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: An individual ("Individual A") and his spouse ("Individual B") have two children who are of the ages of XXXXXXXXXX years and XXXXXXXXXX years. Since XXXXXXXXXX 2000, Individual A and Individual B have been separated from each other and, in XXXXXXXXXX of 2002, Individual A and Individual B entered into a separation agreement (the "Agreement"). Under the Agreement, Individual A and Individual B share the parenting of the two children (i.e., the children will reside 50% of the time at Individual A's residence and the other 50% of the time at the residence of Individual B), and, commencing in 2002, Individual A is required to pay monthly child support of $XXXXXXXXXX in respect of the two children. Is Individual A entitled to claim the amount for an eligible dependent pursuant to paragraph 118(1)(b) of the Income Tax Act (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.
XXXXXXXXXX 2003-000324
M. Eisner, CA
April 9, 2003
Dear XXXXXXXXXX:
Re: Amount for an Eligible Dependent Credit (AED)
This is in reply to your letter dated February 11, 2003 concerning the above-noted subject. We also acknowledge our telephone conversation on March 27.
In the circumstances of your situation, you and your spouse have two children who are of the ages of XXXXXXXXXX years and XXXXXXXXXX years. Since XXXXXXXXXX of 2000, you and your spouse have been living separate and apart from each other by reason of a breakdown of your marriage, and in XXXXXXXXXX of 2002, you and your spouse entered into a written separation agreement (the "Agreement"). Under the Agreement, you and your spouse share the parenting of the two children (i.e., the children will reside 50% of the time at your residence and the other 50% of the time at the residence of your spouse), and, commencing in 2002, you are required to pay monthly child support of $XXXXXXXXXX to your spouse in respect of your two children.
You have asked us for our comments on whether or not you are entitled to claim the AED under paragraph 118(1)(b) of the Income Tax Act (the "Act") in respect of one of your children for 2002. You are concerned that you cannot claim the AED as you pay child support for both children.
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. Where the transactions are completed, the enquiry should be submitted to your local Tax Services Office. We also note that it would be necessary to review all relevant documentation before a determination of the tax implications could be made. However, we are providing you with the following general comments.
For purposes of this reply, we have assumed that the child support payments that you are required to make qualify 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 or former 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) of the Act, 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, a taxpayer cannot claim the AED 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 in 2002 in respect of your children, it is our view that you are not entitled to claim the AED for 2002. Similarly, subsection 118(5) could prevent you from claiming an AED in subsequent years.
Please note that the provisions of the Act dictate our conclusions. The role of the Canada Customs and Revenue Agency ("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. Amendments to the Act are the responsibility of the Department of Finance. Should you which to pursue your 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
Policy and Legislation Branch
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