Tax and Auditing

Manon Labrecque

Vs

Her Majesty The Queen

Tax Research Assignment

Table Of Contents

Summary 3

Background 4

Relevant Link Cases 6

Recommendations 7

Conclusion 8

Bibliography 9

Executive Summary

In the appeal between Manon Labrecque and Her Majesty the Queen; regarding Manon Labrecque's 2003 taxation year. The Minster of National Revenue disallowed a deduction in the amount of $635 for child care expenses, based on the definition under subsection 63(3) of the Canadian Income Tax Act. The child care expenses were incurred on Saturdays, when both parents were not required by their employers to work. Manon Labrecque's eldest son; Simon, born on March 11, 1997, is a non-verbal autistic child for whom required special attention is required at all times.

Services were provided by "Association de Parents de l'Enfance en Difficulté de la Rive-Sud de Montréal", which included child care service for autistic children on Saturdays from 10:00 a.m. to 3:45 p.m. In reference to the Income Tax Act subsection 63(3), Child care expense can only be deducted if the expense was incurred in Canada for an eligible tax payer child to enable the tax payer, to perform the duties of an office or employment. The Minister of National Revenue disallowed the deduction because the expenses were not incurred at the present time the parents were performing employment or office duties. They objected to allowing these deductions based on two reasons; the couple didn't work on Saturdays so why would the child need childcare and why did the parent with the lower income take the deduction, since this gave her a better tax deduction than her spouse.

The income tax act definition never stated "whether it is absolutely necessary for the taxpayer to hold employment at the precise moment when child care services are rendered, or whether it is enough to show that the services in question allowed the taxpayer to hold and maintain employment at any time during the other days of the week (from Monday to Friday in this case)".

The Court is of the opinion that the appellant does indeed meet the conditions under section 63, due to the fact that the definition in subsection 63(a) states "to enable the taxpayer, or the supporting person of the child for the year, who resided with the child at the time the expense was incurred," the act doesn't state that the child care expense have to be incurred at the precise moment the parents are at work. Also in subsection 63(a)(i) states "to perform the duties of an office or employment" . The appellant lived with the child when the expenses occurred and performed employment duties, which makes the defendant qualify for the deduction since there is no requirement that the expense have to occur while the parent is at work. The expenses incurred were necessary to enable the the appellant to perform employment duties.

Background

Manon Labrecque and her spouse are both professionals who were employed full time in 2003 taxation year. The couple worked the average work week hours of 40 between Mondays and Fridays. The family consists of two children with Simon, the eldest son being autistic. He requires constant attention and supervision. The appellant Manon Labrecque claimed the deduction as it was tax advantageous for her to do over her husband since her income was lower than his.

1. The term child care expense is defined in subsection 63(3).

Child care expense means an expense incurred for services rendered in a taxation year for the purpose of providing child care services for any eligible child of a taxpayer if the services were provided to enable the taxpayer or a supporting person the child for the year:

(a) To enable the taxpayer or the supporting person of the child for the year, who resided with the child at the time the expense, was incurred,

(i) To perform the duties of an office or employment,

(ii) To carry on a business either alone or as a partner actively engaged in the business

An eligible child is defined as a child of the taxpayer, his spouse or common-law partner, or a child who is dependent on the taxpayer or his spouse or common law partner and whose income does not exceed the basic personal credit amount ( $10,320 for 2009) or ($7,245 for a person filing taxes for a 2003 taxation year). The child also should be under 16, in the 2003 taxation year and Simon was 6 years old; and because Simon is considered an autistic child, he is categorized as a disabled child therefore the Labrecque's would also qualify for the disability tax credit.

The child care deduction was disallowed because the expenses were incurred on Saturdays and neither parent was working around that time. According to the Ministry because the parents did not work on Saturdays, they were not entitled to the deduction even though (the "Act") does not specifically state that the expense must be rendered while parents are at work in order to be eligible to claim the deduction. The Act states that the deduction is permitted as long as the costs were incurred in order to produce Taxable Income or to receive an education.

As a parent of an autistic child;

"The Guide pour parents et responsables d'enfant autistique by the Quebec Society for Autism" states that autistic children require constant attention and supervision; so even if the parents are not in the office on the weekends in the event that they bring home work with them which most professional do, they would require a child care attendant, therefore the child has the constant supervision it needs. Autistic children typically have behavioral problems and their inability to communicate makes it difficult for parents to care for the child. Professionals that deal with these kinds of children agree that it is practically impossible for parents to shoulder the entire burden in taking care of these children. The need for a child care attendant an essential one.

The deduction was deemed as important as the child care expenses were paid to Association de Parents de l'Enfance