6 November 1996 Internal T.I. 9632037 - CLERGY RESIDENCE DEDUCTION 8(1)(C) OF THE ACT

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether or not the taxpayer is entitled to a deduction under paragraph 8(1)(c) of the Act (clergyman' deduction)

Position:

Doubtful but further information should be obtained and reviewed by the Tax Centre.

Reasons:

	Question of fact: Based on information provided and 	previous review of                                                                   XXXXXXXXXX              Although 	taxpayer appears to have met the status test, the group 	that appointed him to his position and his actual 	employment duties must be examined.

		November 6, 1996
	SURREY TAX CENTRE	HEADQUARTERS
M. Jackstien	D. Zion
	Assistant Director	(613) 957-8953
	Enquiries and Adjustments

	Attention: John Brady, T1 Processing
			963203

Clergyman's Residence Deduction Subsection 8(1)(c) of the Act XXXXXXXXXX

We are forwarding for your consideration and reply the attached letter from XXXXXXXXXX is requesting a review of an adjustment which disallowed the clergyman's residence deduction claimed by XXXXXXXXXX on his XXXXXXXXXX income tax return. We have confirmed with Headquarters Processing Division that this is a matter which falls within field office responsibilities. We have advised XXXXXXXXXX of our action under separate cover.

XXXXXXXXXX No further details regarding XXXXXXXXXX administrative duties, what governing body actually appointed him to the administrative position, or the source of his income has been provided to us. However, we have taken the opportunity to review the issue involved and herein provide comments that we hope will be of assistance.

Generally, as you are aware, to be eligible for the paragraph 8(1)(c) deduction, the individual must first be a member of the clergy, a member of a religious order, or a regular minister of a religious denomination (the "status test"). When one of these conditions is met, such as appears to be the case for XXXXXXXXXX, then the individual must be in charge of or ministering to a diocese, parish or congregation, or engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination (the "function test"). The Tax Court of Canada case Small et al. v. MNR (89 DTC 663) contained a detailed discussion and interpretation of these terms. The appeal of this case, along with two related files, was heard by the Federal Court-Trial Division in the case of Zylstra Estate et al. v. The Queen (94 DTC 6687). As none of the terms under consideration are defined by the Act, Justice MacKay in his judgement outlined the history and intent of 8(1)(c) of the Act. Justice MacKay felt that the purpose of 8(1)(c) is to provide a deduction only in those cases where the taxpayer qualifies by reason of his status or office and discharges responsibilities as defined, which are ordinarily associated with that status or office.

We recently had occasion to review the case of a client who is employed as a
XXXXXXXXXX

XXXXXXXXXX

Although further information in this regard is required, we would assume that the XXXXXXXXXX has a similar purpose and is operated in a comparable manner. Diane King of your office has confirmed on our behalf that the XXXXXXXXXX accepts applications from individuals of any Christian faith and consequently has a multidenominational student body.

Based on the reasoning in the above-noted jurisprudence, it is our view that the XXXXXXXXXX is neither a religious denomination nor a religious order. The XXXXXXXXXX is in itself an entity, separate and apart from XXXXXXXXXX, as evidenced by its singular incorporation. Although, as mentioned above, XXXXXXXXXX has met the initial status test in that he is an ordained minister of a religious denomination, it is our opinion that if he has been appointed to his position by the XXXXXXXXXX or its Board of Governors, then he has not been "engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination" as required by paragraph 8(1)(c) of the Act. If, upon investigation, you determine that XXXXXXXXXX has indeed been appointed by a religious denomination, then a review of his employment duties would be required to ensure that he is "engaged exclusively in full-time administrative service."

We trust our comments have been of assistance to you.

John F. Oulton
Section Chief
Business, Property & Personal Section
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch