21 March 2003 External T.I. 2002-0173045 - TRANSFER OF DISABILITY TAX 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: Whether a parent can continue to claim the disability tax credit transferred from a child under 18 where the child lives away during the week with a caregiver who receives a special allowance under the Children's Special Allowances Act.

Position: The credit may be transferred if the child is dependent on the parent for support - which is a question of fact in each case.

Reasons: Although the child may be dependent on the caregiver, the child may also be dependent on the parent.

2002-017304
XXXXXXXXXX B.G. Dodd
(613) 957-8953
March 21, 2003

Dear XXXXXXXXXX:

Re: Disability Tax Credit

We are writing in reply to your e-mail message of November 7, 2002.

You advise that you and your husband have a XXXXXXXXXX year old daughter in respect of whom you have, in past years, been claiming the disability tax credit. Your daughter is now residing in another town during the week while she attends school and is in the care of a family that is paid by Resources for Children with Disabilities. That family is applying for a Children's Special Allowance in respect of your daughter and as a result, you will no longer receive the Child Tax Benefit. You enquire whether you will continue to be able to claim the disability tax credit on your income tax return in respect of your daughter given that your home is her permanent address, you and your husband are her legal guardians, she has a bedroom in your home, you manage her medical appointments, school decisions, clothing and medications. You also advise that no one else will claim the disability tax credit.

As discussed with you, we are unable to provide you with the specific confirmation that you are requesting. Eligibility for the disability tax credit in any particular situation depends on upon all of the specific facts involved and claims are subject to review by the local tax services office. We can, however, provide you with the following general comments.

A parent may claim a child's unused disability tax credit if certain requirements set out in subsection 118.3(2) of the Income Tax Act are met. Generally, a child's unused disability tax credit may be claimed by a parent in a year if the parent was entitled to claim certain other tax credits in respect of the child for the year, or would have been so entitled if the assumption is made that the child's income for the year was nil and the child had attained the age of 18 before the end of the year. The child must also be resident in Canada at some time in the year. Applying this test, it is our view that if your daughter was dependent on you in a year because of mental or physical infirmity you would be entitled to claim the unused disability tax credit in respect of her for the year.

Your daughter will be considered to be dependent on you in a year if she is, at any time in the year, dependent on you for support. Thus, whether your daughter is dependent on you is a question of fact. It is our understanding that for an applicant (for example, the family with whom your child is staying) to qualify for a special allowance under the Children's Special Allowances Act, the child must be dependent on the applicant for the child's care, maintenance, education, training and advancement to a greater extent than on any other department, agency or institution. In our view, this requirement does not necessarily mean that a child is not also dependent on another person such as a parent since it is possible for someone to be dependent on more than one person. We discuss the issue of dependency in paragraph 26 of Interpretation Bulletin IT-513R, "Personal Tax Credits," which states the following:

Generally, a person will be dependent for support on an individual if the individual has actually supplied necessary maintenance, or the necessities of life, to the person on a regular and consistent basis. For example, when an elderly parent who is not wholly self-supporting because of mental or physical infirmity lives with a married child, and the child provides the necessary food, lodging, clothing, medical care, etc., the parent may qualify as a dependant of that child. The term "support" is discussed in Appendix A.

IT-513R can be obtained from our website at www.ccra-adrc.gc.ca or from your local tax services office. We suggest that you review the discussion of support in Appendix A of IT-513R in its entirety. We would, however, direct your attention to the following extract, which would appear to be relevant to your situation:

In another example, a person may be confined to a hospital for all or substantially all of the year because of mental or physical infirmity and the cost of hospitalization is paid by a provincial government, board or commission under a provincial hospital plan. The latter fact, in itself, does not necessarily mean that the person was not supported by an individual. If expenses such as clothing, comforts, and medical and hospital plan premiums were paid by the individual or the individual supported that person on those occasions when the latter was able to be out of hospital, then, ordinarily, it is recognized that the individual supported that person.

Please note that a child's unused disability tax credit may not be claimed by a parent if expenses for an attendant or nursing home care (other than attendant care expenses under paragraph 118.2(2)(b.1) of the Income Tax Act) in respect of the child are included as qualifying medical expenses in calculating the child's or another person's medical expense tax credit.

We hope this will be of assistance.

Yours truly,

Daryl Boychuk, LL.B
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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