2 April 2008 Ministerial Correspondence 2008-0267351M4 - Payments to home providers

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: 1. Are bed reservation fees included in the caregiver's income. 2. Can a caregiver receive tax free amounts in respect of two residences under 81(1)(h).

Position: 1. No if the conditions in 81(1)(h) are met. 2. A caregiver can own more than one residence and employ other individuals to provide care but an individual can only have one principal residence.

Reasons: The law.

April 2, 2008

XXXXXXXXXX

Dear XXXXXXXXXX :

The office of the Honourable James M. Flaherty, Minister of Finance, forwarded to me a copy of your letter, which I received on February 1, 2008, concerning the application of paragraph 81(1)(h) of the Income Tax Act.

That paragraph of the Act exempts the income an individual, the caregiver, receives for the care of another individual, the cared-for individual, if each of the following conditions is met:

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 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 can be 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 must be maintained for use as the cared-for individual's residence, during the period for which the payment is made.

I can confirm that amounts paid to a caregiver to maintain the availability of his or her principal place of residence for use by a cared-for individual, often referred to as a bed reservation fee, in situations in which the above described conditions are met will be exempt according to paragraph 81(1)(h) of the Act. Those amounts are therefore not included on the individual's T1 return.

Payments that do not meet the conditions in paragraph 81(1)(h) of the Act may be taxable to the recipient. Such circumstances would require a case-by-case review. If an individual wants his or her particular situation reviewed, he or she can contact the Client Services Division of the local tax services office.

You ask about caregivers who own two residences. While a particular caregiver may own more than one residence, at any given time, an individual can only have one principal place of residence. Ordinarily, an individual's principal residence will be the place where the individual regularly, normally, or customarily resides. Other factors, such as where the individual's personal belongings are kept or where the individual's mail is sent may have an impact on the determination of the individual's principal residence. There is nothing to prevent a caregiver from employing other individuals to assist in providing the caregiving services at the caregiver's principal residence.

I trust that the information provided is helpful.

Sincerely,

The Honourable Gordon O'Connor, P.C., M.P.

Michael Cooke
(613) 446-0484
2008-026735
February 15, 2008