Questions? Call 416-367-4222
Father and Child's Hands Together

Published: December 6, 2023

O’Brien v. The King, 2023, is a recent Tax Court of Canada (“Tax Court”) case where the Canada Revenue Agency had redetermined the Canada Child Benefits (“Child Benefits”) of Delia O’Brien. The case revolves around the interpretation of subsection 122.62(5) of the federal Income Tax Act and subparagraph 56(1)(u)(ii). Subparagraph 56(1)(u)(ii) requires social assistance payments received by a spouse to be included in the other spouse’s income if their income is higher. It was on this basis that the CRA had redetermined her income, which Ms. O’Brien successfully challenged in Tax Court.

O’Brien’s Background:

Ms. O’Brien was the recipient of Child Benefits and Ontario Disability Support Program (“ODSP”) payments. She herself was not the claimant of ODSP, instead subparagraph 56(1)(u)(ii) of the Tax Act had operated to reallocate the actual claimant’s, her husband’s, payments to her income. This reallocation resulted in a nearly doubling of her income in 2018. From 2018 to 2020, Ms. O’Brien was thus including in her income both her entitlement to Child Benefits and the ODSP Payments. Unfortunately, tragedy struck in 2020 with the passing of her husband, which also ended the ODSP payments to Ms. O’Brien.

When redetermining her Child Benefits in 2020, the CRA had included her late husband’s ODSP payments in Ms. Obrien’s income when assessing her income taxes. The near doubling of her income because of the inclusion of those payments significantly reduced Ms. O’Brien’s Child Benefits entitlement. The question in this case was whether the CRA correctly included the ODSP payments in Ms. O’Brien’s income for determining her Child Benefits entitlement.

Source of the contention: Social Assistance and The Tax Act

This outcome was due to the operation of two different sections of the Tax Act, and they operated with the two different social programs.

The first was subsection 122.62(5), which affects Child Benefits entitlements. Entitlement to Child Benefits is based on family income from the previous year, which is dealt with in subsection 122.62(5) of the Income Tax Act (“Tax Act”). This subsection sets out with the re-determination of Child Benefits entitlement when a cohabiting spouse dies, and states that the adjusted income is deemed to be equal to the surviving spouse’s income for the year. This is an especially important subsection given the lagged nature of determining Child Benefits entitlement, for instance entitlements in 2020 would be determined based on income in the 2018 tax year.

The second is subparagraph 56(1)(u)(ii) of the Tax Act. Subparagraph 56(1)(u)(ii) allots social assistance payments to the higher income spouse. Specifically, the subparagraph provides that social assistance payments made on a means, need or income test, such as ODSP payments, that are received by one spouse, is to be allotted as income to the spouse with the higher income prior to the inclusion of the ODSP payments. This was why the CRA had included the ODSP payments in Ms. O’Brien’s income.

Tax Court’s Analysis: Legislative Intent and Absurdity

The Tax Court examined the legislative intent and the impact of subparagraph 56(1)(u)(ii) on the application of subsection 122.62(5). The Tax Court highlighted that the intent of subsection 122.62(5) was to exclude the deceased spouse’s income from the adjusted income for the base taxation year. Whereas the inclusion of ODSP payments, which permanently ceased upon the husband’s death, artificially increased Ms. O’Brien’s income, led to a reduction in her entitlement of Child Benefits entitlement. The Tax Court emphasized that the inclusion of this “ghost” income contradicts the legislative purpose of subsection 122.62(5), frustrating its intended application. Learn more about death tax in Canada and TFSA after death here.

The Tax Court also cited legal principles related to statutory interpretation, including the avoidance of absurd consequences. Referring to the Supreme Court of Canada’s position in (Re) Rizzo & Rizzo Shoes Ltd. that a literal interpretation that leads to absurd results should be set aside. The Tax Court found that the interpretation that includes the ODSP payments in Ms. O’Brien’s income for the purpose of subsection 122.62(5) leads to absurd and illogical results.

Due to these reasons the Tax Court allowed the appeal. Thus, directing a re-determination of Child Benefits entitlement without including the ODSP payments. The decision also extended this order to subsequent base taxation years and GST/HST credit entitlements. Additionally, the Tax Court awarded Ms. O’Brien fixed costs of $2,500 and directed that her income for the Child Benefit should not include income “that she herself had not generated, thereby excluding the total of the Ontario Disability Support Plan payments generated by her late husband.” This would apply for her 2018, 2019, and 2020 tax years.

Pro tax tips – Consulting on Absurdity

Ms. O’Brien’s ability to raise an argument of absurdity relied on the very specific facts of her case and how a literal interpretation of the law operated upon those facts. Nonetheless, other situations could arise leading to a similar situation where the literal interpretation of the Tax Act leads to the frustration of the intent of the Tax Act. A Canadian Tax Litigation Lawyer would be able to assess properly the intent of legislation and whether a taxpayer’s situation fits within an absurdity argument or if there are any other applicable arguments to counteract any CRA assessment.


Does the Tax Court have to follow clear and unequivocal language, or literal interpretation, in statutes?

The court acknowledges the principle that clear and unequivocal language in statutes should be enforced, as mentioned in R. v. McIntosh. However, the Tax Court counters this by invoking the concept that the legislature does not intend to produce absurd consequences, as established in Re Rizzo and Rizzo Shoes Ltd., emphasizing that the interpretation in this case may lead to illogical and absurd results.

How does the concept of “ghost” income impact taxpayers in similar situations?

The concept of “ghost” income is significant for taxpayers because it highlights the potential for unjust outcomes in benefit entitlements. In cases where a deceased spouse’s income is included in the surviving spouse’s calculation, even though the payments have ceased, taxpayers may experience a reduction in benefits. The Tax Court’s acknowledgment of this issue could provide relief and clarity for taxpayers in similar circumstances, potentially influencing future decisions. If you think that your situation may benefit from similar arguments raised in this case, then it is highly recommended you speak to a Litigation Tax Lawyer in Toronto.


This article just provides broad information. It is only up to date as of the posting date. It has not been updated and may be out of date. It does not give legal advice and should not be relied on. Every tax scenario is unique to its circumstances and will differ from the instances described in the articles. If you have specific legal questions, you should seek the advice of a Canadian tax lawyer.


"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

Get your CRA tax issue solved

Address: Rotfleisch & Samulovitch P.C.
2822 Danforth Avenue Toronto, Ontario M4C 1M1