| 5-920735 | |
| 19(1) | A. Payette |
| (613) 957-8953 |
April 9, 1992
Dear 19(1)
Re: Common-law Couples and the Equivalent-to-married Tax Credit
We are writing in reply to your letter of February 13, 1992, wherein you requested the Department's interpretation on the "equivalent-to married" tax credit under paragraph 118(1)(b) of the Income Tax Act (the "Act") under two different situations.
The first situation deals with the situation where two individuals, living in a common-law relationship for the entire year, change residences during the year. They each have one child and in your opinion, one individual could claim the equivalent-to-married tax credit for one child with respect to one residence without prohibiting the other individual from claiming the equivalent-to-married tax credit for the other child with respect to the second residence. The second situation concerns two individuals, cohabiting in a residence for the entire year. Each individual is either single, divorced, separated or widowed for the entire year and is the natural parent of one child who is residing with the individual. You mention in your letter, that, although you think it is an oversight of the legislation, only one individual can claim the equivalent-to-married tax credit because they are cohabiting in the same domestic establishment.
Our Comments
As explained in Information Circular 70-6R2 dated September 28, 1990, a copy of which is enclosed, an advanced ruling is a written statement given by the Department to a taxpayer stating how it will interpret specific provisions of existing Canadian income tax law in its application to a definite transaction or transactions which the taxpayer is contemplating. Since your request does not relate to a proposed transaction, we are unable to provide you with a ruling. You will also note that there is a charge for this service. However, we are prepared to offer you the following general comments which may be of some assistance.
Paragraph 118(1)(b) of the Act reads as follows:
"(b) in the case of an individual not entitled to a deduction by reason of paragraph (a) (married tax credit) who, at any time in the year,
(i) is an unmarried person or a married person who neither supported nor lived with his spouse and is not supported by his spouse, and
(ii) whether by himself or jointly with one or more other persons, maintains a self-contained domestic establishment (in which the individual lives) and actually supports therein a person who, at that time, is (...)" Paragraph 118(4)(b) further restricts the equivalent-to-married tax credit:
"(b) not more than one individual is entitled to a deduction under subsection (1) by reason of paragraph (b) thereof for a taxation year in respect of the same person or the same domestic establishment..."
In your first situation, we agree that a change of residence during the year might entitle both individuals, living together in a common-law relationship the entire year, to the equivalent-to-married tax credit. As for your second situation, the Act specifically restricts the equivalent-to-married tax credit to one individual for the same domestic establishment. It should be noted that, in the budget of February 25, 1992, the Honourable Don Mazankowski, Minister of Finance, has indicated that common-law couples will be treated the same way as married couples under the tax system for 1993 and subsequent taxation years. The
Budget Papers state that, as a result of this change, common-law couples will be unable to claim the equivalent-to-married tax credit for 1993 and subsequent taxation years.
We trust our comments will be of assistance to you.
Yours truly,
P.D. Fuocofor DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch