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Sorry long question but hope you can provide guidance. In

Sorry long question but hope...
Sorry long question but hope you can provide guidance.

In a situation where two people have been living with each other for many years but have never shared any financial responsibilities and have lived autonomously from one another for the entire time aside from romantic interaction, how would they ever go about entering into a common-law relationship without facing serious tax repercussions?

These people have lived in the same household since they were 17 years old and never truly considered their relationship as being interdependent (as stated above, their financial affairs have always remained exclusive of one another other than splitting rent on the household they occupied). It's only after many years of living together (13 years) that they have now decided to commit and become fully invested into a common law marriage. The issue has become quite confusing to deal with from a taxation standpoint as they would like to finally declare their newly agreed upon common-law arrangement with the CRA without being deemed criminals by not having declared it from the very start of their living arrangement 13 years ago.

Is there an easy, or at the very least clean way to set the record straight on this? There was never any intention on this couple's behalf to avoid taxes, they simply did not view their relationship as serious enough to warrant the label of marriage in any way until now.

Thank you, XXXXX XXXXX appreciation for any guidance on how to proceed if you can provide any.
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Answered in 16 minutes by:
11/19/2013
Law.Hut
Law.Hut, Lawyer
Category: Canada Law
Satisfied Customers: 7,846
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Hello:

You should not have any issues with CRA. You can list your status as common law. It is doubtful that this would lead to any scrutiny by CRA, as you would not have avoided taxes in failing to claim this status in the past. There are more tax advantages generally available to married or common law spouses, so the fraud that CRA is usually concerned with is when people have separated and try to continue claiming married status.

But if this is challenged, courts have looked at a variety of factors to determine if people are living in a common-law relationship or not. They do not simply look at only the address that both people are living at. They will look at issues of whether there is an intimate relationship or you are sharing a room or not; Whether you are sharing meals together, or traveling together. They look also to see if there is any intermingling of finances. They will look to see if there are permanent plans into the future, such as planning marriage, children or purchasing property together. They examine if your spouses name the other as beneficiary on insurance or pensions or a Will, or as next of kin. They will look to see if the two socialize together, and if they hold themselves out to others as being spouses and whether other people considered them to be spouses or not.

So if the only evidence that you may have been common-law in the past is that you happened to share an address together, but none of the other factors can be proven, then it would be unlikely that there would be a finding that you were in a common-law relationship. But much of this detail could come, if necessary, through testimony of you and your spouse.

So you can try to protect yourself by keeping any records of the above factors that may work in your favour, such as documents that show that you had listed someone else as beneficiary, or that show there were no intermingling of any type of finances.

I hope this is helpful. If you have no further questions, please rate the answer positively, as otherwise the site does not credit me, even if you have paid a deposit. You can still ask follow up questions after rating though, if you wish.
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Customer reply replied 4 years ago

Just to make sure clarify: in the event that this issue was ever raised by the CRA I certainly would never want to give the impression that the relationship was purely platonic as it would be clearly misleading; the relationship was intimate and it was known to others that it was and remains intimate but, financially speaking, expenses were largely separate aside from the odd household expense that only one person would be able to cover (eg. internet/cable bill can only be paid by one individual). My issue is that I could easily envision how someone with enough determination would be able to argue that it was a common-law situation. The concern is with defending this argument and having some detail emerge that compromises the position, as I'm sure there are some past instances that would not support it.


 


So essentially, the plan for the future is that these two are now fully committed, and their situation has slowly transitioned into one that is clearly common-law. Is it safe for these two to file common law in the new year when their baby is born and start from there? Or is there a more prudent course of action to take in order to settle this matter in a way that wouldn't result in extreme financial penalties?



Thank you, XXXXX XXXXX certainly rate you highly after this, just want to get this cleared up.

I do not know of any other way to file, and if the status is now acknowledged as being common law, then there is really no other choice at this point. A lawyer can't advise you to file anything and be purposefully incorrect in the filing. I don't see that you will be risking any financial penalties in doing so- but if you are now common law (and certainly having a child together makes that status more likely), you don't have much choice. You can always dispute the characterization of your relationship in the past if that becomes an issue, but you have no option to file other than as common law if that is your current status.

Living under the same roof and having an intimate relationship is not in itself enough to prove a marriage. Those are two factors that are found in many marriages, but courts have said that every relationship must be looked at independently, looking at the types of criteria that I mentioned. Even if CRA could prove that you became spouses, it may still be an issue as to,when that occurred. There Is no presumption that this would commence as of the time you began residing together.
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