Principal Issues: [TaxInterpretations translation] (1) Can Mr. A and Ms. B each claim the credit under 118(1)(b)? (2) Must only one parent claim the child amount under paragraph 118(1)(b.1) in respect of three children or is it possible for one parent to claim the child amount in respect of two children and the other parent to claim the child amount in respect of the remaining child?
Position: (1) Yes, to the extent that the conditions set out in 118(1)(b) are met. (2) Mr. A and Ms. B must each claim the child amount under paragraph 118(1)(b.1) in respect of the child for whom they claim the credit under paragraph 118(1)(b). Either Mr. A or Ms. B may claim the child amount under subparagraph 118(1)(b.1)(ii) in respect of the third child for whom no credit is claimed under paragraph 118(1)(b).
Reasons: Interpretation of the Act.
April 6, 2010
Jonquière Tax Services Office Income Tax Rulings Directorate Client Services Pierre-Luc Meunier Attention: Caroline Labrecque 2009-034309
Children's amount
This is further to your email of October 2, 2009, in which you requested our views on the application of paragraphs 118(1)(b) and (b.1) as well as subsection 118(4) of the Income Tax Act (the "Act").
Unless otherwise indicated, all legislative references herein are to the provisions of the Act.
You described the following situation for which you wish to have our comments:
- two taxpayers, Mr. A and Ms. B, had been living in separate self-contained domestic establishments since XXXXXXXXXX due to the breakdown of their relationship;
- Mr. A and Ms. B have not had any other spouses since their separation;
- three children were born to them, in 1991 or subsequently;
- both taxpayers had joint custody of their three children;
- no support payments were made by either taxpayer;
- in the month of XXXXXXXXXX, Mr. A and Mrs. B decided to resume living together.
For the 2008 taxation year, you wish to know in what manner both parents could claim the tax credits under paragraphs 118(1)(b) and (b.1).
In addition, you wish to know whether, because of the restrictions imposed by subsection 118(4), Mr. A and Ms. B must agree on which of them will claim the amount under subparagraph 118(1)(b.1)(ii) for the three children, or, given that at some time in 2008 each parent maintained a separate self-contained domestic establishment, whether they can agree that one parent will claim the amount in respect of one child and the other will claim it in respect of the other two children.
Our Comments
The wholly dependent person credit under paragraph 118(1)(b) may be claimed by an individual in respect of a child provided the following criteria are satisfied:
- the individual does not claim the credit under paragraph 118(1)(a);
- at any time in the year, the individual maintains and resides in a separate self-contained domestic establishment in which the individual actually supports the child for whom the credit is claimed and who is, at that time, wholly dependent for support on the individual.
Paragraph 118(1)(b.1) provides the amount that, after being multiplied by the basic rate for the year, is deductible by an individual in computing tax payable under Part I of the Act. This amount is equal to $2,000 (endnote 1) per eligible child under 18 years of age at the end of a taxation year and is available to the following persons:
(i) in the case of a child who resides with both parents throughout the year, either parent,
(ii) in the case of a child who does not reside with both parents throughout the year, the parent who is entitled to claim the wholly dependent person credit under paragraph 118(1)(b) in respect of the child or who would be entitled to claim such a credit if paragraph 118(4)(a) did not apply to the child for the year.
By virtue of paragraph 118(4)(b), only one individual is entitled to the equivalent wholly dependent credit under paragraph 118(1)(b) or the child amount under paragraph 118(1)(b.1) in respect of the same person or the same domestic establishment. Where two or more individuals otherwise entitled to such a deduction fail to agree as to the individual by whom the deduction may be made, no such deduction for the year shall be allowed to either or any of them.
With respect to the credit under paragraph 118(1)(b), although both parents satisfy the requirements of that provision, we are of the view that only one of the parents could claim this credit in respect of the same child by virtue of paragraph 118(4)(b).
With respect to the credit under paragraph 118(1)(b.1), subparagraph (i) is inapplicable since the children were not ordinarily resident with both parents throughout 2008. However, the wording of subparagraph 118(1)(b.1)(ii) provides that “the individual may deduct an amount under paragraph (b) in respect of the individual’s child …, or could deduct such an amount in respect of that child if paragraph 118(4)(a) did not apply to the individual for the taxation year… $2,000 for each such child.” Since paragraph 118(4)(b) provides that only one individual, for example, Mr. A, is entitled to the tax credit under paragraph 118(1)(b) for the same person, such as the oldest child, Mrs. B would not qualify to claim either the credit under paragraph 118(1)(b) or the credit under paragraph 118(1)(b.1) in respect of that child, because of the phrase "may deduct an amount under paragraph (b)" is not satisfied.
Since Mr. A and Ms. B lived in separate self-contained domestic establishments during the period of the year in which they lived apart, the concept of the same "self-contained domestic establishment" in 118(4)(b) does not restrict the right of Mr. A and Ms. B to agree to claim the credits under paragraphs 118(1)(b) and (b.1) in respect of a different child. Either Mr. A or Ms. B may claim the child amount under subparagraph 118(1)(b.1)(ii) in respect of the third child for whom no credit is claimed under paragraph 118(1)(b).
Access to Information
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, the electronic library version can be provided. Alternatively, the client may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Ms. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
We hope that these comments are of assistance.
Best regards,
François Bordeleau, LL.B.
Manager
Business and Partnerships Section
Business and Partnerships Section Division
Income Tax Rulings Directorate.
ENDNOTES
1 Amount subject to indexing by virtue of subsection 117.1(1). For 2008, it was $2,038.