22 February 2005 External T.I. 2004-0097361E5 - Infirm Dependant

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.

Principal Issues: To determine if the taxpayer is eligible for an income tax reduction under the Ontario Income Tax Act for an infirm dependant.

Position: Yes.

Reasons: The taxpayer is eligible for an income tax reduction under the Ontario Income Tax Act for an infirm dependant if an amount is claimed pursuant to subsection 118.3(2) of the Federal Income Tax Act and subsection 4(3.1) of the Ontario Income Tax Act.

2004-009736
XXXXXXXXXX Luisa A. Majerus, CA
(613) 957-2138
February 22, 2005

Dear XXXXXXXXXX:

Re: Infirm Dependent Child

This is in reply to your email dated October 5, 2004, concerning a taxpayer's eligibility for an Ontario tax reduction amount for an infirm dependent child. Specifically, your client (the "parent") has a 20-year-old dependent child with low income. The parent is eligible for the caregiver amount on line 315 of the Federal "Schedule 1" and line 5840 of the Ontario form "ON428" in his personal income tax return. You are concerned that the parent does not qualify for a reduction of Ontario tax for this dependent on line 54 of the Ontario form ON428.

Background

Subsection 118(4) of the Federal Income Tax Act (the "Act") limits the deductions available to the taxpayer under subsection 118(1) of the Act. Specifically, paragraph 118(4)(d) of the Act provides that where paragraph 118(1)(c.1) of the Act (the caregiver amount - line 315 of the Federal Schedule 1) applies, a person who has attained the age of 18 years before the end of the year and was dependent on the taxpayer because of a mental or physical infirmity is deemed not to be a dependant for the purposes of paragraph 118(1)(d) of the Act (the infirm dependant amount - line 306 of the Federal Schedule 1). In other words, where the parent may otherwise deduct an amount for the caregiver amount and the infirm dependant amount, paragraph 118(4)(d) of the Act prevents the parent from claiming the infirm dependant amount and allows the parent to claim only the caregiver amount. Please refer to the notes to lines 306 and 315 in the T1 guide.

The Ontario Income Tax Act ("ON Act") provides for the same treatment of these amounts on form ON428 in that the parent is prevented from claiming the infirm dependant amount on line 5820 of form ON428 and allows the parent to claim only the caregiver amount on line 5840 of form ON428.

However, in addition to the caregiver amount, the parent may also claim the disability amount transferred from a dependant on line 318 of the Federal Schedule 1 and line 5848 of the Ontario form ON428 provided the requirements of subsection 118.3(2) of the Act and subsection 4(3.1) of the ON Act are met.

Our Comments

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. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following general comments.

In order to qualify for an Ontario tax reduction, Step 4 of the Ontario Guide 5006-N "Completing your Ontario Forms" provides that one person can claim the reduction for a dependent child or a disabled or infirm dependant on lines 53 and 54 respectively of form ON428. The instructions to line 54 state, "Enter beside box 6097 the number of disabled or infirm dependants for whom you or your spouse or common-law partner claims an amount on line 5816 ("eligible dependant amount"), 5820 ("infirm dependant amount"), or 5848 ("disability amount transferred from a dependant") of Form ON428."

It is your understanding that since the parent is only claiming a caregiver amount on line 5840 of the form ON428 and not claiming an infirm dependant amount on line 5820 of the form ON428, the parent is not entitled to the reduction on line 54 of form ON428. We agree. Under paragraph 7(2.8)(b) of the ON Act, where a taxpayer is deducting an amount under paragraph 118(1)(c.1) of the Federal Act, the taxpayer will not be able to include an amount for the purposes of calculating the Ontario tax reduction.

However, it is our understanding that where the parent claims the disability amount transferred from a dependant on line 5848 of form ON428, the parent will be entitled to the Ontario tax reduction for this dependant on line 54 of form ON428.

We trust this information is helpful.

Yours truly,

John Oulton, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch