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: 1. Does the exemption in 81(1)(h) of the Income Tax Act apply where a taxpayer carries on a business of providing a residence to other individuals?
2. Would the number of other individuals residing with the taxpayer impact the application of exemption in 81(1)(h) of the Income Tax Act?
3. Is a payment made under the Ontario Disabilities Support Program Act similar to the family allowance provided under the Family Allowances Act?
Position: 1. Provided all the conditions provided for in paragraph 81(1)(h) of the Income Tax Act are met, the fact that the taxpayer carries on a business of providing a residence to the other individuals will not, in and of itself, prevent the application of that exemption.
2. Provided all the conditions provided for in paragraph 81(1)(h) of the Income Tax Act are met, the number of other individuals residing with the taxpayer will not, in and of itself, prevent the application of that exemption.
3. A payment made under the Ontario Disabilities Support Program is not similar to the family allowance provided under the former Family Allowances Act.
Reasons: 1. The taxpayer is an individual and is not carrying on the business within a corporation.
2. The taxpayer is receiving social assistance payments based on a means, need or income test for the benefit of each of the individuals. Any payment received in excess of this amount would not be eligible for the exemption under paragraph 81(1)(h) of the Income Tax Act.
3. The payments under the Ontario Disability Support Program Act are not based on the age of the individual.
XXXXXXXXXX 2005-011437
Luisa A. Majerus, CA
(613) 957-2138
March 9, 2005
Dear XXXXXXXXXX:
Re: Application of Paragraph 81(1)(h) of the Income Tax Act (the "Act")
This is in reply to your letter of February 2, 2005 requesting our views on the application of paragraph 81(1)(h) of the Act.
You have asked whether the exemption in paragraph 81(1)(h) of the Act would apply if the taxpayer carries on a business of providing residences to other individuals referred to in that paragraph provided that the conditions of paragraph 81(1)(h) are met. Additionally, you are concerned whether the number of other individuals residing with the taxpayer impacts the application of this exemption. Finally, you have inquired whether a payment under the Ontario Disabilities Support Program Act is similar to the family allowance provided under the Family Allowances Act for the purposes of subparagraph 81(1)(h)(i) of the Act.
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.
Paragraph 81(1)(h) of the Act provides that no amount shall be included in the income of a taxpayer for a taxation year where an amount is received by the taxpayer and all of the following conditions apply:
? The taxpayer is an individual;
? The taxpayer receives a payment that is a social assistance payment ordinarily made on the basis of a means, needs, or income test;
? The payment is made under a program provided for by a federal, provincial or territorial law;
? The taxpayer, directly or indirectly, receives the payment for the benefit of another individual;
? The other individual is not the taxpayer's spouse or common-law partner or related to the taxpayer or the taxpayer's spouse or common-law partner;
? No family allowance under the Family Allowances Act or any similar allowance provided for by provincial or territorial law is payable in respect of the other individual for the period for which the social assistance payment is made; and
? The other individual resides in the taxpayer's principal place of residence, or the taxpayer's principal place of residence is maintained for use as the other individual's residence, during the period for which the payment is made.
The types of business or employment relationships accepted by the Canada Revenue Agency ("CRA") to which paragraph 81(1)(h) may still apply are provided for in Income Tax Technical News #31 ("ITTN 31"). Where the taxpayer is self-employed, the payments received by the taxpayer are not subject to CPP or EI and the payments may qualify for the exemption in paragraph 81(1)(h) of the Act provided all of the above conditions are met. For your information ITTN 31 can be found on our website at www.cra-arc.gc.ca.
The number of other individuals residing with the taxpayer will not, in and of itself, impact the application of the exemption in paragraph 81(1)(h) of the Act provided all the conditions noted above are met. However, please note that the "principal place of residence" requirement is not met in situations where the taxpayer and the other individuals do not share common living areas in the residence. This includes the kitchen, living room, dining room, family room and entrances to the home. For example, where the taxpayer lives in one unit of a duplex and the other individual lives in the other unit, the principal place of residence requirement would not be met.
Finally, you have inquired whether a payment under the Ontario Disability Support Program Act ("ODSPA") would be similar to the family allowance provided under the Family Allowances Act. It is our understanding that the Family Allowances Act has been repealed. It is our view that a payment under the ODSPA is not similar to the family allowance provided under the former Family Allowances Act.
We trust this information meets your needs at the current time.
Yours truly,
John Oulton, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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