7 February 2002 External T.I. 2001-0113305 - FUNDING FOR CARE OF ADULT CHILD

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:

Tax treatment of funds received to care for disabled adult child.

Position TAKEN:

Question of fact. General information provided. Will re-examine upon submission of additional information.

Reasons:

Insufficient information provided.

XXXXXXXXXX 2001-011330
T. Young, CA
February 7, 2002

Dear XXXXXXXXXX:

Re: Income Tax Treatment of Amounts Received to Provide for Your Adult Child

This is in reply to your letter dated November 27, 2001, requesting our comments on the application of paragraph 81(1)(h) of the Income Tax Act (the "Act"). We also acknowledge our telephone conversations (Young/XXXXXXXXXX) of February 4, 2002.

In your letter, you explained that your daughter, who will soon be 18, is mentally and physically disabled and needs total care. In our discussions, you indicated that you will be receiving funding to care for your daughter in your home. The funding will be received directly from the local board of the Persons with Developmental Disabilities (PDD) program. You have asked if the funds will be taxable to you.

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. It would also be necessary to review all relevant documentation before a definitive determination of the tax implications could be made. Therefore, we can only provide the following general comments.

Paragraph 81(1)(h) of the Act excludes certain social assistance payments from the income of a taxpayer, who is an individual, if all of the conditions set out in the paragraph are met. One of the conditions that must be satisfied is that the cared-for individual cannot be the caregiver's spouse or common-law partner or be related to the caregiver or the caregiver's spouse or common-law partner. Since you will be receiving the funds to care for your daughter, paragraph 81(1)(h) will not apply.

Amounts received for providing in-home care for an adult child may be employment or business income, social assistance under paragraph 56(1)(u) of the Act, a reimbursement of medical expenses, or may fall outside the taxing provisions of the Act completely. You indicated that you will submit to us, by facsimile, details of your contract or proposed contract with the PDD Board along with information detailing the eligibility requirements for the program. As the information will likely not be available until April, we will close our file until we receive the additional information.

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
Policy and Legislation Branch

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