Principal Issues: 1. Taxpayer suggests use of taxable income for the purposes of calculating deduction under paragraph 118(1)(a).
Position: 1. The use of net income rather than taxable income is a question of tax policy.
Reasons: 1. The Legislation.
June 25, 2013
XXXXXXXXXX
Dear XXXXXXXXXX:
Thank you for your correspondence of April 24, 2013, about the amount for a spouse or common-law partner claimed on an income tax and benefit return.
Like you say, the amount for a spouse or common-law partner varies depending on the net income of the spouse or common-law partner. You believe it would be better to use the taxable income of the spouse or common-law partner rather than the net income to calculate that deduction.
The Canada Revenue Agency administers and enforces the Income Tax Act. The use of net income rather than taxable income to calculate many personal tax credits is a question of tax policy. The Department of Finance Canada is responsible for any changes to tax policy or amendments to the Act. You can share your suggestion with Finance Canada by writing to Tax Policy Branch, 17th Floor, East Tower, L'Esplanade Laurier, 140 O'Connor Street, Ottawa ON K1A 0G5.
Please note that when an individual's net income includes taxable dividends from a taxable Canadian corporation, the Act permits the transfer of that dividend income to the individual's spouse or common-law partner only when it allows the spouse or common-law partner to claim or increase his or her claim for the spouse or common-law partner amount. For more information, see the explanation about line 120 on page 15 of the General Income Tax and Benefit Guide.
I trust that the information I have provided is helpful.
Yours sincerely,
Gail Shea, P.C., M.P.
Minister of National Revenue
Robert Dubis
905-721-5191
2013-048710