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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
RULINGS DIRECTORATE
CORRESPONDENCE SUMMARY
Principal Issues:
Whether B, the younger brother of A, will be considered a "child" of A within the meaning of that term as defined in subsection 70(10). A had inherited farm property from his deceased father and cared for his mother and B, then 16 years of age. Many years later A died and transferred the farm property, by will, to B.
Position TAKEN:
It is possible, however it is a question of fact that we are unable to answer based upon the limited set of facts provided.
Reasons FOR POSITION TAKEN:
The definition of "Child" in subsection 70(10), specifically paragraph (c) thereof. previous positions and IT-349R2.
950271
XXXXXXXXXX G. Donell
August 4, 1995
Dear Sir:
Re: Transfer of farm property
This is in reply to your letter of January 20, 1995 in which you requested our opinion on the application of the definition of a "child", within the meaning assigned by subsections 70(10) and 252(1) of the Income Tax Act (the "Act"), for the purpose of subsection 70(9) of the Act. In particular you have enquired whether a brother of an individual could, for the aforementioned purpose, be considered to be the child of that individual. We apologize for the delay of our response.
The extended meaning of "child" in subsections 252(1) and 70(10) of the Act expand the meaning of a child for the purposes of section 70 as indicated in paragraph 9 of IT-349R2, "Intergenerational Transfer of Farm Property on Death", (July 17, 1987), as revised by Special Release dated September 6, 1991. The expanded meaning includes an adopted child whether adopted legally or in fact. The conditions necessary for a finding that a person has been "adopted in fact" are embodied in paragraph 70(10)(c) of the definition of "child" and read as follows:
""child" of a taxpayer includes...
(c) a person who, at any time before the person attained the age of 19 years, was wholly dependent on the taxpayer for support and of whom the taxpayer had, at that time, in law or in fact, the custody and control;".
The issue of adoption in fact, in a tax context, has been examined by the courts. Most recently, the Tax Court of Canada in Madigane v. M.N.R. 89 DTC 37, examined the issue in a case involving whether a taxpayer could claim as dependants several biological nieces and nephews who lived in a country other than Canada. Christie, A.C.J.T.C. reviewed the reported cases dealing with de facto adoption and said:
"In my opinion the authorities cited clearly show that these basic features are common to the de facto adoptive parent-child relationship. They live in close proximity to each other. In each of these cases the facts are that the child and the adoptive parent or parents were residing under the same roof and the child was under the actual control and custody of the parents who were in a position to exercise effective parental care and guidance on a continuing basis. The adoptive parents and child constituted a family unit or part of such unit that was presided over by the parents."
Consequently, some of the factors considered in determining whether a certain relationship between a person and a child constitutes an adoption in fact are the actual control and custody, exercise of parental care and responsibility on a continuing basis, dependency, and proximity to each other including the right of determining the residence, protection, care (physical, mental, and moral), education, and religion.
We would emphasize that the fact that the brothers occupy the same residence, while admittedly a factor in support of adoption in fact, is not determinative, by itself, of a finding that such relationship exists.
In conclusion we are unable to provide you with a definitive response to your enquiry as the determination is based upon a review of all the facts of a particular situation. The review of such transactions falls within the responsibility of the Tax Service Offices, and accordingly we would advise you to contact the office nearest you in order to determine the criteria that are used to assess the specific circumstances of a case.
We trust that the above comments are of assistance to you.
Yours truly,
Chief
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy & Legislation Branch
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