30 March 2004 External T.I. 2004-0061721E5 - Foster Care

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: Are amounts received pursuant to a contract with a provincial government to provide care in a group home exempt income by virtue of paragraph 81(1)(h) of the Act?

Position: Question of fact.

Reasons: The answer depends on whether all of the conditions contained in paragraph 81(1)(h) are satisfied.

XXXXXXXXXX 		T. Young, CA
		2004-006172
March 30, 2004

Dear XXXXXXXXXX:

Re: Foster Care

We are writing in response to your letter of February 4, 2004, concerning the above-noted topic. We also acknowledge our subsequent telephone conversations (Young / XXXXXXXXXX).

In your letter, you asked us to provide an advance tax ruling that amounts received by a taxpayer under a contract with the Minister for Children and Families of British Columbia were exempt from income by virtue of paragraph 81(1)(h) of the Income Tax Act (the "Act"). The name of the taxpayer and certain other information were deleted from the contract submitted to us. The contract covered the period from XXXXXXXXXX.

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 provide the following general comments, which may be of assistance to you.

Paragraph 81(1)(h) of the Act exempts from income social assistance payments made to an individual caregiver (the "Caregiver") for the benefit of a foster person (the "Cared-for individual") under the Caregiver's care. The Cared-for individual can be either a child or an adult.

The income tax exemption applies to an amount received by the Caregiver when all of the following conditions apply:

1. The payment is a social assistance payment ordinarily made on the basis of a means, needs, or income test;

2. The payment is made under a program provided for by a federal, provincial or territorial law;

3. The payment is received directly or indirectly by the Caregiver for the benefit of the Cared-for individual;

4. The Cared-for individual is not the Caregiver's spouse or common-law partner or related to the Caregiver or the Caregiver's spouse or common-law partner;

5. No family allowance under the Family Allowances Act or any similar allowance provided for by provincial or territorial law is payable in respect of the Cared-for individual for the period for which the social assistance payment is made; and

6. The Cared-for individual resides in the Caregiver's principal place of residence, or the Caregiver's principal place of residence is maintained for use as the Cared-for individual's residence, during the period for which the payment is made.

As discussed, if you require further assistance in determining the income tax treatment of the specific payments received under the contract that was submitted with your letter, please contact the Client Services Division of you local Tax Services Office.

Information Circular IC 70-6R5 may be found on our web site at www.cra.gc.ca. We trust our comments will be of assistance to you.

Yours truly,

Randy Hewlett, B. Comm.

for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch