8 October 1997 Ruling 9726213 - FINANCIAL DEPENDENCE, INFIRM

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 Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Can we rule that a child is financially dependent on an annuitant and whether the child is dependent on the annuitant by reason of physical or mental infirmity?

Position:

No

Reasons:

Question of fact. In addition, there were alternate courses of action if favourable ruling can't be provided.

	               	972621
XXXXXXXXXX           M.P. Sarazin

Attention: XXXXXXXXXX

October 8, 1997

Dear Sirs:

Re: Advance Income Tax Ruling Request
XXXXXXXXXX

This is in reply to your letter dated September 23, 1997, wherein you requested an advance income tax ruling on behalf of the above-noted taxpayer.

For the reasons disclosed in paragraphs 15(d) and (j) of Information Circular 70-6R3, we regret that we are unable to provide you with the requested advanced income tax rulings because the ruling contains alternate courses of action that may be undertaken by the taxpayer and the rulings would depend on the existence of XXXXXXXXXX financial dependence on XXXXXXXXXX at the time of her death and the existence of XXXXXXXXXX dependence on XXXXXXXXXX by reason of mental infirmity which are both a question of fact.

For the purposes of determining whether a person is to be considered financially dependent on the annuitant of an RRSP, the definition of refund of premiums provides that it is assumed that, unless the contrary is established, a dependent is not financially dependent on the annuitant for support at the time of the annuitant's death if the income of the dependent for the taxation year immediately preceding the year in which the annuitant died exceeded the amount in paragraph 118(1)(c). We also refer to paragraph 18 of Interpretation Bulletin IT-500R wherein the Department has expressed its views on financial dependency for the purposes of the "refund of premiums" definition. XXXXXXXXXX we would find it extremely difficult to support a conclusion that he was financially dependent on XXXXXXXXXX at the time of her death. The fact that XXXXXXXXXX is not able to maintain the same standard of living that was provided by XXXXXXXXXX when he lived with her in Canada would not, in and by itself, make him financially dependent. We believe that the legislation did not intend to provide for the characterization as a refund of premiums where the child's lifestyle may not be maintained.

The Department has not addressed what is required to be considered dependent by reason of physical or mental infirmity for the purposes of clause 60(l)(v)(B) of the Act. You would have to prove that XXXXXXXXXX was dependent on XXXXXXXXXX because of some physical or mental infirmity at the time of her death before the amount would be eligible for any rollover under paragraph 60(l) of the Income Tax Act. The fact that XXXXXXXXXX was able to XXXXXXXXXX would, in our view, substantiate the fact that XXXXXXXXXX was not dependent on XXXXXXXXXX by reason of being mentally infirm. In addition, the fact that he started up his own business, whether it failed or not, would also support a conclusion that he was not dependent on XXXXXXXXXX by reason of being mentally infirm. Consequently, the facts, as presented, do not support the existence of any dependence as a result of the existence of a physical or mental infirmity.

We are now closing our file and we will be returning your deposit under separate cover.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch