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Room & Board to a family member

#1

If a parent is charging Room and Board to a son or daughter - Is that taxable income

#2

Technically yes but if there is no rent receipt, there is no audit trail for the income.

#3

“Technically yes but if there is no rent receipt, there is no audit trail for the income.”
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So, when completing the presence or absence of the T776, the view taken on it would be… ?
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"205 False or misleading documents and oral representations
RULE:
A registrant shall not:
(a) sign or associate with any letter, report, statement, representation or financial statement which the registrant knows, or should know, is false or misleading, whether or not the signing or association is subject to a disclaimer of responsibility, nor
(b) make or associate with any oral report, statement or representation which the registrant knows, or should know, is false or misleading."

#4

Fair Market value rates, related parties, numerous things to consider, calculate, document. Losses disallowed. Proper professional consideration should be given to all the circumstances.

CRA public guide: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4036/rental-income-2016.html#P109_3004

#5

It really depends upon the details of the circumstances.

Is this simply a reimbursement of their share of utilities and food etc?

Is the “rent” fair market value?

Is the rental income considered a business with the intent to make a profit. Or, is it operating at a break even or at a loss?

etc

#6

Dominic’s answer is the best and most correct

#7

If income from room and board or rent is minimal - basically covering hard costs and no rent receipt is issued, no income needs to be declared. If no rent income is declared and no receipt issued, then the boarder or renter is not entitled to claim ON BEN. I have had situations where room and board is well below market value; this would be an adult family member living at home and contributing to living costs. I have also had the situation where the family member paid fair market value in which case they had an agreement where a rent receipt was issued for a value between cost and fair market value. This might not be technically correct but is an acceptable approach.

#8

I don’t think “proper professional consideration” is necessary where an adult son or daughter or other close relative lives with the family. “Proper professional consideration” could be more expensive than the benefit the boarder or the family would receive from the arrangement. “Proper professional consideration” in the smallest details can so complicate matters and handicap us that we can no longer function.

#9

Yes, you may be right - it could only be a $0.02 tax issue…

But then again, I did one a few years ago where part of the issue was renting rooms to family members, and at the end of the day, the increase in the tax liability was $230,000 as a result.

So whether the Original Poster’s case is a $0.02 tax issue or a $222,222.22 tax issue, I have no idea.

#10

Yes, it does go back to an early statement I made; it depends! Too often there is more than one acceptable answer even when we seem to have all the details.

#11

From CRA’s mouth itself:

“You can deduct your expenses only if you incur them to earn income. In certain cases, you may ask your son or daughter, or another relative living with you, to pay a small amount for the upkeep of your house or to cover the cost of groceries. You do not report this amount in your income, and you cannot claim rental expenses. This is, in fact, a cost-sharing arrangement, so you cannot claim a rental loss. If you lose money because you rent a property to a person you know, for less money than you would to a person you don’t know, you cannot claim a rental loss. When your rental expenses are consistently more than your rental income, you may not be allowed to claim a rental loss because your rental operation is not considered to be a source of income. However, you can claim a rental loss if you are renting the property to a relative for the same rate as you would charge other tenants and you reasonably expect to make a profit.”

So it all hinges on how much you would rent the same space to a third party with intention to make a profit.

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/rental-income/renting-below-fair-market-value.html

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#12

REOP wins in my mind here per Dominique. Otherwise simple defrayal of costs, which is not either reportable as income or valuable for “creating” a loss.

FMV rent to a non arms-length person, especially of a space which has been previously rented to an arms-length person at a similar amount is a distinguishable fact situation, and may, in fact, result in reportable income.

Not living in a province (or even having clients in a province) with a rental credit anymore I have no opinion on claimability.

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