21 April 1994 Internal T.I. 9400177 - FAMILY ALLOWANCE RECEIVED IN 1993

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.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Family allowances payments were received in 1993 although they relate to the 1991 and 1992 taxation years. In which year(s) are they to be reported?

Position TAKEN:

The payments are to be reported in the years to which they relate (i.e., 1991 and 1992).

Reasons FOR POSITION TAKEN:

The treatment is in accord with the wording of the Income Tax Act. It is also consistent with a position the Department previously took.

		April 21, 1994

	Sudbury District Office	Head Office
	Carmen Menard	Rulings Directorate
	Client Assistance Division	M. Eisner
		957-8953
		940017

Family Allowance Benefits Received in 1993

This is in reply to your memorandum of January 5, 1994 concerning the above-noted subject.

In the situation you asked us to consider, an individual received family allowance benefits in 1993 which relate to the 1991 and 1992 taxation years. As it appears that the individual is of the view that the benefits are subject to tax in the 1993 taxation year on the basis that the benefits were received in that year, the Sudbury District Office (DO) contacted Head Office (Client Assistance Directorate) personnel for their views. In this regard, the DO was advised that the benefits in question should be included in the taxpayer's 1992 income. As this treatment of the benefits was not acceptable to the individual, you asked us for our comments on this issue.

In the comments that follow, unless otherwise stated, all statute references are to the Income Tax Act S.C. 1970-71-72, c.63 as amended, consolidated to June 10, 1993 (the "Act").

Our comments in respect of your situation are as follows:

(a)It seems that it may have been indicated to the DO that the family allowance benefits could be included in the individual's income for 1992 under paragraph 56(7)(b) of the Act on the basis that this is a "catch all" provision. In relation to this comment, it is our view that paragraph 56(7)(a), paragraph 56(7)(b) and subsection 56(6) of the Act comprise a set of rules for the purposes of determining the taxpayer in whose hands family allowance benefits are to be taxed.

(b)(i) In order for benefits to be taxable in a taxation year or years prior to 1993, it is our view that they must be described in subsection 56(5) with respect to such a year and that, for this to occur, family allowance benefits must not be subject to tax on a received basis. In connection with these comments, subsection 56(5) provides that "an individual who is deemed by subsection (6) or (7) to have supported in a particular month of a taxation year a person in respect of whom a family allowance ... is paid for the particular month shall include in computing his income for the year an amount of such an allowance received ...". As a consequence of this wording, it is our view that the timing of the receipt of family allowances benefits is not a relevant consideration in determining the year (or years) in which they are to be subject to tax. Rather, the key consideration is the year to which the benefits relate regardless of when they are paid. It is also our view that even though subsections 56(5) to (7) of the Act were repealed for 1993 and subsequent years, family allowance benefits are required to be included in income as long as they relate to taxation years that are prior to 1993. Of course, the provisions of section 180.2 would also be applicable to such benefits for the particular year involved.

(ii) As a consequence of the above comments, the benefits in the situation provided to us that relate to the 1992 taxation year would be included in the income for that year of an individual as determined by subsections 56(6) and (7). Similarly, the benefits that relate to the 1991 taxation year would be included in the income of an individual for that year.

Should further assistance be required, we would be pleased to provide our views.

P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch

cc: Assessment of Returns Directorate
Client Assistance Directorate