15 April 1998 External T.I. 9724625 - EQUIVALENT TO SPOUSE TAX CREDIT - DE FACTO ADOPTIONS

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:

(1) Two single women live in the same house and share responsibility for the biological child of one of the women. Can the other woman, A, claim the equivalent to spouse tax credit for that child?

(2) If the answer to (1) is yes, can the biological mother claim the Child Tax Benefit ("CTB") and a GST credit for the child?

Position:

(1) To qualify for the equivalent to spouse tax credit, the requirements in paragraph 118(1)(b) must be satisfied. One such requirement is that the individual must be related to the child. In the circumstances described, the key is whether A can be considered to have factually adopted the child. This is a question of fact and law. Accordingly, we are unable to provide a definitive answer. However, we have set out the relevant criteria as established by jurisprudence.

(2) Generally, the provisions of the Act do not preclude a biological mother from claiming the CTB and a GST credit for her child if she otherwise meets all the requirements in sections 122.6 and 122.5 of the Act. It is a factual determination as to whether these requirements are met.

Reasons:

(1) Legislation and case law.

(2) Legislation.

XXXXXXXXXX 5-972462

April 15, 1998

Dear Madam:

Re: Equivalent to Spouse Tax Credit and Child Tax Benefit

This is in response to your letter of July 28, 1997, a copy of which was forwarded to us for reply by the Winnipeg Taxation Centre on September 15, 1997. We also acknowledge receipt of your letters dated October 2 and 15, 1997, and January 8 and February 12, 1998, and your facsimile of November 27, 1997.

You have asked for our views with regard to the availability of the equivalent to spouse tax credit, the Child Tax Benefit ("CTB") and the goods and services tax (GST) credit in circumstances involving two women, both of whom are single and neither of whom live in a common-law relationship with a person of the opposite sex. They live in the same house and share in the provision of the emotional, physical and financial needs of a six month old child. One of the women is the biological mother of the child and the other woman, A, has been appointed guardian of the child under Child Welfare Act of Alberta. You advise that there are no other persons responsible in any way for the child.

Please note that enquiries relating to a factual situation involving completed transactions fall within the responsibility of the Tax Service Offices. Accordingly, to the extent that you require assistance in determining the tax treatment with respect to a specific situation, all relevant facts and documentation should be submitted to your local office for their views in the matter. However, we can provide you with the following general comments which are not binding on the Department.

Your first question is whether A can claim the equivalent to spouse tax credit for the child. Under paragraph 118(1)(b) of the Income Tax Act (the "Act"), an individual who does not claim a spousal tax credit and who, at any time in the year, is not married or is married but did not support nor live with his or her spouse and is not supported by his or her spouse may be entitled to claim the equivalent to spouse tax credit if the individual maintained (either alone or jointly) a self-contained domestic establishment and actually supported in that establishment a person who, at that time, is:

(a) a resident of Canada, except in the case of a child of the individual;

(b) wholly dependent for support on the individual, or the individual and any other person or persons who jointly maintained the self-contained domestic establishment;

(c) related to the individual; and

(d) under 18 years of age or dependent by reason of mental or physical infirmity, except in the case of a parent or grandparent of the individual.

It is a factual determination as to whether all of the above requirements are satisfied. In the circumstances described, it appears that the key requirement which is of concern to you is whether A can be considered to be related to the child. Paragraph 251(2)(a) of the Act provides that individuals connected by blood relationship, marriage or adoption are related to each other for the purposes of the Act. Under paragraph 251(6)(c) of the Act, persons are connected by adoption if one has been adopted, either legally or in fact, as the child of the other. Under subsection 252(1) of the Act, a "child" of a taxpayer includes an adopted child of the taxpayer.

We note that adoption rules are governed by provincial law. While a legal adoption of the child has not occurred in the situation described, it is possible that a de facto adoption has taken place. Whether or not a de facto adoption has occurred is a question of fact that can only be determined with regard to the particular circumstances. In our view, the fact that an individual is appointed guardian of a child does not, in and of itself, constitute adoption in fact. We note that there is a limited number of reported income tax cases dealing with de facto adoptions. Generally, the courts will not recognize a de facto adoption unless the "adoptive" parent exercised parental care and guidance on a continuing basis. The factors to look for in determining whether a certain relationship between a person and a child constitutes an adoption in fact are actual control and custody, an exercise of parental care and responsibility on a continuing basis, dependency, and proximity to each other. Accordingly, if it can be established that A and the child have a de facto adoptive parent-child relationship, they would be "related" to each for income tax purposes with the result that A would be entitled to claim the equivalent to spouse tax credit for the child assuming that the other requirements set out in paragraph 118(1)(b) of the Act are met. Please note that the equivalent to spouse tax credit cannot, by virtue of paragraph 118(4)(b) of the Act, be claimed by more than one individual in respect of the same person or in respect of the same domestic establishment.

Your remaining questions concern the biological mother's eligibility for the CTB and a GST credit for the child. Generally, it would be expected that, where the CTB and an equivalent to spouse tax credit are claimed in respect of the claimant's child, both claims would be made by the same parent, since the equivalent to spouse tax credit is not intended to apply in a situation where a child resides with two parents. Likewise, in such a situation, one would expect that the incomes of both parents would be taken into account in computing the CTB and any GST credit claimed in respect of that child. However, we note that generally the provisions of the Act do not preclude a biological mother from claiming the CTB and a GST credit for her child if she otherwise meets all the requirements in sections 122.6 and 122.5 of the Act. Accordingly, each situation must be reviewed on the facts before any determination on eligibility can be made.

We hope that our comments are of assistance to you.

Yours truly,

Manager
Financial Institutions Section
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch