Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues:
Tax treatment of amounts received to operators of open custody homes.
Position TAKEN:
General information provided.
Reasons:
Question of fact.
XXXXXXXXXX 2002-013513
T. Young, CA
June 12, 2002
Dear XXXXXXXXXX:
Re: Open Custody Home Operators
This is in reply to your letter of March 18, 2002, to the XXXXXXXXXX Tax Centre requesting their views on whether amounts paid to open custody homes operators (the "Operators") in XXXXXXXXXX would qualify for the exemption from income under paragraph 81(1)(h) of the Income Tax Act (the "Act"). We also acknowledge our telephone conversations of June 5 (Young/XXXXXXXXXX ) and June 6 (Young/XXXXXXXXXX).
Your enquiry relates to XXXXXXXXXX who receive payments for operating open custody homes as defined in subsection 24.1(1) of the Young Offenders Act. The Operators perform tasks, within the scope of agreements with XXXXXXXXXX to provide care and supervision of youth placed in their homes by XXXXXXXXXX. In your view, these payments and tasks are similar to those associated with persons engaged by XXXXXXXXXX to operate foster homes for children and youth placed in those homes by XXXXXXXXXX. In our discussion with XXXXXXXXXX, he indicated that the youths are placed in the Operator's home for sentences generally ranging from three months to one year. The Operators also receive payments to maintain space in their home during periods when no one is in their care.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Therefore, we can only provide you with the following general comments, which we hope will assist you in determining if each home operator qualifies for the exemption under paragraph 81(1)(h) of the Act.
Paragraph 81(1)(h) of the Act excludes certain social assistance payments from the income of a taxpayer, who is an individual, if all of the conditions set out in the paragraph are met. In order for the payments to the caregivers to be exempt under paragraph 81(1)(h), they would have to be payments of social assistance and would have to satisfy the following conditions:
1. The payments must be ordinarily made on the basis of a means, needs, or income test.
2. The payments must be made under a program provided for by federal or provincial law.
3. The payments must be received directly or indirectly by the caregiver for the benefit of the cared-for individual.
4. The cared-for individual cannot be the caregiver's spouse or common-law partner or related to the caregiver or the caregiver's spouse or common-law partner.
5. No family allowance under the Family Allowances Act or any similar allowance provided for by provincial law can be payable in respect of the cared-for individual for the period for which the social assistance payments are made.
6. The cared-for individual must live in the caregiver's principal place of residence; or the caregiver's principal place of residence must be maintained for use as the cared-for individual's residence during the period for which the payments are made.
Although it is a question of fact whether amounts received by a particular Operator meet the requirements of the exemption under paragraph 81(1)(h) of the Act, in our view, providing all of the above conditions are met, the payments would be exempt.
If you require further assistance in determining the income tax treatment of these payments and whether paragraph 81(1)(h) of the Act would apply, please contact the Client Services Division of the XXXXXXXXXX Tax Services Office.
We trust our comments will be of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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