Category Archives: Child Tax Benefit

Cunningham v The Queen, 2012 TCC 279

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Claiming the Child Tax Benefit pursuant to ITA Section 118 – Differences Between Section 8 and Section 9 of the Federal Child Support Guidelines.

Cunningham v The Queen, 2012 TCC 279

At issue was whether, on joint custody of a single child, the parents were able to both claim the Canada Child Tax Benefit according to their agreement pursuant to subsection 118(5.1).

The Court held that a joint custody agreement under section 9 of the Guidelines is one single payment, not a set-off payment, and therefore ITA subsection 118(5.1) does not come into play, and the parent who pays child support cannot claim the credit pursuant to 118(5) of the ITA.

The Husband (“taxpayer”) and his wife divorced and in their separation agreement shared custody of their only child.  The child has resided with each of them for about 50% of the time.  The parties agreement with respect to child support specified that they based it on section 9 of the Federal Child Support Guidelines, SOR/97-175 dealing with shares custody.  In their separation agreement, the parties agreed that they would alternate in taking the Canada Child Tax Benefit.

The Father claimed the benefit in 2009, but the MNR reassessed and denied the benefit to the taxpayer pursuant to subsection 118(5) on the basis that the taxpayer was required to pay support to his spouse or former spouse.

Justice Boyle reviewed the law applicable.  Paragraph 118(1)(b.1) provides a tax credit in respect of a taxpayer’s child under 18, but subsection 118(5) denies that credit to a taxpayer who has paid child support to his spouse or former spouse.  Subsection 118(5.1) restricts the application of 118(5), such that the latter will not apply if the effect would be to deny the credit to both partners.  In case that 118(5.1) applies, paragraph 118(4)(b.1) provides that both parents are entitled to the credit according to their agreement as to which one will claim it on an annual basis (failing which the credit it denied to both of them.

The relevant provisions read:

118. (1) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted an amount determined by the formula

[…]

(b.1) if

(i) a child, who is under the age of 18 years at the end of the taxation year, of the individual ordinarily resides throughout the taxation year with the individual together with another parent of the child, the total of

[…]

(4) For the purposes of subsection 118(1), the following rules apply:

[…]

(b.1) not more than one individual is entitled to a deduction under subsection (1) because of paragraph (b.1) of the description of B in that subsection for a taxation year in respect of the same child and where two or more individuals otherwise entitled to such a deduction fail to agree as to the individual by whom the deduction may be made, no such deduction for the year shall be allowed to either or any of them;

[…]

(5) No amount may be deducted under subsection (1) in computing an individual’s tax payable under this Part for a taxation year in respect of a person where the individual is required to pay a support amount (within the meaning assigned by subsection 56.1(4)) to the individual’s spouse or common-law partner or former spouse or common-law partner in respect of the person and the individual

(a) lives separate and apart from the spouse or common-law partner or former spouse or common-law partner throughout the year because of the breakdown of their marriage or common-law partnership; or

(b) claims a deduction for the year because of section 60 in respect of a support amount paid to the spouse or common-law partner or former spouse or common-law partner.

[…]

(5.1) Where, if this Act were read without reference to this subsection, solely because of the application of subsection (5), no individual is entitled to a deduction under paragraph (b) or (b.1) of the description of B in subsection (1) for a taxation year in respect of a child, subsection (5) shall not apply in respect of that child for that taxation year.

The Court referred to past cases where in cases of joint custody the taxpayer’s appeals have been dismissed by the TCC, including: reasons for judgment of Woods J. in Perrin v. Her Majesty the Queen, 2010 TCC 331, those of Webb J. in Melnyk v. Her Majesty the Queen, 2007 TCC 733, and those of Lamarre J. in Ladell v. Her Majesty the Queen, 2011 TCC 314.

Shared custody arrangements are governed by the guidelines, and there are not two offsetting support payments payable by the parents – there is only one parent required to make support payments.  The SCC in Contino v. Leonelli‑Contino [2005] 3 SCR 217, stated that in shared custody under section 9 of the guidelines, child support was NOT payable on a set-off basis, but rather the parent with the higher income is required to make net payments equal to the difference between the two support amounts.  This is in contrast to section 9 cases of split custody (each parent having custody of a different child), which does provide for a set-off.

Therefore, since there is only one support payment made under section 9 of the guidelines in joint custody, ITA subsection 118(5.1) does not come into play and the parent who pays support cannot claim the credit.

Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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Ethier v The Queen, 2012 TCC 241

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Determining Who the “Eligible Individual” is in Respect of a Child when the Child Doesn’t Live Exclusively With One Parent.

Ethier v The Queen, 2012 TCC 241

The issue was the factual determination of when the child began living with the father, and therefore until when the taxpayer (mother) was the “eligible individual” in respect of the son as defined under section 122.6 of the ITA.

The court considered the wording of the section and the factors under section 6302 of the Income Tax Regulations, before concluding that on the evidence the taxpayer remained the person primarily responsible for the care and upbringing of the son, despite the part-time residence at the father’s home.

The taxpayer was reassessed and denied the Canada Child Tax Benefit (CCTB) she received for the periods under consideration (2007, 2008, 2009) in respect of her son.  This was based on her not being the “eligible individual” as she did not reside with the child and is not primarily fulfill the responsibility for the child’s care and upbringing. However, the Crown at trial did not contest that the taxpayer fulfilled the responsibilities of the child’s care and upbringing until December 2008, so the issue became the months in 2009 and 2010.

The taxpayer divorced from the child’s father on October 10, 2005, and was granted legal custody of the child, who resided with her.  The father had access rights.  Sometime in 2009, the child began staying with his father while still living with the taxpayer.

The two spouses lived about two kilometers apart.  The taxpayer demonstrated, using a calendar she kept, that her son stayed with her during the months in question and that the son began spending more time and more nights with the father, until he moved with the father permanently in June 2010.

The father claimed that the son moved in on a full-time basis in January of 2009, and relied on a note from the principal of the son’s school, a handwritten note from the son, and the employer of the girlfriend of the father.

The Court began with a review of the relevant portions of the definition of “eligible individual” in section 122.6 of the ITA, which reads:

“eligible individual” in respect of a qualified dependant at any time means a person who at that time

(a)     resides with the qualified dependant,

(b)     is the parent of the qualified dependant who primarily fulfils the responsibility for the care and upbringing of the qualified dependant,

[. . . ]

(h)     prescribed factors shall be considered in determining what constitutes care and upbringing;

The Court noted that paragraph (b) of the definition was replaced by SC 2010 c 25, subsection 24(2) to be applied to overpayments that arise after June 2011.  The amendment allows the sharing of overpayments for dependents equally between those two eligible individuals who live separately but share custody on an equal or near-equal basis, and who are both primarily responsible for the care of the dependent.  This, however, has no application in this case.

The Regulations at section 6302 require the consideration of the following factors:

For the purposes of paragraph (h) of the definition “eligible individual” in section 122.6 of the Act, the following factors are to be considered in determining what constitutes care and upbringing of a qualified dependant:

(a)     the supervision of the daily activities and needs of the qualified dependant;

(b)     the maintenance of a secure environment in which the qualified dependant resides;

(c)     the arrangement of, and transportation to, medical care at regular intervals and as required for the qualified dependant;

(d)   the arrangement of, participation in, and transportation to, educational, recreational, athletic or similar activities in respect of the qualified dependant;

(e)     the attendance to the needs of the qualified dependant when the qualified dependant is ill or otherwise in need of the attendance of another person;

(f)     the attendance to the hygienic needs of the qualified dependant on a regular basis;

(g)     the provision, generally, of guidance and companionship to the qualified dependant; and

(h)     the existence of a court order in respect of the qualified dependant that is valid in the jurisdiction in which the qualified dependant resides.

The Court reviewed the evidence and concluded that the taxpayer never gave up her responsibility as the primary caregiver of her son, even when the son lived part-time under the father’s roof.  She had legal custody of her son up to June 2010, and continued her responsibility for the care and upbringing of the son (medical expenses, education, recreational activities).  The court relied on receipts provided by the mother, and the lack of receipts from the father, dealing with care costs of the son.

The Court concluded that the taxpayer was the eligible individual in relation to her son at the beginning of the month for each of the six-month period ending June 30, 2009 and of the twelve-month period ending on June 30, 2010, for purposes of claiming the CCTB.

– Sas Ansari, BSc BEd PC JD LLM PhD (exp) CPA In-Depth Tax 1, 2 &3

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