10 October 2001 External T.I. 2001-0097735 - EQUIVALENT TO SPOUSE CREDIT

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 CCRA.

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

Principal Issues:

Taxpayer paid child support to estranged spouse in respect of children from XXXXXXXXXX . The obligation to pay child support ceased on XXXXXXXXXX , when the children began living with taxpayer. Can taxpayer claim Amount for an Eligible Dependent (formerly equivalent-to-spouse) in respect of one of the children?

Position TAKEN:

Question of fact. No, if taxpayer and spouse (or former spouse) were living separate and apart throughout the year or if a deduction was claimed under section 60 in respect of the spouse of former spouse.

Reasons:

Subsection 118(5). Previous opinions.

XXXXXXXXXX 		2001-009773
T. Young, CA
October 10, 2001

Dear XXXXXXXXXX:

Re: Equivalent-to-Spouse Credit

This is in reply to your letter of August 15, 2001, concerning the equivalent-to-spouse credit. We also acknowledge our telephone conversations (Young/XXXXXXXXXX ) of September 27 and 28, 2001.

In your letter you stated that, prior XXXXXXXXXX, you were paying child support to your estranged wife for your three children who were living with her. Beginning on XXXXXXXXXX, the children began living with you and the obligation to pay child support ceased. You also stated that you continued to pay her a monthly amount in respect of your pension and that this obligation would cease on XXXXXXXXXX.

In a letter from the Preassessment Review Unit dated July 3, 2001, the Canada Customs and Revenue Agency (CCRA) denied your claim for the equivalent-to-spouse credit in 1999. The reason given was: "You cannot claim this amount for a dependant for whom child support payments were made".

In your view, you should be able to claim the equivalent-to-spouse credit in 1999 because the children were living with you from XXXXXXXXXX, and you were not required to pay child support for your children throughout that period. In support of your position, you refer to the General Income Tax and Benefit Guide for 1999, which states

You may be able to claim an equivalent-to-spouse amount if, at any time in the year, you were single, divorced, separated, or widowed and, at that time, you supported a dependant ...

and

You cannot claim this amount if any of the following applies ... The claim is for a child for whom you were required to make support payments.

In your view, because you were not required to make support payments from XXXXXXXXXX, when the children were living with you, you should be eligible to claim the equivalent-to-spouse credit.

Our Comments

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R4, Advance Income Tax Rulings, dated January 29, 2001.

The guides issued by the CCRA attempt to provide accurate information on common income tax situations to enable individuals to file accurate income tax returns. The restriction on claiming the equivalent-to-spouse credit when child support is payable is found in subsection 118(5) of the Income Tax Act (the "Act"). For 1999, subsection 118(5) stated:

(5) No amount may be deducted under subsection (1) in computing an individual's tax payable under this Part for a taxation year in respect of a person where the individual is required to pay a support amount (as defined in subsection 56.1(4)) to the individual's spouse or former spouse in respect of the person and the individual

(a) lives separate and apart from the spouse or former spouse law partner throughout the year because of the breakdown of their marriage; or
(b) claims a deduction for the year because of section 60 in respect of a support amount paid to the spouse or former spouse.

Pursuant to subsection 118(5), if the spouses or former spouses lived separate and apart throughout the year because of the breakdown of their marriage, the equivalent-to-spouse credit could not be claimed in respect of a child, if the taxpayer was required to pay child support in the year for that child. Our position is supported by the Technical Notes released by the Department of Finance in conjunction with the 1996 amendment to subsection 118(5). Since you made child support payments for your children for eight months in the year, in our view, you are unable to claim the equivalent-to-spouse credit for 1999. In order to be able to claim the credit, the law would have to be changed.

As per our telephone conversation (Young/XXXXXXXXXX) of September 27, if you wish to file a Notice of Objection with respect to the reassessment of your 1999 taxes, it must be filed within 90 days of the date we mailed the reassessment. You can find more information in our brochure, "P148, Your Appeal Rights Under the Income Tax Act", which you can obtain from our web site at http://www.ccra-adrc.gc.ca/E/pub/tg/p148eq/README.html. As you requested in our conversation (Young/XXXXXXXXXX) of September 28, we will also forward your letter of August 15 to the Chief of Appeals at the XXXXXXXXXX Tax Services Office.

We trust our comments will be of assistance to you.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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