sum and one with. She then looked at the tax differences between her two returns and claims I owe that amount...rather sizable portion.
My lawyer and I disagree. We both believe that all I need to indemnify her from is the tax that is owed ONLY on the lump sum amount. In other words, take her average overall tax rate and multiply the lump sum payment by the tax rate and I have the tax amount owing...which is considerably less.
My lawyer said the language was very standard for this clause and is always meant to pay the tax amount ONLY for the lump sum.
who is right in this case? Thought I would ask the experienced folk on this board...and thanks.
"The sum of $XX,XXX, payable on or before MMM-DD-YYYY. This Amount shall be included in the Applicant's income and shall be deducted from the Respondent's income for income tax purposes pursuant to sub-sections....of the Income Tax Act."
"The Respondent shall indemnify and save the Applicant harmless with respect to any income tax that she is obligated to pay as a result of the spousal support payment of $XX,XXX as set out in section (above)."
"The Applicant and Respondent shall exchange any supporting documentation necessary to substantiate the tax amount owing by the Respondent to the Applicant"
I am the respondent and have paid the amount as per the Court Order and have claimed it as a deduction, which the CRA accepted.
We are now having a dispute as to the actual tax amount owing to my ex (Applicant):
She claims that as a result of the lump sum payment, it increased her overall taxable income that pushed her into a higher tax bracket, and therefore I owe all her tax owing amount for 2018. She sent me her tax return without the lump sum and one with. She then looked at the tax differences between her two returns and claims I owe that amount...rather sizable portion.
My lawyer and I disagree. We both believe that all I need to indemnify her from is the tax that is owed ONLY on the lump sum amount. In other words, take her average overall tax rate and multiply the lump sum payment by the tax rate and I have the tax amount owing...which is considerably less.
My lawyer said the language was very standard for this clause and is always meant to pay the tax amount ONLY for the lump sum.
who is right in this case? Thought I would ask the experienced folk on this board...and thanks.
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