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:
Individuals receive amounts for caring for foster children. The issue is the nature of the amounts for income tax purposes.
Position:
The amounts are taxable as salary or wages under subsection 5(1) of the Act.
Reasons:
The individuals are provided with vehicles, are reimbursed for expenses they incur in respect of the children, and are supervised.
970344
XXXXXXXXXX M. Eisner
Attention: XXXXXXXXXX
April 10, 1997
Dear Sirs:
Re: Foster Children and Funds From Provincial Governments
This is in reply to your letters of February 7 and March 14, 1997 concerning the above noted subject.
In your letter, you have set out a situation where Mrs. X is paid by the provincial government under a foster parenting program. She is responsible for the care of 11 children who live in two rented homes. Care is provided by two couples (the Caregivers) who have been hired to live in the homes with the children, as well as and by other individuals (part-time caregivers) who are hired by Mrs. X on a part-time basis for the weekends. Mrs. X supervises the care of the children. Mrs. X pays all the expenses in respect of the care of the children, including the leasing and maintenance of two vehicles .
You have asked us whether the Caregivers are required to report the amounts they receive from Mrs. X for being foster parents and, if this is the case, whether they are entitled to deduct the amounts in computing their incomes (on the basis that paragraphs 56(1)(u) and 110(1)(f) of the Income Tax Act (the Act) apply). In addition, you have asked whether Mrs. X is entitled to deduct 100% of the costs she incurs in respect of the two vehicles and whether the Caregivers are required to report standby charges and operating benefits in respect of the vehicles.
On the basis of the above information provided to us, it is our view that Mrs. X is carrying on business and, accordingly, must report her annual profit and loss under section 9 of the Act on her T-1 income tax return. It is also our view that the Caregivers (as well as the part-time caregivers) are employees of Mrs. X. Accordingly, the amounts paid to them for caring for the children are taxable as salary or wages under subsection 5(1) of the Act.
Where an employer provides an employee with a vehicle, a benefit in that regard is required to be included in the employee's income. We have enclosed Interpretation Bulletin IT-63R5 and the pamphlet entitled "Employers' Guide to Payroll Deductions" which discuss vehicle benefits. As a further comment, benefits may be required to be included in the employees' incomes in respect of board and lodging under paragraph 6(1)(a) of the Act.
On the basis that Mrs. X is carrying on a business, it is our view that she would be entitled to deduct vehicle expenses to the extent that they are laid out to earn income. Accordingly, whether or not Mrs. X may deduct 100% of the vehicle costs is a question of fact. A discussion of these expenses is set out in Interpretation Bulletin IT-521R and the pamphlet entitled "Business and Professional Income" which has been enclosed for your reference.
If you require further assistance, you should contact the tax services office in your area.
We trust our comments will be of assistance to you but caution that they do not constitute an advance income tax ruling and, accordingly, are not binding on the Department.
Yours truly,
John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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