Agence du revenu du Québec v. Cristofaro, 2021 QCCA 1025

The taxpayer, who was an Ontario resident, paid taxes in Quebec as a result of his professional firm carrying on a portion of its practice through Quebec office(s). The ARQ reassessed to reduce to nil his claim for tuition credits that had been transferred to him by his daughter (also an Ontario resident) who was studying at a university in Scotland, and who was a resident of Ontario and did not carry on business in Quebec. In its decision, the ARQ stated that “as the Plaintiff’s daughter is not subject to Quebec income tax, she is not entitled to the applicable tax credit, and as such cannot transfer it to the Plaintiff”.

Before confirming the ARQ view (and reversing the decision below), the Court noted that the daughter was not subject to Quebec income tax, referred to the Oceanspan decision as being “particularly illuminating” (para. 44, TaxInterpretations translation), and further stated (at para. 45):

The Oceanspan decision was recently cited … in the Marino decision. Mr. Marino immigrated to Canada in 2012. The Federal Court [i.e., Tax Court] refused to apply a tax credit, for tuition fees paid during the years 2002 to 2011, when Mr. Marino was studying in the United States, to the 2013 year. The Federal Court ruled that the term "taxation year" was not applicable to the years 2002 to 2011, based on the interpretation adopted by the Federal Court of Appeal in Oceanspan. It held that the term "individual" in the ITA refers only to "those individuals who are captured by Part I of the Act in the taxation year and thus are capable of computing tax payable under Part I for the taxation year.”

In 2003-0026827, CRA applied Oceanspan to find that a non-resident student who has no Canadian sources of income is precluded from transferring her unutilized tuition credits to her resident father under ITA s. 118.9 because:

an individual who is not resident in Canada and who has no Canadian source income would not be entitled to the tuition and education tax credits. The individual is not liable to pay tax in Canada, and therefore has no need to utilize the provisions permitting the tax credits.

Here, a similar approach was followed in finding that an Ontario-resident, who paid Quebec income taxes because a portion of his professional firm’s practice was in Quebec, could not be transferred a tuition credit (under the Quebec equivalent of s. 118.9) by his daughter studying in Scotland, who was resident in Ontario and had no Quebec sources of income. In addition to referring to Oceanspan as “particularly illuminating,” the Court quoted with approval the reasoning of Monaghan J in Marino (finding that U.S. tuition generated by a student while not a Canadian resident and without a source of income under s. 2(3) could not be carried forward to when he became a Canadian resident).