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: Whether the exceptions to the attribution rules under 74.5(3) apply only if the individuals are living separate and apart because of the breakdown of their common-law partnership for a period of 90 days or more.
Position: The 90 threshold does not appear to apply under 74.5(3). Common-law partners will be considered to be living separate and apart because of the breakdown of their common-law partnership if from a social and economic perspective they are no longer part of a single family unit.
Reasons: If the 90 threshold was required to be met, then it would be specified in the provision – as it is in other provisions of the Act.
XXXXXXXXXX
2012-043802
Andrea Boyle, CGA
April 25, 2012
Dear XXXXXXXXXX :
Re: Breakdown of Common-Law Partnership
I am writing in reply to your email dated February 24, 2012, in which you asked whether the exceptions to the attribution rules under 74.5(3) apply only if the individuals are living separate and apart because of the breakdown of their common-law partnership for a period of 90 days or more. Specifically, you have asked whether the view expressed in a previously issued interpretation (2005-0131351E5) represents our current view.
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. We are, however, prepared to offer the following general comments, which may be of assistance.
All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended.
The answer to this question hinges upon whether the 90 day period in the definition of “common-law partner” under 248(1) is only relevant in assessing the continuity of cohabitation in a conjugal relationship for purposes of the 12-month common-law partner test or whether it is also relevant in determining the meaning of “…the period throughout which the individual is living separate and apart from that person by reason of a breakdown of their marriage or common-law partnership…” under 74.5(3).
It seems from the wording of the definition of “common-law partner” under 248(1) that the 90 day period is for the purposes of determining “deemed co-habitation”, not for the overall purposes of defining the general meaning of living separate and apart by reason of a “breakdown” of a common-law partnership.
Subsection 74.5(3) does not specify that a 90-day separation period (or any other specific separation period) is required for the breakdown of a common-law relationship. There is no suggestion that there is any particular minimum time that a couple must be separated for there to be considered a breakdown of a marriage for the purposes of this provision. As it would be inappropriate to add words to the provision that are not there, the view as expressed in document 2005-0131351E5 does not represent the current view of the CRA
It would be a question of fact whether, for the purposes of 74.5(3), two individuals meet the required status of living separate and apart. Generally speaking living separate and apart would mean that two individuals are not, from a social and economic perspective, living as a single family unit.
We trust that these comments will be of assistance.
Yours truly,
Doug Watson
Manager
for Director
Corporate Financing Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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