Principal Issues: [TaxInterpretations translation] 1. Should the CRA take into account the changes brought about by the Johanne Maurice case when considering the tax treatment of amounts received by the mother of an accident victim as home care allowances for the victim?
2. Is the amount received from the SAAQ in this situation taxable?
Position: 1. Yes
2. No
Reasons: 1. The amount could not have been included in the mother's income before 2001 because it did not have income status. The decision in Maurice was made on March 19, 2001. The changes brought about by this decision apply to the mother for her 2001 taxation year in accordance with our policy on the scope of tax judgements.
2. The mother was caring for a minor or mentally incompetent child. Consequently, the situation is similar to the one in Maurice where the judge concluded that the amounts received from the SAAQ were not taxable.
August 3, 2004
Mr. Victor Girard Headquarters Chicoutimi Tax Services Office Sylvie Labarre, CA Client Services (613) 957-8953
2004-007799
Amount received from the Société de l'assurance automobile du Québec
This is further to your memorandum in which you asked for our opinion on the tax treatment of an amount received from the Société de l'assurance automobile du Québec (SAAQ).
In 2001,XXXXXXXXXX ("Madame") received an amount of $XXXXXXXXXX from the SAAQ. This amount was received as a personal home assistance amount to assist her son XXXXXXXXXX ("Son"), who was the victim of an accident, under the personal home assistance program.
This amount was received following the assessment of the Son's personal assistance needs for the period XXXXXXXXXX, the results of which were sent to the Son on XXXXXXXXXX. The SAAQ had then awarded amounts for the years XXXXXXXXXX and onwards and the SAAQ indicated that a form had to be completed to obtain a refund of the eligible amounts. The amount of $XXXXXXXXXX also includes the amount paid for the purpose of the year 2001.
The Son was born on XXXXXXXXXX. According to the Disability Tax Credit Certificate, the Son suffers from a traumatic brain injury with cognitive sequelae and is unable to think, perceive and remember.
You wish to know if the amount of $XXXXXXXXXX is taxable.
Our Comments
The decision in Johanne Maurice v. Her Majesty The Queen (T.C.C.), 2001 DTC 3710, has had an impact on our previous position on the taxation of amounts received from a government agency or an insurance company, for example, to compensate a family member of the disabled person for the care and support services they provided. This decision was issued on March 19, 2001.
The Canada Revenue Agency's (CRA) usual policy on the scope of tax judgments that result in a change to a previous CRA interpretation or position that is beneficial to taxpayers is that the change applies in respect of all future assessments or reassessments.
In 2001, the SAAQ awarded compensation to Madame for personal assistance services and determined the amount. Madame received the amount in 2001. Consequently, we are of the view that there must be an examination as to whether the amount is part of Madame's business or employment income for the year 2001 and not for a previous year. On the one hand, the amount could not have formed part of Madame's business income before 2001 because it did not have "income status" before that date, even though the compensation paid covered services for the period beginning in XXXXXXXXXX, and on the other hand, the amount could not have been added to her employment income before 2001 because Madame did not receive it before that date.
Since the decision in Maurice was rendered on March 19, 2001, the changes brought about by this decision must be taken into account in determining whether the amount received from the SAAQ by Madame is taxable in 2001, in accordance with our policy regarding the scope of judgments.
Assuming it was not from employment, our general position is that if an activity generates a profit, that activity was undertaken with a view to making a profit and constitutes a business. However, following Maurice, we accept that there may be exceptional situations where amounts received by the father or mother of a victim who is a minor or mentally unfit to manage the minor’s affairs are not taxable in the hands of the father or mother even though those amounts were received by them in their capacity as the person rendering the services.
The present situation appears to us to be similar to that in Maurice, since Ms. Maurice's child was a minor until XXXXXXXXXX and then continued to be mentally unfit. In Maurice, Ms. Maurice was receiving amounts for home help services to personally care for her minor and mentally incompetent daughter. In that case, the judge was of the view that Ms. Maurice had a support obligation towards her daughter. He considered that the complainant had not intended to make a profit in this particular situation and that she would have taken care of her daughter even if she had not received any money for that care. The judge therefore concluded that those amounts were not taxable. In situations similar to Ms. Maurice's, we consider that the amounts received for home help would not be taxable since, in such circumstances, the notion of profit is difficult to envisage. Consequently, in this situation, the amount of $XXXXXXXXXX is not taxable.
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. Should you require further information on the content of this document, please do not hesitate to contact us.
Ghislaine Landry, CGA
for the Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch