1.1 Paragraph 251(1)(a) deems that related persons do not deal with each other at arm’s length. This is the case regardless of how they actually deal with one another. Subsection 251(2) defines related persons for the purposes of the Act. Subsections 251(3) to 251(6) clarify and expand on the definitions.
Related individuals
1.2 According to paragraph 251(2)(a), individuals connected by blood relationship, marriage,common-law partnership or adoption are related persons.
Blood relationship
1.3 Paragraph 251(6)(a) refers to a blood relationship as being that of:
a parent and a child (or other descendant, such as a grandchild or a great-grandchild), or
a brother and a sister.
1.4 In particular, subsection 252(1) provides that a child of an individual includes:
a) a person of whom the individual is the legal parent;
b) a person who is wholly dependent on that individual for support if the person is or was, before reaching 19 years of age, in law or in fact, under the individual’s custody and control;
c) a child of the individual’s spouse or common-law partner (that is, a stepchild); and
d) a spouse or common-law partner of the individual’s child (that it, a son-in-law or a daughter-in-law), as well as the spouse or common-law partner of a stepchild or of a person considered to be the individual’s child as described in ¶1.4(b) above.
1.5 On the divorce or death of an individual’s child (described in ¶1.4(a), (b) or (c)), the child’s former spouse or common-law partner ceases to be the child’s spouse or common-law partner (see ¶1.7) and is no longer a child of the individual.
1.6 Paragraph 252(2)(b) provides that an individual’s brother includes:
the brother of the individual’s spouse or common-law partner and
the spouse or common-law partner of the individual’s sister.
It does not include the spouse or common-law partner of the sister or of the brother of the individual’s spouse or common-law partner.
Similarly, paragraph 252(2)(c) provides that an individual’s sister includes:
the sister of the individual’s spouse or common-law partner and
the spouse or common-law partner of the individual’s brother.
It does not include the spouse or common-law partner of the brother or of the sister of the individual’s spouse or common-law partner.
Therefore, if Mr. A and Mr. B are otherwise unrelated, and they have each married one of two sisters, they are not connected by blood according to paragraph 251(6)(a). Similarly, if Mr. X and Mrs. Y are brother and sister, Mrs. X and Mr. Y are not connected by blood. However, Mr. A and Mr. B, and Mrs. X and Mr. Y, in the respective examples, are connected by marriage according to paragraph 251(6)(b).
Marriage
1.7 According to paragraph 251(6)(b), two persons are connected by marriage if one person is married to the other person or to an individual who is connected by blood relationship to that other person. For example, an individual will be connected by marriage to the parents and any siblings of their spouse. However, where an individual’s marriage is dissolved by either divorce or the death of his or her spouse, the individual will cease to be connected by marriage or to be connected by blood relationship to the parents and any siblings of their former spouse.
Common-law partnership
1.8 Paragraph 251(6)(b.1) provides that two individuals are connected by common-law partnership if one individual is in a common-law partnership with the other or with a person who is connected by blood relationship to that other person. Subsection 248(1) defines a common-law partnership as the relationship between two persons who are common-law partners of each other.
1.9 The term common-law partner in respect of a taxpayer is defined in subsection 248(1) and at a particular time includes:
a) a person who at that time cohabits in a conjugal relationship with the taxpayer and has done so throughout the continuous 12-month period that ends at that time; and
b) a person who at that time cohabits in a conjugal relationship with the taxpayer and is the parent of a child of the taxpayer for one of the following reasons (as more fully described in ¶1.4(a) and (b) ):
i) the person is the legal parent of the child; or
ii) the child is wholly dependent on the person for support and the person has, in law or in fact, the custody and control of the child (or did immediately before the child turned 19).
1.10 Under the definition of common-law partner, once individuals begin to cohabit in a conjugal relationship they are deemed to continue cohabiting in that conjugal relationship until they live separate and apart for a period of 90 consecutive days because of a breakdown of their conjugal relationship. After this 90-day period has passed, the effective day of the change of marital status is the date the individuals started living separate and apart.
Example 1
Ms. X and Mr. Y have no children and have been living together in a conjugal relationship that began February 1, 2004. On March 15, 2010, they began to live separate and apart as a result of a breakdown in their relationship. Over a year later, on June 30, 2011, they reconciled and resumed living together in a conjugal relationship.
Ms. X and Mr. Y commenced being common-law partners on February 1, 2005, being the end of a continuous 12-month period of living together in a conjugal relationship. Because Ms. X and Mr. Y separated for a period of at least 90 consecutive days because of a breakdown in their relationship, they will be considered to have ceased to be common-law partners on March 15, 2010, being the first day of the 90-day period. Because they ceased to be common-law partners, when they reconciled and resumed living together in a conjugal relationship on June 30, 2011 they would not be considered common-law partners until they satisfy a continuous 12-month period of living together in a conjugal relationship. In this case, the earliest they will be considered common-law partners will be June 30, 2012.
1.11 In determining whether a person is a parent of his or her partner’s child, paragraph b. of the definition of common-law partner does not restrict the determination to the natural child of the partner. Instead, it generally extends to all those individuals described in ¶1.4(a) or (b). Where a person is a parent of his or her partner’s child at the time that the couple begin to cohabit in a conjugal relationship, a common-law partnership will commence at that time. Similarly, if a person becomes a parent of his or her partner’s child while the couple are already cohabiting in a conjugal relationship and before the 12-month minimum period has completed, their common-lawpartnership will begin at the time the person becomes a parent of the child. In both situations, there is no requirement that the couple have cohabited for the 12-month minimum period described in ¶1.9(a).
1.12 For the purposes of ¶1.9(b) and the discussion in ¶1.11, a child does not generally include a son-in-law or a daughter-in-law. Therefore, for example, a woman who begins to live together in a conjugal relationship with her son-in-law’s father will not be the common-law partner of her son-in-law’s father until they have lived together for a continuous 12-month period.
Other relatives
1.13 For purposes of the Act, an individual’s niece, nephew, aunt, uncle or cousin is not connected by blood, marriage or common-law partnership or adoption to the individual. This will be the case unless such person is related to the individual because of some other relationship (for example, becoming a child of the individual because of the extended meaning of child as described in ¶1.4(b)).
Adoption
1.14 According to paragraph 251(6)(c), two individuals are connected by adoption if one individual is the adopted child of the other. In addition, an individual who is connected by blood (except a brother or sister) to another individual will be connected by adoption to that person’s adopted child. Therefore, individuals are connected by adoption to their adoptive children, parents and grandparents.
1.15 Adoption includes a legal adoption and an adoption in fact. An adoption in fact is also known as a de facto adoption.
1.16 Whether a de facto adoption has occurred at a particular time is a question of fact and has to be determined based on a consideration of the particular circumstances. The appointment of a guardian of a child does not, in and of itself, constitute a de facto adoption. For a de facto adoption to exist, generally the adoptive parent must exercise parental care and guidance on a continuing basis. The factors to consider in determining whether a certain relationship between an individual and a child constitutes a de facto adoption are:
actual control and custody,
an exercise of parental care and responsibility on a continuing basis,
dependency, and
proximity to each other.