13 January 2003 External T.I. 2002-0175305 - AMOUNT FOR ELIGIBLE DEPENDENT

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 a former spouse in respect of a daughter from XXXXXXXXXX . The child began living with the taxpayer on XXXXXXXXXX and the obligation to pay child support ceased. Is the taxpayer entitled to claim the amount for an eligible dependent pursuant to paragraph 118(1)(b) of the Act?

Position: No.

Reasons: Subsection 118(5) provides that no amount may be claimed under subsection (1) where a support amount was required to be paid in respect of the child and a) the taxpayer and the former spouse were living separate and apart throughout the year or b) if a deduction was claimed under section 60 in respect of a support amount.

		2002-017530
XXXXXXXXXX 	Karen Power, CA
(613) 957-8953
January 13, 2003

Dear XXXXXXXXXX:

Re: Eligible Dependent

We are writing in response to your letter of November 21, 2002 concerning your eligibility for the Amount for an Eligible Dependent (AED) pursuant to paragraph 118(1)(b) of the Income Tax Act (the "Act").

In your letter you stated that until the end of XXXXXXXXXX, you were paying child support to your former wife in respect of your XXXXXXXXXX daughter who was then living with her. Beginning on XXXXXXXXXX your daughter began living with you. A court order provides that from XXXXXXXXXX onwards, you are responsible for your daughter's day-to-day care and custody.

You have indicated that your claim for the AED was denied because you were required to make support payments for your daughter in XXXXXXXXXX. In your view you should be entitled to claim the AED as you supported your dependent daughter in your home from XXXXXXXXXX. You also indicate that your former spouse is not entitled to claim the AED; however, we have not been provided with any information on which to comment with respect to her entitlement to this amount.

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 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. However, we are prepared to offer the following general comments which may be of assistance. For purposes of this reply, we have assumed that you have been living separate and apart from your former spouse because of the breakdown of your marriage since prior to XXXXXXXXXX, and that the child support payments you made qualified as a "support amount" as defined in subsection 56.1(4) of the Act (see paragraph 4 of the enclosed Interpretation Bulletin IT-530 "Support Payments").

The restriction on claiming the AED when child support is payable is found in subsection 118(5) of the Act. Subsection 118(5) states:

"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 (within the meaning assigned by subsection 56.1(4)) to the individual's spouse or common-law partner in respect of the person and the individual

(a) lives separate and apart from the spouse or common-law partner or former spouse or common-law partner throughout the year because of the breakdown of their marriage or common-law partnership; or

(b) claims a deduction for the year because of section 60 in respect of a support amount paid to the spouse or common-law partner or former spouse or common-law partner."

Pursuant to paragraph 118(5)(a), if the spouses or common-law partners or former spouses or common-law partners lived separate and apart throughout the year because of the breakdown of their marriage or common-law partnership, the AED can 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 also supported by the Technical Notes released by the Department of Finance in conjunction with the 1996 amendment to subsection 118(5). Since you were required to make child support payments for your daughter in the XXXXXXXXXX year, in our view, you are unable to claim the AED for XXXXXXXXXX.

Please note that the provisions of the Act dictate our conclusions. As you are aware, the role of the CCRA is to administer and enforce the Act as passed by Parliament. The CCRA strives to carry out this role fairly and uniformly for all taxpayers. In our view, a legislative amendment would be required to enable you to claim the AED. Tax policy concerns, such as those raised in your letter, and amendments to the Act are the responsibility of the Department of Finance. Should you which to pursue these concerns further, you may write to the officials in the Tax Policy Branch at the Department of Finance, L'Esplanade Laurier, 140 O'Connor Street, Ottawa, Ontario, K1A 0G5.

While we regret that we could not give you a favourable reply, we trust that our comments are of assistance to you.

Yours truly,

Milled Azzi, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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