26 June 2013 Internal T.I. 2013-0478301I7 - Child Tax Credit

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. Comments on content in Guide T4011 as they pertain to line 367.

Position: 1. Current content is correct but consideration should be given to expanding discussion in future publications.

Reasons: 1. Current content addresses only situations involving subparagraph 118(1)(b.1)(i) of the Act.

Eric Watterud
Senior Programs Officer
Taxpayer Services and Debt Management Branch 2013-047830
Taxpayer Services Directorate Robert Dubis
Information Programs Division (905) 721-5191
GST/HST, Benefits and Complex Information Section
395 Terminal Avenue, 3rd Floor
Ottawa ON K1A OL5

June 26, 2013

Dear Mr. Watterud:

We are replying to your enquiry relating to line 367 of the guide T4011, Preparing Returns for Deceased Persons. Line 367 relates to the non-refundable tax credit for children who are under 18 years of age at the end of the year as provided in paragraph 118(1)(b.1) of the Income Tax Act (Act).

Specifically, you expressed concern that the content pertaining to line 367 in guide T4011 does not properly reflect the CRA's application of the law as it pertains to the deceased parent's eligibility to claim the amount for the eligible dependant under paragraph 118(1)(b) of the Act (line 305). As part of your enquiry, you referred to Rulings Document 2009-0308111I7. That document addresses the application of paragraph 118(1)(b.1) in the context of a situation where parents have joint custody of a dependant child. The interpretations in that rulings document are provided specifically in that context.

The content pertaining to line 367 of guide T4011, which was recently added to the guide, currently discusses the claim on line 367 only in the context that the child resided with both parents throughout the taxation year. In this context, the guide is technically correct because it addresses the eligibility for the child tax credit according to subparagraph 118(1)(b.1)(i) of the Act. As noted in Rulings document 2009-0308111I7, the term "throughout the taxation year" as used in subparagraph 118(1)(b.1) of the Act refers to the calendar year, which means the conditions must be met at all times of the taxation year, from 1 January to 31 December. Although the child could not in fact reside with a parent who died during the year throughout the entire calendar year, the applicable test in subparagraph 118(1)(b.1)(i) of the Act is whether the child "ordinarily" resided with that parent throughout the taxation year. If the facts indicate the child ordinarily resided with both parents throughout the taxation year, then the requirement has been met and the deceased parent could claim the deduction under subparagraph 118(1)(b.1)(i) of the Act. Because both parents were residing together prior to the death, the deceased individual could never make a claim on line 305 for a child because consideration must first be given to a claim for a spouse or common-law partner under paragraph 118(1)(a) of the Act (line 303).

How does the Act apply to the surviving spouse or common-law partner? Although there is a change in marital status of the surviving individual during the taxation year, there was no breakdown of the marriage prior to, or by virtue of death. Providing all the requirements of paragraph 118(1)(b) of the Act are met after the death of their spouse or common-law partner, the surviving parent could make a claim on line 305 of their return for a child who is under 18 years of age at any time in the year. However, if the deceased had made a claim in respect of a particular child on line 367 of their final return, paragraph 118(4)(b.1) would prevent the surviving spouse from claiming a deduction on line 367 in respect of the same child for that taxation year.

While guide T4011 refers the users to the General Income Tax and Benefit Guide for more information, future publications of Guide T4011 could provide additional content to clarify the availability of the child tax credit on line 367 in circumstances where a parent dies during the year but the parents did not reside together throughout the taxation year. The additional content could give consideration to such issues as marital status, living arrangements, payment of child support and prior claims for amounts by the deceased under paragraphs 118(1)(b) and 118(1)(b.1) of the Act.

We hope our comments are of assistance.

Yours truly,

Sharmini Ratnasingham
Manager
for Director
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch