Principal Issues: [TaxInterpretations translation] Can a person with a dependent child who has been placed with her by a youth centre receive the wholly dependent person tax credit by virtue of paragraph 118(1)(b) of the Income Tax Act (the "Act")?
Position: Probably, if all the conditions of section 118(1)(b) are satisfied. A question of fact.
Reasons: If all the other conditions of paragraph 118(1)(b) of the Act are satisfied, an individual would be entitled to the wholly dependent person tax credit if the individual is wholly responsible for the support of a dependent child and has de jure or de facto custody and control of the child under the extended definition of "child" in paragraph 252(1)(b) of the Act.
April 11, 2008
Jonquière Tax Service Office Headquarters Client Services Business and Partnerships Division 2251 René-Levesque Blvd., Jonquière Lucie Allaire, Advocate, CGA Attention: Ghyslaine Larouche 2007-023962
Tax credit for a wholly dependent person
This is further to your memorandum dated June 7, 2007, in which you asked whether a person is related to a child in the care of a youth centre for the purpose of obtaining the wholly dependant person tax credit under paragraph 118(1)(b) of the Income Tax Act (the "Act") for the 2001 to 2005 taxation years. We apologize for the delay in responding to your request.
The documentation submitted with your application contains the following facts:
- A child, born on XXXXXXXXXX, has been placed in the care of the taxpayer since the age of two and a half, i.e. since 1993, by a youth centre.
- The youth centre concerned confirms that the taxpayer has not received any remuneration from the Direction de la protection de la jeunesse (Youth Protection Branch) for several years and the taxpayer confirms that the child has been in her care since 1998.
- According to the taxpayer, the father has not claimed the wholly dependent person tax credit for approximately five years.
Our Comments
Under paragraph 118(1)(b) of the Act, an individual may claim the wholly dependent person tax credit if the individual does not claim a deduction for the year under paragraph 118(1)(a) and if, at any time in the year
(i) is
(A) a person who is unmarried and who does not live in a common-law partnership, or
(B) a person who is married or in a common-law partnership, who neither supported nor lived with their spouse or common-law partner and who is not supported by that spouse or common-law partner, and
(ii) whether alone or jointly with one or more other persons, maintains a self-contained domestic establishment (in which the individual lives) and actually supports in that establishment a person who, at that time, is
(A) except in the case of a child of the individual, resident in Canada,
(B) wholly dependent for support on the individual, or the individual and the other person or persons, as the case may be,
(C) related to the individual, and
(D) except in the case of a parent or grandparent of the individual, either under 18 years of age or so dependent by reason of mental or physical infirmity,
Determining whether the taxpayer has actually supported the child, has custody and control of the child and whether the child is wholly dependent on the taxpayer can only be done with certainty after an examination of all the facts relevant to that particular situation.
Section 252 expands the definition of certain terms in the Act to include individuals who would not normally be considered blood relatives. By virtue of paragraph 252(1)(b), a child of a taxpayer includes 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. In that respect, the term "custody" generally means the right to determine the residence, care (physical and moral), education and even religion of a minor child. Thus, even if there is no biological parental link between the taxpayer and the child, the taxpayer can be considered to be related to the child.
On the basis of the facts submitted, we understand that the place where the child lived during the years 2001 to 2005 on a regular and habitual basis is the taxpayer's self-contained domestic establishment. In that situation, we assume that the child did not live with the child’s parents in the same self-contained domestic establishment at any time during the taxation years in question and that the child's mother did not claim the wholly dependent person tax credit for those years. Paragraph 118(4)(b) states that only one individual is entitled to the wholly dependent tax credit for the same person. Thus, if two or more individuals would otherwise be entitled to this deduction, they must agree on which of them will claim it. If no agreement is reached, the credit is not granted to any of them.
Furthermore, another condition in clause 118(1)(b)(ii)(B), which is also repeated in paragraph 252(1)(b), is that the child be wholly dependent on the taxpayer. Generally, an individual has a wholly dependent child where the individual contributes financially to all of the child's basic needs on a regular and consistent basis. In addition, it is our view that maintenance refers to economic or financial support for the provision of necessities of life such as food, shelter, medical care and clothing.
Consequently, we are not in a position to reach a definitive conclusion because we do not know all the details surrounding the financial contribution for the child's maintenance. In fact, according to Quebec legislation and regulations, a financial contribution is payable by the parents where a minor child is housed by a youth centre in a foster home. In this respect, the facts submitted in this case do not indicate whether the parents were exempted from paying the financial contribution or whether the taxpayer's rights to recover any compensation against the Province are statute-barred. However, for this particular case only, and if all the other conditions for the application of paragraph 118(1)(b) are otherwise satisfied, the taxpayer may be entitled to the wholly dependent person tax credit, if she actually supports the child who is wholly dependent on her.
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 will be of assistance.
Best regards,
Randy Hewlett
Manager
Business and Partnerships Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch.