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.
Principal Issues: In a factual situation, whether in the year of marriage breakdown parents are each entitled to claim a non-refundable tax credit for a wholly dependent person in respect of one of their two children.
Position: Question of fact.
Reasons: Paragraph 118(1)(b) of the Act requires that the parent support the child in the self-contained domestic establishment being maintained for that purpose. Pursuant to paragraph 118(4)(b) of the Act, not more than one individual is entitled to the credit in respect of the same domestic establishment. In this situation it is apparent that the children are being supported in the same domestic establishment (the marriage separation agreement indicates that the children live in the main residence portion of the marital home). However, if the facts show that at any point in time during the year one or both children lived in the self-contained basement apartment with one of the parents, paragraph 118(4)(b) of the Act will not apply to prevent both parents from claiming the credit.
Randy Hewlett, B.Comm.
XXXXXXXXXX 613-957-8973
2004-005678
February 17, 2004
Dear XXXXXXXXXX:
Re: Non-Refundable Tax Credit - Wholly Dependent Person
Subsection 118(1)(b) of The Income Tax Act (the "Act")
We are writing in response to your letter of January 7, 2004, wherein you asked our opinion on whether you and your spouse are each entitled to claim a non-refundable tax credit for a wholly dependent person ("equivalent-to-spouse").
Our understanding of the relevant facts is as follows:
? You and your spouse were married in XXXXXXXXXX and have two minor children.
? Since XXXXXXXXXX, you and your spouse have lived separate and apart by reason of a breakdown in your marriage.
? Pursuant to the terms of the marriage separation agreement:
o You and your spouse have joint custody of the children.
o On an alternating monthly basis, you and your spouse will live with the children in the main residence portion of the marital home while the other lives in the portion that has a self-contained basement apartment.
o You and your spouse will share the costs of maintaining both the main residence portion of the marital home and the self-contained basement apartment.
o You and your spouse are not required to pay child support under this arrangement.
o No spousal support is payable by either you or your spouse.
? You indicated that this living arrangement existed at December 31, 2003, and is likely to continue until the marital home is sold.
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 income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following general comments.
Where an individual does not claim a spousal tax credit under paragraph 118(1)(a) of the Income Tax Act (the "Act"), the individual may claim a tax credit under paragraph 118(1)(b) for a wholly dependent person, provided at any time in the year, the individual is:
(i) a person who is unmarried and who does not live in a common-law partnership, or
(ii) a person who is married or in a common-law partnership, who neither supported nor lived with their spouse or common-law partner and who is not supported by that spouse or common-law partner,
and
(iii) whether alone or jointly with one or more other persons, maintains a self-contained domestic establishment (in which the individual lives) and actually supports in that establishment a person who, at that time, is
(A) except in the case of a child of the individual, resident in Canada,
(B) wholly dependent for support on the individual, or the individual and the other person or persons, as the case may be,
(C) related to the individual, and
(D) except in the case of a parent or grandparent of the individual, either under 18 years of age or so dependent by reason of mental or physical infirmity.
Subsections 118(4) and 118(5) of the Act contain further restrictions with respect to an individual's entitlement to the credit under paragraph 118(1)(b). For example, pursuant paragraph 118(4)(a) of the Act an individual cannot claim the credit in a taxation year in respect of more than one person. Paragraph 118(5)(b) of the Act prevents a parent from claiming the credit under paragraph 118(1)(b) in the year of marriage breakdown if the parent claims a deduction for the year because of section 60 in respect of a support amount paid to the spouse or former spouse. For years subsequent to the year of marriage breakdown, where the spouses live separate and apart throughout the year, paragraph 118(5)(a) of the Act prevents a parent from claiming the credit under paragraph 118(1)(b) if the parent is required to pay a support amount to that parent's spouse or former spouse in respect of that child.
In general terms, where at any time in a taxation year married persons live separate and apart and share joint custody of two or more minor children, and each parent otherwise meets the above-noted criteria, one parent can claim the credit for one of the children and the other parent can claim the credit for the other child. We would like to emphasize, however, that paragraph 118(1)(b) of the Act requires that the parent support the child in the self-contained domestic establishment being maintained for that purpose. Pursuant to paragraph 118(4)(b) of the Act, not more than one individual is entitled to the credit in respect of the same domestic establishment. In terms of your particular situation, if the children were supported in the same domestic establishment (the marriage separation agreement indicates that the children live in the main residence portion of the marital home), then because of paragraph 118(4)(b) of the Act only you or your spouse can claim the credit. If that is the case and you and your spouse cannot agree on who will claim the credit for the 2003 taxation year, paragraph 118(4)(b) of the Act applies such that neither will be allowed to claim the credit. If at any point in time during 2003, however, one or both children lived in the self-contained basement apartment when you or your spouse resided there, paragraph 118(4)(b) of the Act will not apply to prevent you and your spouse from each claiming the credit under paragraph 118(1)(b) of the Act in 2003.
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 Planning Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2004
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2004
Email this Content