12 September 1989 Income Tax Severed Letter RCT-0132

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.

This is to confirm recent discussions with G. Balice on the above subject related to the draft version circulated by L.A. Donnelly on August 23.

Due to the absence of draft regulation or other supporting documentation it was not possible to verify the accuracy of the following:

Page 2 - "What's new for 1989"

• • Third bullet. Reference to $47,190 under line 235.

Page 3

• • The reference in the heading to an application for the goods and services tax credit.

Page 22

• • That part of the comments on line 235 that relate to recovery of 0.1. benefits.

Page 28

• • The "Note" at the end of the page.

Page 43

We understand that the Province of Ontario has confirmed the accuracy of this page.

Numerous typographical errors were noted (mainly words run together) but these are not enumerated because we understand corrections have been made. Specific comments that we felt to be important from a technical perspective are

• • Page 14, line 130, - "Other income" - See Appendix.
• • Page 16 - Calculation of "earned income".
• RRIF payments are missing from the enumeration (we understand that this was deliberate).
• • Page 19, fourth bullet. We remain of the view that supportability for the last exception to the rule is doubtful.
• • Page 25, third bullet. See Appendix.
• • Page 29, fourth bullet under "How to claim". In the second sentence the reference to "pension income" is very imprecise and may be confusing. An annuity under a DPSP can be rolled under paragraph 60(j) but would not normally be described as a "pension". In addition, all of the receipts enumerated in the first 17 bullets under line 314 are described as "pension income" but only a few may be rolled. There is a similar problem with the heading of Chart 3.
• • Page 30, Chart 3, line (9)

Reference to line (1) should be to line (3).

• • Page 31 - Example
• The line "Her tuition fees" should be deleted because only sections 118 and 118.7 are to be taken into account under paragraph 118.3(2)(d). The figures need to be recalculated and the table realigned.
• • Page 35 - Minimum tax
• The first sentence may be misleading because minimum tax liability would be more likely to arise from deductions or credits claimed than from payments received.
• • Page 38 - line 549-4, third bullet. See Appendix.
• • Page 40, First bullet
• We found the words "minimum security institution" to be an inadequate description of an institution similar to a prison. We understand that "other penal institutions will now be used.

We understand that not all of our concerns can be accommodated at this time for 1989 but hope that these will be carefully considered next year.

APPENDIX

We continue to have some difficulty with the comments concerning payments for caring for disabled adults.

• a) Paragraph 56(1)(u) does not have application if the adult In respect of whom the payment is being made is not related to the recipient.
• If payments in respect of unrelated adults are to be included in income it seems to us that it would have to be under section 9. Where this is the case such amounts should be reported on lines 135 to 143 by the recipient but your comment requires a taxpayer claiming the recipient as a dependant to add the amounts to the recipient's income again. This is obviously wrong.
• b) Paragraph 56(1)(u) does not refer to "disabled" persons. If welfare or social assistance payments do include payments in respect of persons who are not disabled your comments are too narrow in scope.
• c) Subparagraph 110(1)(f)(iii) allows a deduction in computing taxable income only to a recipient residing with the person in respect of whom the payment is made. Thus, a recipient in receipt of such a payment in respect of a person not living in the same residence should report this as income on line 130 and no adjustment should be made under lines 301 or 549-4.
• d) The deduction under subparagraph 110(1)(f)(iii) appears to be available to a recipient in the business of providing such services if living in the same residence as the person being cared for. We do not know how common this would be, but your second sentence seems to be based on the premise that this is not possible.
• e) We attach a copy of a recent article that is very critical of the department's treatment of foster parents. Although we believe that the substance of the criticism is unfounded, you may want to consider disassociating the comment about businesses from the comments on foster parents. We are uncertain as to the number of persons carrying on foster parenting as a business but it would seem to us to be relatively insignificant to those in the business of caring for adults.