Where Cupid leads, taxman sure to follow: Common-law or single? CRA wants to know

National Post


Romantic dinners, chocolates, roses and ... taxes. What could income tax
possibly have to do with Valentine's Day? Does the taxman have a place in the
nation's bedrooms?

You may be surprised to find out that the issue of relationships, and in
particular, "conjugal relationships" has been the subject of numerous court
cases over the years.

Under Canadian tax law, "common-law partners" are defined as two people,
regardless of sex, who cohabit in a conjugal relationship and have done so for a
continuous period of at least one year. In other words, two adults who are
living together in a relationship of some permanence (even if just one year)
must report themselves on their tax returns as living common-law. Sounds
straightforward, so why the fuss?

The issue -- and thus the subject of various tax cases -- is that two people
who are living together in a common-law relationship may be tempted to continue
filing their tax returns each year as "single" taxpayers to avoid losing certain
government benefits, such as the GST credit, certain provincial tax credits and
in some cases, the Child Tax Benefit, whose amounts are all based on the
combined income of both partners.

The question the courts continually try to answer is what exactly is a
conjugal relationship? Let's review a tax case decided just over a year ago in
Quebec. Gerard Bellavance was reassessed and asked to repay his GST credits
based on the fact that the CRA claimed that he was living in a common-law
relationship with Lucille Gendron. As a result, the CRA maintained that both
incomes should be included for the purpose of calculating the GST credit and not
just Mr. Bellavance's income, thus lowering the credit to which he was entitled.

Mr. Bellavance acknowledged in Court that while he did live with Ms. Gendron
in a common-law relationship from February to December, 1999, he ended their
common-law relationship in December of that year.

After that, Mr. Bellavance began renting a room to Ms. Gendron in his house.
While they continued to speak to each other, Mr. Bellavance and Ms. Gendron each
did their own shopping, meal preparation, housework and laundry.

Traditionally, whenever the subject of conjugal relationships comes to trial,
the courts refer back to various jurisprudence (endorsed by the Supreme Court)
which determined that there are seven characteristics of a conjugal
relationship: shared shelter, sexual and personal behaviour, services (such as
preparation of meals, household maintenance), social activities, societal
perception of the couple, financial support and children.

The judge found that although Mr. Bellavance and Ms. Gendron resided at the
same address, "they did not have the same kind of affinity for each other that
is normally found in a conjugal relationship, based on the factors to be
considered in determining whether or not such a relationship exists" and
consequently, ruled that no conjugal relationship existed.

This decision is consistent with prior cases, which have determined that it
is possible for spouses to live "separate and apart" while continuing to live
under the same roof.

So tonight, as you enjoy an intimate Valentine's Day dinner with your
partner, keep in mind that when it comes to affairs of the heart, the taxman
shares a keen interest.