28 April 1993 Internal T.I. 9300907 F - PHSPS

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.

April 28, 1993

Surrey Taxation Centre      Business and General Assessing Division     Division T.P.S. Section       M. Eisner  (613) 957-2138Ms. K. Parker

Married Equivalent Tax Credit

This is in reply to your memorandum of January 13, 1991 in which you asked us for our comments on the above-noted subject in respect of a situation which was outlined in a letter dated October 29, 1992 which you attached.

In the situation with which you are concerned, a father has in past years claimed his daughter as a dependent. The family allowance payments made in respect of the daughter were received by her mother and were reported for income tax purposes by the father. The father, mother, and the daughter, as well as the daughter's grandmother (the mother of the daughter's mother) live in a self-contained domestic establishment.

In the above situation, it has been mentioned in the letter you attached that pension cheques received by the grandmother go towards household operating costs and that other financial assistance may have been provided to the family over the years. The grandmother also does some meal preparation, purchases and makes clothing for her granddaughter, and cares for the granddaughter in other ways.

With respect to the above circumstances, the author of the letter you attached has indicated that the grandmother should be entitled to claim the married equivalent tax credit for the years 1989, 1990, and 1991 on the basis that she supports the granddaughter in the self-contained domestic establishment in which they both live.

Our Comments:

The issue in the case at hand involves certain wording paragraph 118(1)(b) of the Income Tax Act (the Act). In this regard, this paragraph, in part, refers to "an individual who, ... whether by himself or jointly with one or more other persons, maintains a self- contained domestic establishment (in which the individual lives) and actually supports therein a person who, at that time, is ...wholly dependent for support on the individual, or the individual and such other person or persons, as the case may be" (emphasis added).

At the outset, we wish to mention that, in our view, the word "support" in paragraph 118(1)(b) essentially involves financial support.

With respect to the wording set out above, we would first note that if the grandmother only pays amounts that can be regarded as being for her accommodation and meals, it is our view that no amount should be considered to have been paid as support for the granddaughter. The basis for this view is the Goodman case (57 DTC 89) in which it was held that amounts paid by a son to his father represented amounts paid solely for his accommodation and meals rather than involving support in respect of his younger brother. In relation to these comments, it is unclear whether the grandmother has provided financial support (We do not regard the grandmother as having supported her granddaughter by virtue of the fact that she purchased and made clothing for her granddaughter). In addition, it is our view that the fact that the grandmother may have provided amounts to the family on an irregular basis over the years does not establish that the amounts can be regarded as support described in the first sentence of the second paragraph set out below.

As a further comment, it is our view that support of the granddaughter was not involved if the assumption is made that the grandmother paid amounts on a regular basis which are not regarded as relating to meals and accommodation. Comments based on this assumption are set out in the following paragraph.

In general terms, "support" involves the provision of the basic necessities of life such as food, shelter, and clothing. In the case under consideration, it appears that the daughter's parents are legally responsible for her support. In addition, the author of the letter you attached has indicated that the child tax credit (section 122.2) could not be claimed in respect of the years 1989, 1990, and 1991. This information indicates that the parents clearly had the means to support their daughter and no information has been provided to indicate that they did not do so. On the basis that this is the case, we regard any financial assistance provided by the grandmother as enhancing the lifestyle of the family (including her granddaughter of course) rather than being in the nature of support for her granddaughter. It is, accordingly, our view that the granddaughter should be considered to be wholly dependent solely on her parents for support. It follows that the Department should not permit the grandmother to claim the married equivalent tax credit. We also note that these comments are consistent with the decision rendered in the Goodman case (57 DTC 89) in which it was mentioned that one older brother was not entitled to the married equivalent exemption in respect of his younger brother because the father had the means to support his younger son and there was no reason for regarding the younger brother as being wholly dependent upon his father and older brother.

Since it is our understanding that the daughter's mother and father live in the same domestic establishment, we also believe that there is an additional argument for not permitting the grandmother to claim the equivalent to married tax credit. In this regard, subparagraph 118(1)(b)(ii) refers to the circumstances where two or more individuals support a wholly dependent person while paragraph 118(4)(b) refers to the situation where two or more persons who are entitled to the deduction under paragraph 118(1)(b). In relation to these provisions, it is the Department's position as outlined in paragraph 18 of Interpretation Bulletin IT-513 "Personal Tax Credits" that "A taxpayer who is a married person and who is unable to claim the married tax credit because of the amount of the spouse's income, will not be entitled to claim the married equivalent tax credit". Consistent with these comments and on the basis that the father and/or the mother would be entitled to claim the married exemption (subject to the amount of the relevant spouse's income), it is our view that neither of them could be regarded as being an additional person for the purposes of subparagraph 118(1)(b)(ii) and paragraph 118(4)(b). In our view, it would follow that the grandmother would not be entitled to the married equivalent tax credit since her granddaughter was not wholly dependent upon her.

Should you require further technical assistance, we would be pleased to provide our views.

P.D. Fuoco Section Chief Personal and General SectionBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch

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