20 July 2010 External T.I. 2010-0373061E5 - Equivalent to Spouse in the year of separation

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: 1) Is a spouse paying support entitled to claim the "equivalent to spouse" credit in the year of separation? 2) What happens if both spouses want to claim the "equivalent to spouse" and "child tax credit" in the year of separation? 3) Is an amended T1 required in the case where a person was separated late in the year, but entered "married" on the T1 (as the 90 day waiting period did not pass until early in the following year)?

Position: 1) Yes, but only if the individual is otherwise eligible, support payments are not claimed and if spouses agree. 2) Neither can claim the credit. 3) Filing an amended T1 return is not required; however, each taxpayer should file form RC65 after 90 days has passed to inform the CRA of the effective date of separation.

Reasons: 1) 118(4) and (5). 2) 118(4)(b) 3) Pamphlet P102 and RC65.

XXXXXXXXXX
				2010-037306
				T. Posadovsky, CMA
				(613) 952-8283
July 20, 2010

Dear XXXXXXXXXX :
Re: Claiming the "equivalent to spouse" credit in the year of separation.

I am replying to your email of July 6, 2010 concerning whether a spouse paying support is entitled to claim the "equivalent to spouse" credit in the year of separation. Further, you wish to know what would happen in the case where both spouses cannot agree who should claim the "equivalent to spouse" credit and/or the "child tax credit" in the year of separation.

Subsection 118(1) of the Income Tax Act (the "Act") allows several personal credits for the purposes of computing an individual's income tax payable. In the year in which a marriage breakdown occurs, such as in your case, an otherwise eligible individual is permitted to claim credits under subsection 118(1), in respect of a child, spouse or common law partner, if it is advantageous to do so and provided he or she does not claim a deduction for support payments pursuant to subsection 118(5) of the Act. Because of subsection 118(4), the equivalent-to-spouse tax credit cannot be claimed by more than one individual for the same person, or for the same residence. If the individuals are unable to agree as to who should claim the tax credit, neither can claim the credit.

Note that in the year in which there is a change in marital status, an individual may also meet the requirements for claiming the "spousal tax credit" under paragraph 118(1)(a) and the "equivalent-to-spouse" tax credit under paragraph 118(1)(b) of the Act. In such cases, the individual may claim the spousal tax credit or the equivalent-to-spouse tax credit, whichever is more beneficial, but not both.

The second part of your question concerns the "child tax credit". This credit under paragraph 118(1)(b.1) of the Act may only be claimed where:

1. the child ordinarily resides throughout the taxation year with that parent together with another parent of the child; or

2. the child would qualify as a wholly dependent person of the parent under paragraph 118(1)(b) of the Act for that taxation year.

Assuming they would otherwise qualify, paragraph 118(4)(b) of the Act requires that only one parent may claim the child tax credit for a particular child. If the child does not reside with both parents together throughout the entire year, the parent or the spouse or common-law partner who claims the "equivalent to spouse" amount for that child would be entitled to claim the child tax credit.

In your email, you also asked us to confirm whether it was necessary to file an amended T1 return in the case where a person was separated late in the year, but entered "married" on the T1 (as the 90 day waiting period did not pass until the following year). We confirm that it is not required to file an amended T1 return in this situation. However, where a separation exceeds 90 days due to a breakdown in the relationship, the effective day of the "separated" status is considered to be the day the spouses started living separate and apart. Each spouse should complete Form RC65, Marital Status Change, and send the form to the applicable tax centre or tax services office as soon as possible. Informing the Canada Revenue Agency of the effective date of separation helps calculate entitlement to the Canada Child Tax Benefit, Working Income Tax Benefit advance payments, and/or the GST/HST Sales Tax Credit. This form is available on our website at www.cra-arc.gc.ca, under the heading "Forms and Publications".

We trust that these comments have been of assistance.

Yours truly,

Randy Hewelett
Manager
for Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch