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: We have been provided with an example where a husband ("Individual A") and wife ("Individual B") have one child (the "Child"). Individual A and Individual B separate in June 2003 by reason of the breakdown of their marriage. Following the separation, Individual A had custody of the Child for two months and Individual B had custody of the Child for the remainder of the year. Individual A paid to Individual B monthly spousal support of $200 and monthly child support of $500. Individual A and Individual B agree that Individual A should claim the tax credit under paragraph 118(1)(b) of the Income Tax Act (the "Act") in respect of the Child for 2003.
Can Individual A claim both the spousal support (paragraph 60(b) of the Act) and the tax credit in respect of the Child in the year in which the marriage breakdown occurred?
Position: No
Reasons: By virtue of paragraph 118(5)(b) of the Act, as Individual A is required to pay a support amount to Individual B for the Child, Individual A cannot claim a credit under subsection 118(1) of the Act in respect of the Child if Individual A claims a deduction under section 60 of the Act in respect of a support amount paid to Individual B.
XXXXXXXXXX 2003-004411
M. Eisner, CA
January 21, 2004
Dear XXXXXXXXXX:
Re: Tax Credit for an Eligible Dependent and the Payment of Support Amounts
This is in reply to your letter dated October 10, 2003 concerning the above-noted subject.
In your letter, you have set out an example where a husband ("Individual A") and wife ("Individual B") have one child (the "Child"). Individual A and Individual B separate in June 2003 by reason of the breakdown of their marriage. Following the separation, Individual A had custody of the Child for two months and Individual B had custody of the Child for the remainder of the year. Commencing in 2003 (after the separation), Individual A paid to Individual B monthly spousal support of $200 and monthly child support of $500 (we assume the child support relates to the time while Individual B had custody of the Child). You indicate that the child support payments are not deductible as the separation agreement is made after April 1997, but that the spousal support payments qualify for deduction. You also indicate that Individual A and Individual B agree that Individual A should claim the Amount for an Eligible Dependent Tax Credit (the "AED credit") under paragraph 118(1)(b) of the Income Tax Act (the "Act") in respect of the Child for 2003.
You have asked us whether in the year of separation, subsection 118(5) of the Act would prevent Individual A from claiming both a deduction for the spousal support and the AED credit in respect of the Child.
The situation that is described in your letter appears to involve completed transactions that relate to specific taxpayers. 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 IC-70-6R5 dated May 17, 2002. Where the particular transaction is completed, the inquiry should be addressed to the relevant Tax Services Office. We can, however, provide the following general comments.
With respect to the following comments on your example, as requested, we have assumed that each of the spousal support payments and child support payments that Individual A was required to make in 2003 qualifies as a "support amount" as defined in subsection 56.1(4) of the Act, and that the spousal support payments qualify for the deduction under paragraph 60(b) of the Act. Also, as requested, we have limited the discussion to the year of the breakdown of the marriage (i.e., 2003).
The restriction to which you refer in your letter on claiming personal tax credits is found in paragraph 118(5)(b) 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." (Emphasis Ours)
In the above situation, since Individual A was required to pay a support amount to Individual B in respect of the Child, in our view, as a consequence of paragraph 118(5)(b) of the Act, if Individual A claims a deduction for 2003 because of section 60 of the Act in respect of any of the support amounts (as defined in subsection 56.1(4) of the Act) paid to Individual B (including the spousal support payments), Individual A could not claim the AED credit in respect of the Child for 2003. On the other hand, if Individual A does not claim a deduction for 2003 for support amounts paid to Individual B, it is our view that Individual A would be entitled to claim the AED credit for 2003, assuming he otherwise meets the requirements to do so (we have not been provided with sufficient facts to establish whether all the other requirements for claiming the AED credit have been met).
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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