Principal Issues: (1) Whether the facts outlined in the letter will meet the "principal place of residence" requirement of paragraph 81(1)(h). (2)Whether payments made to casual assistants will be exempt from income tax.
Position: General comments provided.
Reasons: Question of fact
XXXXXXXXXX 2008-027518 A. Townsend December 16, 2008
Dear XXXXXXXXXX :
This is in response to your fax requesting our comments on whether a certain arrangement would meet the principal place of residence requirements as set out in subparagraph 81(1)(h)(ii) of the Income Tax Act, and consequently exempt the receipt of social assistance payments from income. In addition, you are requesting confirmation that any remuneration paid to casual assistants would also be exempt for income tax purposes.
The situation outlined in your letter appears to relate to a factual one. Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. We are, however, prepared to offer the following general comments, which may be of assistance.
All statutory references in this letter are references to the provisions of the Income Tax Act, R.S.C. 1985 (5th supp.) c. 1, as amended (the "Act").
Section 81 lists various amounts that are not included in computing a taxpayer's income for a taxation year. In general, paragraph 81(1)(h) excludes from income social assistance payments paid to an individual caregiver (the "Caregiver") for the benefit of an adult or child under the person's care (the "Cared-for Individual"). One of the requirements for this exemption is that the Cared-for Individual reside in the Caregiver's principal place of residence or, the Caregiver's principal place of residence is maintained for use as the Cared-for Individual's residence, during the period for which the payment is made.
Income Tax Technical News 31R2 provides factors to consider when determining principal place of residence. These factors include where the individual normally sleeps, where the individual receives his or her mail, and where the individual's immediate family, including the individual's spouse or common-law partner and children, reside. Other factors to consider are the responsibility for the cost of maintenance of the separate residence and the location of the Caregiver's personal belongings.
The determination of an individual's principal place of residence is a question of fact that must be decided on a case by case basis. In the situation you have described, we are of the view that the care home does not constitute the Caregiver's principal place of residence.
With respect to your second question, a Caregiver may employ other individuals to assist in providing the care giving services. It is our view that the income exclusion under paragraph 81(1)(h) does not apply to the remuneration paid to the casual assistant. The Cared-for Individual would not be residing with the casual assistant, and similarly the casual assistant's residence would not be maintained for use as the Cared-for Individual's residence. Depending on the facts of each case, the subject payments may be income from a business under section 9 or employment income under section 5.
We trust these comments are helpful.
Lita Krantz
Assistant Director
For Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch