Citation: 2006TCC650
Date: 20061207
Docket: 2005-4211(IT)I
BETWEEN:
INA GEFTER,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
O'Connor, J.
[1] The issue in this appeal is what deduction or deductions in the 2003 taxation year is the Appellant entitled to under paragraph 118(1)(d) of the Income Tax Act ("Act").
[2] The relevant provisions are:
118.(1) Personal credits - For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted an amount determined by the formula
A x B
where
A is the appropriate percentage for the year, and
B is the total of,
(d) dependants - for each dependant of the individual for the year who
(i) attained the age of 18 years before the end of the year, and
(ii) was dependent on the individual because of mental or physical infirmity, the amount determined by the formula
$8,466 - E
where
E is the greater of $4,966 and the dependant's income for the year, and
Paragraph 118(6) of the Act - Definition of "dependant"
118(6) Definition of "dependant" - For the purposes of paragraphs (d) and (e) of the description of B in subsection (1) and paragraph (4)(e), "dependant" of an individual for a taxation year means a person who at any time in the year is dependent on the individual for support and is
(a) the child or grandchild of the individual or of the individual's spouse or common-law partner; or
(b) the parent, grandparent, brother, sister, uncle, aunt, niece or nephew, if resident in Canada at any time in the year, of the individual or of the individual's spouse or common-law partner.
Paragraph 56(1)(u) of the Act - Social assistance amount to be included in income
56.(1) Amounts to be included in income for year - Without restricting the generality of section 3, there shall be included in computing the income of a taxpayer for a taxation year,
(u) social assistance [welfare] payments - a social assistance payment made on the basis of a means, needs or income test and received in the year by
(i) the taxpayer, other than a married taxpayer or a taxpayer who is in a common-law partnership who resided with the taxpayer's spouse or common-law partner at the time the payment was received and whose income for the year is less than the spouse's or common-law partner's income for the year, or
(ii) the taxpayer's spouse or common-law partner, if the taxpayer resided with the spouse or common-law partner at the time the payment was received and if the spouse's or common-law partner's income for the year is less than the taxpayer's income for the year,
except to the extent that the payment is otherwise required to be included in computing the income for a taxation year of the taxpayer or the taxpayer's spouse or common-law partner;
Paragraph 56(9) of the Act - Meaning of "income for the year"
56(9) Meaning of "income for the year" - For the purposes of paragraphs (1)(s) and (u), "income for the year" of a person means the amount that would, but for those paragraphs, paragraphs 60(v.1) and (w) and section 63, be the income of that person for the year.
Subsection 233(1) of the Regulations
233. Social assistance - (1) [Informal return] - Every person who makes a payment described in paragraph 56(1)(u) of the Act shall make an information return in prescribed form in respect of the payment.
. . .
[3] In 2003 the Appellant's father Issaak, born in 1932 and the Appellant's mother Kima, born in 1931 were dependants of the Appellant.
[4] The only income from which they benefited in 2003 was a social assistance payment of $9,056.15 paid by York Regional Services ("York").
[5] The Appellant's position is that the payment made by York was for the benefit of both her parents, notwithstanding that York issued a T5007 statement of benefits showing the Appellant's father Issaak as the recipient of the entire $9,056.15. Thus the Appellant on her return for 2003 attributed one half of that amount, i.e. $4,528.08, to each parent and claimed the paragraph 118(1)(d) deduction for both her parents.
[6] The Minister reassessed on the basis the entire payment belonged to Issaak and as Issaak did not meet the income test provided for in paragraph 118(1)(d), the Appellant's deduction in respect of Issaak was denied. The Minister considered further that the Appellant's mother, Kima, had zero income although no return was filed for her and thus the paragraph 118(1)(d) deduction by the Appellant was allowed only for her mother.
[7] The Appellant filed a letter of Yorkdated November 16, 2005, it reads as follows:
To Whom It May Concern:
November 16, 2005
RE: Issaak Rokhline Tax Form T5007 for Year 2003
The family of Issaak Rokhline and Kima Oulman was on our social assistance program in the year 2003.
In 2003 they have received the amount of $9056.15 in social assistance. The assistance was provided for the family of two people (Issak (sic) Rokhline and Kima Oulman). The amount was calculated based on the needs of family of two. The principal applicant was Isaak (sic) Rokhline. The full amount of social assistance was made payable to Issaak Rokhline.
Our reporting system works in the way that even the social assistance is provided for two people, we cannot issue separate T5007 tax forms for each individual in the family. We can only issue one T5007 per family on our assistance program.
York Region Social Services
[8] The T5007 Guide - Return of Benefits - prepared by the Canada Revenue Agency (CRA) lays down numerous rules as to who must file a T5007 statement of benefits. Amongst the many provisions of this Guide is one obliging the paying organization (i.e. York) to obtain the social insurance numbers of the persons entitled to receive social assistance.
[9] It should be noted that although paragraph 56(1)(u) of the Act includes a social assistance payment in income of the recipient, the amount is offset by the deduction contemplated in paragraph 110(1)(f). In other words the recipient/dependant is not taxed on the assistance. The only effect is on net income which can effect, amongst other things, the ability of another person, such as the Appellant, to claim the recipient as a dependant.
[10] No authorities have been submitted to me which bear on the issue raised in this appeal and I have been unable to find any. However, in my opinion the simple T5007 statement of benefits cannot be the end of the matter. In my opinion since the amount of the payment is calculated on the basis of the entitlement to social assistance by the two persons who are both parents of the Appellant and are dependent on the Appellant, it is both of them who receive the payment and in the present case in equal amounts as the Appellant has claimed.
[11] The only provision which results in the social assistance payment being attributed to the spouse with the higher income is paragraph 56(1)(u) combined with the effect of subsection 56(9) and that provision is not applicable because neither spouse had any income other than the social assistance payment from York.
[12] Consequently, the appeal from the reassessment made under the Act for the 2003 taxation year is allowed and the matter is referred back to the Minister for reconsideration and reassessment on the basis that the Appellant is entitled to the deduction the Appellant claimed on her return for both her parents under paragraph 118(1)(d) of the Act.
Signed at Ottawa, Canada, this 7th day of December, 2006 .
T. O'Connor
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