27 August 2004 External T.I. 2004-0073451E5 - Wholly Dependent Person Amount-Child Tax Benefit

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: Can only the parent receiving the child tax benefit in respect of a minor child, claim the wholly dependent person amount pursuant to paragraph 118(1)(b)?

Position: No.

Reasons: A taxpayer's eligibility to claim the amount for a wholly dependent person pursuant to paragraph 118(1)(b) of the Act is not dependant on whether the taxpayer receives a child tax benefit pursuant to subsection 122.61(1) of the Act.

2004-007345
XXXXXXXXXX Karen Power, CA
(613) 957-8953
August 27, 2004

Dear XXXXXXXXXX:

Re: Paragraph 118(1)(b) - Amount for a Wholly Dependent Person

We are writing in reply to your letter of April 21, 2004, concerning eligibility for the amount for a wholly dependent person pursuant to paragraph 118(1)(b) of the Income Tax Act (the "Act"), in certain situations where the child tax benefit under subsection 122.61(1) of the Act is received by the other parent.

Our Comments

The particular circumstances in your letter on which you have asked for our views involve factual situations concerning specific taxpayers. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. If your situation involves a completed transaction, you should submit all relevant facts and documentation to the appropriate tax services office for their views. However, we are prepared to offer the following general comments, which may be of assistance

Where an individual does not claim a spousal tax credit under paragraph 118(1)(a) of 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 to paragraph 118(4)(a) of the Act an individual cannot claim the credit in a taxation year in respect of more than one person. In addition, pursuant to paragraph 118(4)(b) of the Act, the credit cannot be claimed by more than one individual for the same person or the same domestic establishment. If two or more individuals are otherwise eligible to claim the credit, and they are unable to agree as to who should claim the tax credit, neither can claim the credit. Paragraph 118(5)(b) of the Act prevents, inter alia, a parent from claiming the credit under paragraph 118(1)(b) for the year of marriage breakdown if the parent claims a deduction for the year because of section 60 of the Act 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 or former spouses live separate and apart throughout the year, paragraph 118(5)(a) of the Act prevents, inter alia, a parent from claiming the credit under paragraph 118(1)(b) in respect of a child, 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 in a taxation year married persons live separate and apart, have joint custody of a minor child with the child living 50% of the time with each parent, and each parent otherwise meets the above-noted criteria, either parent (but not both) can claim the credit under paragraph 118(1)(b) of the Act for the child. In our view, a taxpayer's eligibility to claim the amount for a wholly dependent person pursuant to paragraph 118(1)(b) of the Act is not dependant on whether the taxpayer receives a child tax benefit pursuant to subsection 122.61(1) of the Act.

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 Planning Branch