1 August 1995 External T.I. 9511795 - EQUIVALENT TO SPOUSE 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.

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.

Principal Issues:

Whether position in Directorate's correspondence of May 28, 1992 contradicts position expressed in paragraph 18 of IT-513 regarding an alternative entitlement to the married equivalent claim when taxpayers are also married in the year

Position TAKEN:

In our view, there is no contradiction.

Reasons FOR POSITION TAKEN:

Paragraph 18 of the bulletin sets out general position on entitlement to married equivalent when married claim denied only by reason of spousal income. Paragraph 11 explains the administrative position of allowing the claimant the most beneficial claim to which s/he is entitled in the year of status change.

		951179
XXXXXXXXXX	J.A. Szeszycki

Attention: XXXXXXXXXX

August 1, 1995

Dear Sirs:

Re: Equivalent-to-Spouse Personal Credit

This is in reply to your letter dated April 17, 1995 in which you requested clarification as to the circumstances under which an individual is entitled to an equivalent-to-spouse personal tax credit. We apologize for the delay in responding.

You made reference in your letter to an opinion issued by this Directorate which indicated that in a situation where an individual, who otherwise would be entitled to the equivalent-to-spouse tax credit, marries in the year, the individual could be eligible for the credit for that year. In your view, this would appear to be contrary to the position expressed in Interpretation Bulletin IT-513 "Personal Tax Credits" at paragraph 18, which states that a taxpayer who is a married person and who is unable to claim the spousal tax credit because of the amount of the spouse's income will not be entitled to claim the equivalent-to-spouse tax credit.

Paragraph 18 of the bulletin sets out the Department's general position prohibiting the alternative claim of an equivalent-to-spouse credit where the spousal tax credit is denied only because of the income of the spouse. We would draw your attention to paragraph 11 of the bulletin which deals with situations where there is a change in marital status. Paragraph 11(a), in particular, provides that where an individual becomes entitled to a credit under more than one provision during the year he or she is allowed the one that is most beneficial. Even though the technical reading of paragraph 118(1)(b) of the Income Tax Act (the Act) would suggest that a determination of the individual's entitlement under paragraph 118(1)(a) is required, which could preclude an alternative claim under paragraph 118(1)(b), it is a longstanding policy of the Department to permit the application of the provision most beneficial to the taxpayer in the year of a change in status from married to single or vice versa.

The correspondence to which you refer dealt with a situation where two individuals, each maintaining a self-contained domestic establishment wherein they supported at least one child, each satisfied the criteria for entitlement to the equivalent-to-spouse credit early in the taxation year and then later married each other, coming under the scope of paragraph 118(1)(a) of the Act. The letter concluded that the individuals would each be entitled in that year of change to the more beneficial equivalent-to-spouse tax credit. Since, for the purposes of the equivalent-to-spouse tax credit, each was supporting a child in a different self-contained domestic establishment in the year, they were not prohibited by paragraph 118(4)(b) of the Act from each claiming the credit.

We trust our comments will be of assistance to you.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch