Taxpayer A and B, who are separated and living apart in separate homes, received a court order stating that Taxpayer A has sole custody of their minor child and requiring Taxpayer B to pay periodic support amounts for the child. Taxpayer C is a blood relative of Taxpayer B and is not married or in a common-law partnership.
Scenario 1
Two years after the court order took effect, the child begins living with Taxpayer B on a full-time basis. The court order is not varied, but Taxpayer A and B have a written agreement stating the child lives with Taxpayer B on a full-time basis. In commenting on the s. 118(1)(b) equivalent-to-spouse deduction, the Directorate stated:
[W]hether an individual is wholly dependant on a parent … does not solely depend on the custody arrangements defined in a Court Order. Therefore, if the particular facts of the case indicate that the child is financially dependent on Taxpayer B such that Taxpayer B provides almost entirely for the person’s well-being it could be determined that the child is wholly dependant for support on Taxpayer B.
… [G]iven the court order requires Taxpayer B to make child support payments and this court order has not been varied to remove the requirement for Taxpayer B to make child support payments, Taxpayer B will not be able to claim a credit under paragraph 118(1)(b) pursuant to subsection 118(5).
Scenario 2
Taxpayer A can no longer take care of the child so the child begins to live with Taxpayer C. The court order is not altered, but Taxpayer A and C have a written agreement. The Directorate commented:
The extended meaning of child includes a person that is wholly dependent on that individual for support if, before reaching 19 years of age, the person is or was under the individual’s custody and control, in law or in fact. Therefore, if the particular facts of the case indicate that the child is in Taxpayer C’s custody and control (whether it is the case in law or not) and the child is financially dependent on Taxpayer C such that Taxpayer C provides almost entirely for the child’s well-being it could be determined that the child is wholly dependant for support on Taxpayer C.
Subject to the limitations in subsection 118(4), Taxpayer C may be able to claim the EDC assuming all the remaining conditions of paragraph 118(1)(b) are met and subsection 118(5) does not apply.
Scenario 3
Taxpayer A and B become unreachable and the child commences to live full-time with Taxpayer C and be wholly dependent on Taxpayer C for support. No change is made to the court order.
The Directorate indicated that the answers were the same as for Scenario 2.
Scenario 4
Re where an altered court order for custody fails to state any change in the support arrangements, the Directorate stated:
If Taxpayer B is legally required to make child support payments, Taxpayer B will not be able to claim the EDC, pursuant to subsection 118(5).