25 January 1990 Internal T.I. 74487 F - Deduction of Social Assistance 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.

SUBJECT:  Payments/Income Received from the Ministry of Social Services

This is in reply to your memorandum of November 1, 1989, wherein you requested our opinion concerning the deduction for social assistance payments under subparagraph 110(1)(f)(iii) of the Income Tax Act (the "Act") in the following situation.

A husband and wife reside together in a home they jointly own. This home is also used as a group home for handicapped adults. The couple are in an income position and appear to be in business in common with a view to profit.  The income is divided on a 50-50 basis.

Based on the above, you have asked for our opinion on whether the husband and wife are considered a partnership and, if so, whether they are entitled to claim the deduction under subparagraph 110(1)(f)(iii) of the Act if they meet the requirement of "residing with" the individuals being cared for.

It is our view that a social assistance payment which otherwise qualifies for a deduction pursuant to subparagraph 110(1)(f)(iii) of the Act will be deductible under this subparagraph if;

a)        it is received by a person who resided with the individual in respect of whom the payment was made, and

b)        to the extent that it has been included in computing the person's income for the year.  It is our view that the inclusion of the payment as business income rather than under paragraph 56(1)(u) of the Act would not, by itself, preclude a deduction under subparagraph 110(1)(f)(iii) of the Act.

It may be helpful to you if we explain our position on the definition of "resided with".  In this respect we have considered four different types of business operations.

1.     A private family home where people who are entitled to receive social assistance are residents.  In this case the residents share the full house with the owners.

2.     A private family home where people who are entitled to receive social assistance are provided with a private room and board.  Some sharing of facilities take place (i.e. washrooms, games room and dining area) but for the most part the individuals enjoy the privacy of their rooms.

3.     A private family home where small self-contained apartments are provided to people who may or may not be receiving social assistance.

4.     A large facility that accommodates approximately 20 people who are entitled to receive social assistance.  The residents require constant care and attention.  This large facility also contains the principal residence of the owners.  The residents do not have access to the principal residence unless permission is granted.

We have researched the issue and could find no Departmental or judicial guidance on precisely what the term "resided with" means.  It is a question of fact to be decided in each individual case.  However, we offer the following comments in respect of each type of situation described above.

1.     It appears that the owners and residents reside with each other, since both share the full house.

2.     There are a number of factors to be considered in this situation.  If the building is a private family home, if the washrooms, games room and dining area are shared both by the owners and the residents, and if there is a significant amount of socializing between the owners and the residents, then our opinion is that the owners and residents do reside with each other, even if the owners do not have free access to the resident's rooms.

3.     Since the apartments are self-contained (we assume that this includes cooking and washrooms facilities and that the owners do not have free access), our view is that the owners and residents are not residing with each other.

4.     We assume that the owner's principal residence is self-contained.  Since this is a large facility and the owner's residence constitutes a separate area to which the residents do not have access, we believe that the owners and residents do not reside with each other.  It would appear that the reason that the owners have free access to the residents' rooms is because the residents require constant care and attention.  If the residents did have free access to the owner's residence, they may still not be residing with each other if the residents have their own dining, washing and recreational facilities.

In combination with the physical arrangements of a facility, it may be helpful in cases of doubt to look at the intention and relationship of the owners and residents.  For example, in a private family home where the residents are foster children and the intent is that they be under the guardianship of the owners, it is more likely that the owners and residents would be residing with each other than if the residents were adults who could come and go as they pleased.  It is our belief that in most cases, the physical arrangements will reflect the intent and relationship of the owners and residents vis-a-vis their residing with each other.

21(1)(b)

With respect to your question as to whether the husband and wife are considered a partnership, we are unable to give a definitive reply as we do not have enough information concerning the situation to make that determination.  In this regard, we would direct your attention to the comments contained in IT-90 and IT-231R2.

P.D. Fuoco for DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and Intergovernmental Affairs Branch

c.c.       Mr. R. Roy 10th Floor 123 Slater