Principal Issues: [TaxInterpretations translation] In a particular situation where, following the breakdown of their relationship, two spouses have continued to live in the same home, who is eligible for the wholly dependant person [“equivalent to spouse”] credit, the child amount or the child care expense deduction?
Position: Question of fact. On the facts before us, it appears that the spouses have lived separate and apart due to marriage breakdown while remaining in the same self-contained domestic establishment, thereby limiting the possibilities for allocating the equivalent wholly dependent credit and the child amount. Child care expenses incurred in the year will be deductible by the parent who paid the child care expenses, provided that all the conditions for claiming the deduction are satisfied.
Reasons: Interpretation of the Act, previous ITRD positions and relevant jurisprudence.
XXXXXXXXXX 2010-036484 Pierre-Luc Meunier July 27, 2010
Dear Sir,
Subject: Tax issues arising from separation
This is in response to your letter of April 23, 2010, in which you asked for our opinion on the effect of your separation on your ability to claim certain credits and deductions such as the wholly dependant person [“equivalent to spouse”] credit, the child amount, and the child care expense deduction.
Unless otherwise indicated, all legislative references herein are to the provisions of the Income Tax Act (the "Act").
Your request described the following situation:
- You have been separated from your spouse since XXXXXXXX 2009.
- In the agreement that was submitted to the Court for a divorce judgment that should be issued shortly, the official date of your separation is also XXXXXXXX 2009.
- Despite your separation, you remained under the same roof as your spouse because of your two children.
- You and your spouse have continued to function as a family financially (joint bank account and joint expenses).
In a telephone conversation on April 28, 2010, you told us that throughout the period beginning on XXXXXXXXXX 2009 and ending on XXXXXXXXXX 2010 you and your spouse:
- Occupied separate bedrooms.
- Did not have sexual relations.
- Had little communication except with respect to your children, which was mostly by e-mail.
- Did not do housework for each other.
- Ate meals separately
- Did not have common social activities.
You also stated in that conversation that you had a higher income than your spouse.
Our Comments
It appears to us that the situation described in your letter and summarized below 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 documentation to the appropriate Tax Services Office for its opinion. However, we can offer the following general comments that may be helpful.
The courts have held that it is possible for two spouses to live separate and apart due to marriage breakdown, even if they still live under the same roof, in the following circumstances (footnote 1):
- the spouses occupy separate bedrooms;
- the absence of sexual relations between the spouses;
- little, if any, communication between the spouses;
- no domestic services between the spouses;
- the spouses eat their meals separately;
- the spouses have no social activities in common.
The question of whether, for the purposes of the Act, two spouses are living separate and apart by reason of a breakdown of their marriage, even if they are still living under the same roof, is a question of fact, which can only be resolved after a full examination of all the relevant facts of a particular situation. Although there are several elements to be considered, it is not essential that all the elements be present in a particular situation.
Based solely on the facts you have presented to us, we are of the view that the existence of a joint account and the payment of joint expenses does not prevent you and your spouse from living separate and apart due to the breakdown of your marriage on XXXXXXXXXX 2009.
Assuming that, since that date, you have been living separate and apart because of a breakdown of your marriage, either you or your spouse would be able to claim the wholly dependant person [“equivalent to spouse”] credit under paragraph 118(1)(b) in respect of one of your children, to the extent that the married or common-law partner credit under paragraph 118(1)(a) is not claimed and you were not supporting or dependent on your spouse at any time in the year (footnote 2). Since you lived in the same self-contained domestic establishment as your spouse throughout 2009, it is not possible for both of you to claim the wholly dependant person [“equivalent to spouse”] credit because of the restrictions imposed by subparagraph 118(4)(b). If you and your spouse do not agree on who will claim the credit, neither of you will be entitled to it.
The person claiming the equivalent wholly dependent person credit with respect to one of your children could also claim the child amount under paragraph 118(1)(b.1) for both children (footnote 3). Paragraph 118(4)(b) again limits the possibilities for sharing this credit.
With respect to child care expenses, there does not appear to be a "supporting person" (footnote 4) in the situation you have presented to us, since even if you lived in the same household as your spouse, you likely did not "reside with" her at any time during the first 60 days of 2010 (footnote 5).
In this case, child care expenses may be deducted under subsection 63(1) by the paying parent for child care expenses incurred by him or her in the year of separation, provided all other conditions for claiming the deduction are satisfied. For more information on these conditions, refer to Interpretation Bulletin IT-495R3, Child Care Expenses, which is available at the following Internet address: http://www.cra-arc.gc.ca/E/pub/tp/it495r3/it495r3-e.html.
Best regards,
François Bordeleau, LL.B.
Manager
Business and Partnerships Section
Business and Partnerships Division
Income Tax Rulings Directorate.
FOOTNOTES
Due to our system requirements, footnotes contained in the original document are reproduced below:
1 See, in particular, Kelner v. The Queen, [1996] 1 C.T.C. 2687.
2 In the event that the person wishing to claim this credit in respect of a child was required to pay support for 2009 in respect of that child, as well as in respect of the spouse, we refer you to paragraph 35 of Interpretation Bulletin IT-530R, Support Payments, which deals with additional restrictions and is available at the following Internet address: http://www.cra-arc.gc.ca/E/pub/tp/it530r/it530r-e.html.
3 See comments under footnote 2 which are also applicable to this credit.
4 Under the definition provided in subsection 63(3).
5 See the Eliacin v. The Queen, [1993] 2 C.T.C. 2635 (T.C.C.) and Bronec v. The Queen, [1996] 3 C.T.C. 2637 (T.C.C.) decisions for an analysis of the phrase “resides with”.