2 February 1999 External T.I. 9833805 - FOSTER CHILDREN CARE

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:

Are certain payments received under a provincial foster parenting program exempt from taxation?

Position:

Insufficient information and completed or ongoing transaction.

Reasons:

General information concerning the possible application of paragraph 81(1)(h) of the Act.

XXXXXXXXXX 			983380
J. E. Grisé
Attention: XXXXXXXXXX 

February 2, 1999

Dear Sirs:

Re: Foster Children Care

This is in reply to your letter of December 10, 1998 requesting clarification regarding the income tax treatment of individuals in receipt of funds paid by a provincial government under a foster parenting program.

The clarification you have requested seem to be in respect of completed or ongoing transactions. As set out in paragraph 22 of Information Circular 70-6R3, Advance Income Tax Rulings (the circular), written opinions on completed transactions are normally considered by our tax services offices. This was the basis of our previous advice to contact your local tax services office should you require further assistance. However, we are prepared to offer the following general comments which may be helpful to you.

Paragraph 81(1)(h) of the Income Tax Act provides an exemption from inclusion in computing the income of a taxpayer in respect of certain social assistance payments received by an individual. A social assistance payment will not be included in the income of an individual for income tax purposes, if all of the following conditions are met:

• The payments must be ordinarily made on the basis of a means, needs or income test.
• The payments must be made under a program provided for by federal or provincial law.
• The payments must be received directly or indirectly by the individual for the benefit of another individual (the “cared-for individual”).
• The cared-for individual cannot be the individual’s spouse or related to the individual or the individual’s spouse.
• No family allowance under the Family Allowances Act or any similar allowance provided for by provincial law can be payable in respect of the cared-for individual for the period for which the social assistance payment is made.
• The cared-for individual must live in the individual’s principal place of residence, or the individual’s principal place of residence must be maintained for use as the cared-for individual’s residence during the period for which the payments are made.

We are now of the view that the above exemption can apply where the payments received are otherwise employment income to the recipient. As indicated in the third item above, the funds can be received through an intermediary and still qualify providing the other requirements are met.

We hope our comments are helpful.

Yours truly,

J.F. Oulton, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

Enclosure

c.c.: Client Services
Burnaby-Fraser TSO
- 3 -

.../cont’d