Final arguments were underway Friday in a child-custody battle in Winnipeg involving two parents alleged to have taught their children neo-Nazi beliefs.

Manitoba Child and Family Services is seeking permanent guardianship of two children who were seized after one showed up at school with racist drawings on her skin in March 2008.

The agency's lawyer told the court the parents inflicted emotional harm on the kids.

He also said the parents neglected the children and have taken no steps to provide a stable and safe home.

The lawyer for the father told the judge, "You can fundamentally be a racist … but the point is, people's beliefs are legal in Canada."

None of the people involved in the case — parents, lawyers, psychologists and social workers — can be identified in order to protect the identities of the children.

The parents deny neglecting the children, and the father argues he has a constitutional right to teach his racial beliefs to his kids. He is the stepfather of the girl, now eight years old, and the biological father of the boy, who is now three years old.

The judge has already indicated she will reserve her decision.

Girl had white supremacist markings

The children were taken from their home when the girl went to school with a swastika drawn on her arm. Her teacher scrubbed it off in the afternoon, but the girl showed up again the next day with another one, along with other white supremacist symbols drawn on her body.

Family services case workers were alerted and went to the family's apartment, where they found neo-Nazi symbols and flags. They took custody of the couple's son and picked up the daughter at her school.

The couple, now separated, are also accused of failing to provide adequate care for their children. Lawyers and social workers told court earlier this year there were problems related to drug and alcohol abuse, domestic violence, criminal behaviour and mental health problems.

The mother, who lives in another province, testified in June that her estranged husband isn't fit to be a parent. She told the hearing that he is a heavy drinker and has been suicidal.

The mother had initially sought custody but has, for now, given up on getting her kids back. When she travelled to Manitoba for the hearing, she was arrested on charges of credit card fraud.

With files from The Canadian Press