11 April 2011 External T.I. 2011-0397251E5 - "Custody and Control" and Wholly Dependant"

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.

Principal Issues: Under the extended meaning of the word "child" under 252(1), when is a person considered to be "wholly dependant on a taxpayer for support" and when is a taxpayer considered to have, "in law or in fact, the custody and control" of a person? Will a parent and an individual with whom the parent cohabits in a conjugal relationship be considered "common-law" when the cohabiting individual is not the parent of the child by birth or adoption, and the couple have not been living together for at least a year?

Position: Provided general discussion of the definitions of "wholly dependant" and "custody and control'. Whether two particular individuals who cohabit in a conjugal relationship are common-law is always a question of fact.

Reasons: Previous interpretations given.
CRA PUBLICATIONS: T1 General Income Tax and Benefit Guide, 2009-0352771E5,

XXXXXXXXXX
									2011-039725
      								Andrea Boyle, CGA

April 11, 2011

Dear XXXXXXXXXX :

Re: Definition of "Custody and Control" and "Wholly Dependant"

I am writing in reply to your email dated February 23, 2011, in which you asked for clarification of the meaning of "custody and control" and "wholly dependant" in the context of determining whether a parent and an individual with whom the parent co-habits in a conjugal relationship would be considered to be "common-law". Specifically you have asked whether a parent and a cohabiting individual, who is not a parent of the child by birth or adoption, would be considered common-law partners when the couple have not yet been living together for at least a year.

The particular situation outlined in your email may relate to a factual one, involving a specific taxpayer. Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. We are, however, prepared to offer the following general comments, which may be of assistance.

All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended ("the Act").

Under the definition in 248(1) of the Act, a "common-law partner" of a taxpayer means a person who cohabits at that time in a conjugal relationship with the taxpayer and, either has cohabited with the taxpayer for a continuous period of at least one year, or is considered to be a "parent" of a child of whom the taxpayer is also a parent. In other words, in order for two individuals cohabiting in a conjugal relationship to be considered common-law partners in the first year of cohabitation, both individuals must be considered parents of a child.

An individual can be considered the parent of a child for income tax purposes when they are either the biological or adoptive parent of a child. Furthermore, because of the extended meaning of the word "child" provided in 252(1) of the Act, a taxpayer can, for income tax purposes, be considered to be a parent of a child that is "wholly dependent on the taxpayer for support" and of whom the taxpayer has "in law or in fact, the custody and control."

In general terms, support involves the provision of the basic necessities of life such as food, shelter, and clothing. "Wholly dependent for support" means that the child is financially dependent on the individual such that the individual provides almost entirely for the child's well being.

A child is generally not considered to be "wholly dependent for support" on an individual who cohabits with the parent of the child, if the parent or the child has income of some significance or there are other sources of significant financial support for the parent and/or the child. Examples of other potential sources of "support" for a child could include (but are not limited to): financial contributions from the other biological parent of the child, financial contributions to the parent from other family members, or student loans or scholarships provided to a parent to cover living expenses while attending school.

Generally, "custody and control" involves the right of determining the residence, protection, care (physical, mental, and moral), education, and religion of a minor child. Custody and control involves not only the right to make the major decisions, such as those concerning the residence, health, education, and religion, but also the routine decisions of effective parental care and guidance which arise in the daily activities of a minor child, such school attendance, meal preparation, and the imposition and enforcement of house rules (e.g. rules concerning TV watching, Internet surfing, curfew and so on).

It is a question of fact whether a person is wholly dependent for support on a taxpayer and whether that taxpayer has, in law or in fact, the custody and control of that person. However, we are of the view that, in most cases when a parent and an individual (who is not a parent of a child by birth or adoption) move in together, they would likely not be considered to be common-law until they have been living together for a year. In most of these cases we would not expect that both criteria required for the cohabiting individual to be considered to be a "parent" of the child - i.e. "wholly dependant for support" and "custody and control" - would be met.

We trust that these comments will be of assistance.

Yours truly,

Guy Goulet C.A., M.Fisc.
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch