Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Are payments received by a spouse for personal care of the ill person taxable?
Position: Question of fact.
Reasons: Tax Court of Canada (Informal Procedure) decision in Maurice v. The Queen [2002] 1 TCC 2172 and Pellerin v. The Queen 2008 DTC 3210.
XXXXXXXXXX
2013-048542
Maryann Hikspoors
April 25, 2014
Re: Payments to Spouse for Attendant Care
Dear XXXXXXXXXX:
This is in response to your correspondence dated April 9, 2013, concerning the tax treatment with respect to the various payments made to a common law spouse pursuant to the Income Tax Act ("Act"). We are sorry for the delay in responding to your correspondence.
More specifically, you have described the situation as follows:
1. Mr. X has been struggling with XXXXXXXXXX and was declared incapable of taking care of himself in XXXXXXXXXX.
2. Mr. X prepared a Mandate in the province of Quebec in XXXXXXXXXX appointing his three daughters, D1, D2 and D3, as well as his common law spouse to be the mandators responsible for his personal care and finances.
3. The Quebec court homologated the Mandate in XXXXXXXXXX with a consent agreement between the mandators concerning their rights and responsibilities following Mr. X's incapacity.
4. Mr. X moved into XXXXXXXXXX care facility in XXXXXXXXXX in XXXXXXXXXX at the direction and choice of his common law spouse, who resides in XXXXXXXXXX and assists with the personal care and needs of Mr. X.
5. D1, D2 and the late D3 all reside in XXXXXXXXXX. D1 is responsible for administering Mr. X's financial affairs.
With respect to the described situation, you would like to know the tax treatment of the following three payments to Mr. X's common law spouse:
a. A car allowance based on the number of kilometers driven to attend to Mr. X's needs.
b. A monthly amount of $XXXXXXXXXX starting XXXXXXXXXX for Mr. X's common law spouse's accommodation expenses.
c. An annual payment of $XXXXXXXXXX for various expenses incurred as well as a reasonable indemnity for the time spent with Mr. X.
Our Comments
This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.
With respect to your situation, we cannot provide any comments regarding the legal effects of the mandate, the nature of the amounts paid or whether the mandate is governed by articles 2130 and following of the Civil Code of Quebec.
The basic rules for income computation are set out in section 3 of the Act. Specifically, section 3 of the Act requires a taxpayer to include in income all amounts from a source that is an office, employment, business or property or any other source.
The Act does not specifically define the concept of business. However, subsection 248(1) specifies the following various activities that are included in the concept:
A "business" includes a profession, calling, trade, manufacture or undertaking of any kind whatever and,
, an adventure or concern in the nature of trade but does not include an office or employment.
A fee earned for the administration of an estate by an executor thereof will be treated either as income from a business or income from an office, depending on the particular circumstances of each case. Fees earned by a taxpayer for acting in the capacity of executor in the course of business form part of the business income of the taxpayer, and expenses incurred in this regard are deductible in the usual way in computing such income, to the extent they are not recoverable from the funds of the estate. When the executor is a person who does not act in this capacity in the course of carrying on a business, the fee for acting as executor is considered to be income from an office or employment.
Although a guardian is not an executor, it is reasonable to assume, by analogy, that payments made to a guardian would generally receive the same treatment for tax purposes. The duties of a guardian and of an executor are similar.
When the amount received is considered income from employment, a T4 must be prepared with the applicable source deductions. When the amount is considered income from business, a T4A is generally prepared.
We would like to bring to your attention two Tax Court of Canada ("TCC") decisions which concluded that amounts received for the services rendered by a mother for her child did not have to be included in income. In Lise Pellerin v. Her Majesty the Queen, [2006] DTC 3341, the son of the Appellant was a victim of a major accident and received an allowance for homecare from the Société d'assurance automobile du Québec ("SAAQ"). Her son paid her for the care and attention that she gave him due to a significant and permanent partial disability. In paragraph 19 of the reasons, Justice Tardif stated the following:
"This was in no way a business relationship or even an employment contract. The affection stemming from the parental bond was the primary and fundamental reason for the relationship. The notion of profit was non-existent and there was no relationship of subordination."
In Maurice v. The Queen, [2002] 1 CTC 2172, Justice Tardif stated at paragraph 28 that:
"
the appellant was not an employee, since she was completely independent in the way she did her work, worked in her own environment with her own tools and was not in any way part of a third party's business. Nor was the appellant an independent contractor within the meaning of the case law, mainly because, although she acted independently in performing her work, she was not free to organize her time as she saw fit due to her daughter's specific and continuous needs and because her alleged potential profit was fixed in advance and in no way depended on her own efforts."
Justice Tardif then concluded that the personal home care assistance payments received by the mother from the SAAQ were not taxable as employment, business income or otherwise.
Thus, as a general rule, the Canada Revenue Agency's ("CRA") position is that amounts that a parent or spouse receives to take care of a child or a spouse represents taxable income for the year from an office, employment or business. However, for situations similar to the cases noted above, the CRA's position is that the amounts do not have to be included in income. It is not clear to us whether the situation described is sufficiently similar to those situations.
We trust that these comments have been of assistance.
Yours truly,
Stéphane Charette CPA, CMA, MBA
Acting Manager
Business and Employment Division
Income Tax Rulings Directorate
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