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: Is the spouse of a catastrophically injured person required to pay tax on money received from the injured person's personal care allowance in return for the care provided to that person in the family home?
Position: In this case, No
Reasons: In accordance with paragraph 3(a) of the Act, income of a taxpayer for a taxation year is the total of all amounts each of which is the taxpayer's income for the year (other than taxable capital gains from the disposition of property which are treated separately) from an office, employment, business or property. Generally, where a payment from an insurance company is meant to offset personal expenses to attend to a severely injured spouse's care, the payment is not included in income for income tax purposes.
XXXXXXXXXX 2011-039824
B. Ruttan-Morillo
June 30, 2011
Dear XXXXXXXXXX :
Re: Personal Care Allowance
I am writing in response to your email of March 7, 2011 concerning the taxation of payments received for attendant care. More specifically, you have enquired whether an individual must include in taxable income amounts received for the care of a spouse severely injured in a car accident.
In the situation you described, an individual provides daily care to her spouse who was classified as catastrophically injured under provincial legislation governing their public insurance company. The family home was renovated by the insurance company in order that the individual could bring her injured spouse home to be with his family rather than remaining institutionalized. The injured spouse receives a monthly personal care allowance from the insurance company to provide for 24 hour care since he is unable to walk, talk, eat properly or carry out the activities of daily living. However, in order to maintain the monthly personal care allowance, the individual is required to sign a form each month stating that she provides at least 8 hours of care a day to her injured spouse. The form also states that she does this in the capacity of an independent contractor.
The individual maintains a part-time job which requires her to be out of the house for an average of 5 hours per day during which time resource aides are employed to provide for her spouse's care. The aides are paid by the insurance company from her spouse's monthly personal care allowance. After the resource aides are paid, the balance of the personal care allowance is deposited in her spouse's name to their joint bank account.
Our Comments
Written confirmation of the tax implications inherent in particular transactions may only be provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the Internet at http://www.cra-arc.gc.ca. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to provide the following general comments.
Paragraph 3(a) of the Income Tax Act (the "Act") provides that the income of a taxpayer for a taxation year is the total of all amounts each of which is the taxpayer's income for the year (other than taxable capital gains from the disposition of property which are treated separately) from a source inside or outside Canada including the taxpayer's income for the year from an office, employment, business or property. It is a question of fact as to whether the payments received for the attendant care of an injured spouse can be considered income from employment or business (i.e. as a self-employed individual) in accordance with paragraph 3(a) of the Act.
In our view, it would be difficult to conclude that payments from an insurance company in respect of the care of an injured person are income of the spouse who provides care in the family home. Generally, such arrangements do not have the requisite element of compensation to be considered income for tax purposes. It is our view that such a payment is more than likely meant to offset additional personal expenses incurred in providing the care and therefore is not included in income for income tax purposes.
We trust these comments will be of assistance.
Phyllis Waugh
A/Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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