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This translation was prepared by Tax Interpretations Inc. The CRA did not issue this document in the language in which it now appears, and is not responsible for any errors in its translation that might impact a reader’s understanding of it or the position(s) taken therein. See also the general Disclaimer below.
Principal Issues: [TaxInterpretations translation] (1) Can a taxpayer claim the credit provided for in 118(1)(b) if the taxpayer pays support for the taxpayer’s children?
(2) Can the person in charge of a foster family claim the credit provided in 118(1)(b.1)?
(3) Can a taxpayer claim the credit provided in 118(1)(b) for the year in which the taxpayer obtains custody of the taxpayer’s child if the taxpayer has paid one month of support for that child in the year in question?
Position: (1) No (2) Probably not. (3) No.
Reasons: (1) and (3) Subsection 118(5) provides that a parent who is required to pay support for a child in a taxation year cannot claim the credit under subsecti1on 118(1)(b) in respect of that child for that taxation year.
(2) The foster child would not be considered the "child" of the foster caregiver for the purposes of the credit provided in 118(1)(b.1) where the head of the foster family receives social assistance payments for the needs and care of the child.
XXXXXXXXXX 2010-038222
I. Landry, M.Fisc.
April 29, 2011
Dear Madam XXXXXXXXXX,
Subject: Wholly dependent person credit and child amount
This is in response to your fax of September 30, 2010, in which you requested our opinion regarding the application of the wholly dependent person credit and the child amount in paragraphs 118(1)(b) and (b.1) respectively of the Income Tax Act (the “Act") in three particular situations.
Unless otherwise indicated, all statutory references herein are to the provisions of the Act.
Situation 1
First, you described a situation where two taxpayers, Mr. A and Ms. B, separated during the 2009 taxation year and since that time:
- Mr. A and Ms. B live in separate, self-contained domestic establishments due to the breakdown of their marriage;
- Mr. A and Ms. B have shared custody of their three children for one week each;
- Mr. A does not have any other spouses; and
- Mr. A is required to pay support for his children.
You wish to know if Mr. A can claim the wholly dependent person credit provided for in paragraph 118(1)(b) for the 2010 and subsequent taxation years even if he is required to pay support for his children.
Situation 2
In a situation where a foster family cares for a child, you wish to know if the person in charge of the foster family can claim the caretaker amount provided for in paragraph 118(1)(b.1) respecting that child.
Situation 3
Finally, you described a situation where a taxpayer, Mr. C, obtained custody of his child in February 2010 and was no longer required to pay support for that child from that point on. Mr. C paid child support for that child in 2010 only for the month of January. You wish to know if Mr. C can claim the wholly dependent person credit provided for in paragraph 118(1)(b) for the 2010 taxation year even though he was required to pay support for one month only.
Our Comments
It appears to us that the situation described in your letter and hereinafter summarized could constitute an actual situation involving taxpayers. As explained in Information Circular 70-6R5, it is not the practice of this Directorate to provide comments on proposed transactions involving specific taxpayers otherwise than in the form of an advance income tax ruling. If your situation involved specific taxpayers and one or more transactions, you should submit all relevant facts and documents to the appropriate Tax Services Office for their opinion. However, we are able to offer the following general comments that may be helpful to you. It should be noted that the application of one or more provisions of the Act generally requires the analysis of all facts relating to a particular situation. Accordingly, and in light of the fact that your letter only briefly describes a particular hypothetical situation, our comments below may not be fully applicable in a particular situation.
Comments on Situation 1
An individual may claim the wholly dependent person credit where the conditions in paragraph 118(1)(b) are satisfied. That paragraph states, in particular, that the individual must not claim the spousal or common-law tax credit under paragraph 118(1)(a), that the individual must not be married or live in a common-law relationship or, if that is the case, does not live with their spouse or common-law partner and is not supported by that spouse or common law partner, and must, at any time of the year, whether alone or jointly with one or more other persons, maintain a self-contained domestic establishment and actually support in that establishment a person who is wholly dependent for support on the individual. Paragraphs 11 to 22 of Interpretation Bulletin IT-513R, Personal Tax Credits (available on our Internet site at the following address: http://www.cra-arc.gc.ca/E/ pub / tp / it513r / it513r-e.html), provide further explanation of these conditions of application.
Subsection 118(5), however, provides that, notwithstanding the fact that an individual satisfies the conditions for the application of the wholly dependent person credit pursuant to paragraph 118(1)(b), no credit may be claimed in respect of a dependent where the individual lives separate and apart from the spouse or common-law partner or former spouse or common-law partner throughout the year because of the breakdown of their marriage or common-law partnership and is required to pay a support amount (within the meaning assigned by subsection 56.1(4)) to the individual’s spouse or common-law partner or former spouse or common-law partner in respect of the person. Consequently, where one of the parents with joint custody of children pays child support, only the parent, with shared custody of children, receiving child support is eligible to claim the wholly dependent person credit provided for in paragraph 118(1)(b), provided that the parent otherwise satisfies the conditions set out in paragraph 118(1)(b). However, where a taxpayer is required to pay child support for a particular child, the taxpayer may still claim the wholly dependent person credit provided in paragraph 118(1)(b) for another child for whom the taxpayer is not required to pay support provided that the taxpayer satisfies all the requirements of paragraph 118(1)(b).
We understand from the facts you submitted to us that Mr. A was required to pay child support for his three children. As a result, he would not be able to claim the wholly dependent person credit provided for in paragraph 118(1)(b) for the taxation years in which he was required to pay child support for his three children by virtue of subsection 118(5).
Comments on Situation 2
Paragraph 118(1)(b.1) provides that a caregiver amount may be claimed by the following individual for each child who is under the age of 18 at the end of the year:
(i) in the case of a child who resides with both parents throughout the year, one or the other of the parents,
(ii) in the case of a child who does not reside with both parents throughout the year, the parent who may, among other things, claim the wholly dependent person credit under paragraph 118(1)(b) in respect of the child.
The question of whether a child in foster care is a "child" of the taxpayer who is in charge of the foster family for the purposes of the child amount is a question of fact. The term "child" is not defined in the Act, but subsection 252(1) broadens the common definition to include:
- a person of whom the taxpayer is the legal parent;
- a person who is wholly dependent on the taxpayer for support and of whom the taxpayer has, or immediately before the person attained the age of 19 years had, in law or in fact, the custody and control;
- a child of the taxpayer’s spouse or common-law partner;
- a spouse or common-law partner of a child of the taxpayer.
A child living in a foster family could therefore be considered a "child" for the taxpayer having charge of the foster family in the broader sense of that term in subsection 252(1) if the child is a "a person who is wholly dependent on the taxpayer". We are of the view that a child residing in a foster family is not wholly dependent on the taxpayer in control of the foster family where the latter receives welfare benefits from a public institution for the needs and care of the child. In such a situation, the taxpayer having charge of the foster family could not claim the caregiver amount under paragraph 118(1)(b.1).
It is therefore not possible for us to answer the question asked without having analyzed all the relevant facts relating to the situation submitted.
Comments on Situation 3
Pursuant to paragraph 118(1)(b) and subsection 118(5) previously explained, if the custody of a child passes from one parent to the other during the year, the parent who obtains custody of the child cannot claim the wholly dependent person credit for that taxation year if that parent is required to pay child support for that child in that taxation year. On the other hand, the parent who obtains custody of the child may claim the credit for a subsequent taxation year provided that that parent is no longer required to pay support for that child during that subsequent taxation year.
In the situation submitted, Mr. C could not claim the wholly dependent person credit for the 2010 taxation year since Mr. C. was required to pay support for his child for the month of January 2010.
Best regards,
Guy Goulet CA, M. Fisc.
for the Director
Ontario Corporate Income Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.
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