15 September 1998 External T.I. 9807225 - CHILD CARE EXPENSES - N/R SUPPORTING PERSON

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:

Does the reference to income of a supporting person in subsection 63(2) of the Act mean world income of the supporting person or only income that is taxed in Canada?

Position TAKEN:

World income.

Reasons FOR POSITION TAKEN:

Position taken in other files. Under the scheme of the Act, the provisions of Division B of Part I apply to require both residents and non-residents to calculate their “income” for the year in the same manner. Therefore, for the purposes of calculating a non-resident person’s “income” for the year under various provisions of the Act, the non-resident person’s “income” will be calculated under section 3 of the Act, on the same basis as a resident of Canada. The 1995 Technical Notes regarding section 180.2 support this view, as does the wording used in sections 115 and 118.94.

XXXXXXXXXX 5-980722
M. Azzi
September 15, 1998

Dear Madam:

Re: Child Care Expenses

This is in reply to your letter of March 8, 1998, wherein you requested our views on whether, for purposes of the child care expense deduction under section 63 of the Income Tax Act (the “Act”), income of a non-resident supporting person includes world income or only Canadian source income.

We understand that, in XXXXXXXXXX, you moved from Canada to the US

XXXXXXXXXX

You indicate that your spouse’s 1998 income from his new employer will be in the order of $XXXXXXXXXX US, and will be US sourced, while your employment income with XXXXXXXXXX will amount to $XXXXXXXXXX (Canadian dollars), such that your spouse’s 1998 world income will far exceed yours. You also expect to incur at least $XXXXXXXXXX in child care expenses in 1998. You indicate that, pursuant to proposed amendments to subsection 250(1) of the Act, contained in the Notice of Ways and Means Motion of the February 24, 1998 federal budget, your spouse will elect to be treated as a non-resident of Canada as of February 24, 1998. As a result, you indicate that your spouse’s income which will be subject to Canadian tax, that is, his world income from January 1 to February 23, 1998, will be less than your income which will be subject to Canadian tax. We have assumed that your spouse’s world income for the period from January 1 to February 23, 1998 exceeds your income for that same period.

Our Comments

Whether an individual is a non-resident of Canada is a question of fact which must be determined on a case-by-case basis, and requires an analysis of all relevant facts. We are therefore not in a position to comment on the residency status of your spouse. However, we would note that it is our opinion that income of a supporting person referred to in subsection 63(2) of the Act means income as determined under section 3 of the Act, notwithstanding that the supporting person is a non-resident of Canada. In other words, it means world income of the supporting person, not only income that is taxed in Canada. Accordingly, you should be entitled to a child care expense deduction in 1998, subject to the limitations described in subsection 63(1) of the Act.

We trust that these comments will be of assistance.

Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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