12 January 2000 External T.I. 9932925 - FAMILY CARE PAYMENTS

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 family care payments received in part from Social Services and Mental Health taxable?

Position:

Insufficient information and completed or ongoing transaction.

Reasons:

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

XXXXXXXXXX 993292
J. E. Grisé
January 12, 2000

Dear XXXXXXXXXX:

Re: Family Care Payments

This is in reply to your fax of December 16, 1999 requesting clarification regarding the income tax treatment of family care payments paid in part by Social Services and Mental Health for the care of foster children or handicapped adults.

The clarification you have requested seems to be in respect of completed or ongoing transactions. As set out in paragraph 22 of Information Circular 70-6R3, Advance Income Tax Rulings, written opinions on completed transactions are normally considered by our tax services offices. 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 in computing the income of an individual in respect of certain social assistance payments received by the 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 indirectly ( i.e. through an intermediary) and still qualify provided the other requirements are met. Accordingly, a payment made to the individual by the cared-for individual may qualify for exemption provided the cared-for individual received the funds from which the payment is made on the basis of a means, needs or income test under a program provided for by federal or provincial law. A payment from the Canada Pension Plan would not be a payment made on the basis of a means, needs or income test.

We hope our comments are helpful. Please contact your local tax services office should you require further assistance.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch

Enclosure

??

- 2 -