6 March 1990 Internal T.I. F3396 F - Taxation of Family Allowances for Year of Separation

Taxation of Family Allowances For Year of Separation

This is in reply to your memorandum of November 8, 1989 in which you raised objections to a certain example in the 1989 T1 Guide (Mavis and Charles, under Line 304) illustrating the income tax treatment of family allowances in the year of separation.

We forwarded your concerns to Finance and have now received their reply.  A copy of our correspondence is enclosed for your information.

You will note that Finance agrees that to say the couple decided that neither of them would claim the equivalent-to-married amount for their 10 year-old daughter is somewhat unrealistic, but an example of a certain set of circumstances is given in which neither parent would be entitled to claim the equivalent to married exemption for the child.

Regarding the interpretation of subsection 56(6), Finance agrees with Asessings' interpretation, i.e. that even though Charles and Mavis were separated for more than 90 days commencing in the year when the matter is viewed as of the of the year, that Charles must report the family allowance for the four months before their separation, as the conditions in subparagraphs 56(6)(b)(i) and (ii) are met during those first four months and the test in subsection 56(6) as to which individual is deemed to have supported a child (and therefore required to report the family allowance payment) is one which must be applied on a month by month basis.  For example, at the end of each of the months January, February, March and April, Charles and Mavis were married and were not separated for a period of more than 90 days commencing in the year, and since Charles has the higher net income, he is required by virtue of subsections 56(5) and (6) to report the family allowance payments for those months.

We agree with Finance's view on this issue.

B.J. Bryson Acting DirectorCurrent amendments and Regulations Division

EnclosureNMS/jab