25 June 2014 External T.I. 2014-0520401E5 - Attendant care payments

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 a parent must include in taxable income amounts received (i.e., lump-sum payment and periodic payments) in respect of a court order, for care provided to their disabled child?

Position: In this case, most likely no.

Reasons: See response below.

XXXXXXXXXX
2014-052040
C. Underhill
June 25, 2014

Dear XXXXXXXXXX:

Re: Attendant care payments

We are writing in response to your letter of February 10, 2014, in which you asked about the taxation of amounts received for attendant care services. More specifically, you asked whether a parent must include in taxable income lump-sum and periodic amounts received under a court order, for the attendant care services he or she provides to his or her child. If it is determined that the lump-sum amount is taxable to the parent, you asked if it would be a qualifying amount under section 110.2 of the Income Tax Act ("Act").

In the situation described, the child was mentally and physically handicapped after an accident. The child received a non-taxable award of damages ("Original Award") that was placed in trust to facilitate the continuous care of the child. A monthly amount was paid out of the Original Award and deposited to the parent's personal bank account that was specifically set up to receive and disburse funds for the care, maintenance, and housing of the child. The child is unable to carry out the activities of daily living and requires 24-hour personal care. Since the accident, the parent has been providing attendant care for the child in the family home. In a subsequent judgement, the parent was awarded a lump-sum amount in satisfaction of past attendant care services and a monthly amount for future attendant care services. The amounts are paid out of the Original Award.

Our Comments

This technical interpretation provides general comments about the provisions of the Act and related legislation (where referenced). It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination. The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.

Paragraph 3(a) of the Act provides that the income of a taxpayer for a taxation year is the total of all amounts each of which is the taxpayer's income for the year (other than taxable capital gains from the disposition of property which are treated separately) from an office, employment, business, or property (inside or outside Canada). Generally, it is the view of the Canada Revenue Agency that amounts received by a parent or spouse for the attendant care services he or she provides to his or her child or spouse represents income from employment or a business (i.e., as a self-employed individual).

However, the courts (Maurice v. The Queen, [2002] 1 CTC 2172 and Pellerin v. The Queen, 2008 DTC 3210) have taken the view that amounts paid to a parent (out of a non-taxable award for damages) for the care of his or her child, who was mentally and/or physically handicapped after an accident, are not considered income from employment or a business, and therefore, not taxable under the Act.

Based on the jurisprudence, it is our view that the lump-sum and periodic amounts received by the parent, under the circumstances outlined above, would not be included in the income of the parent under the Act. Consequently, our comments concerning section 110.2 of the Act are not required.

We trust these comments will be of assistance.

Yours truly,

Nerill Thomas-Wilkinson, CPA, CA
Manager
Business and Employment Income Section
Business and Employment Division
Income Tax Rulings Directorate