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: Treatment of special work site allowance in respect of completed and proposed transaction.
Position: .General comments only.
Reasons: Involves completed and proposed transactions.
XXXXXXXXXX 2000-000380
Wm. P. Guglich
March 29, 2000
Dear XXXXXXXXXX:
Re: Special Work Site Allowance
This is in reply to your letter of January 21, 2000, requesting our views as to the tax treatment under subparagraph 6(6)(a)(i) of the Income Tax Act (the "Act") of an $XXXXXXXXXX per month allowance you receive from your employer to cover rent, utilities and food for your family while you and your family live away from your home at a special work site.
You stated that since you did not want to leave your house empty during your absense, a family friend agreed to live in your home for a nominal rent (less than 50% of its rental value), with the agreement that you could stay there at any time. You have now determined that since you rented out your home, your allowance is taxable. Since the tax payable on this allowance is almost twice the amount of rent you received, you propose to return the rent money received to date and no longer charge your friend any rent while they continue to live in your home. You inquire whether this would still be considered renting out your home. You also requested our views as to whether the $XXXXXXXXXX per month allowance received from your employer would be considered reasonable.
You referred to the Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations.
Subparagraph 6(6)(a)(i)of the Act excludes from the income of an employee, the value of an allowance received (not in excess of a reasonable amount) in respect of expenses the employee has incurred for the employee's board and lodging at the special work site provided certain conditions are met. These conditions include:
(a) the employee must have worked at a special work site, being a location at which the duties performed by the employee were of a temporary nature;
(b) the employee maintained at another location a self-contained domestic establishment as the employee's principal place of residence
(i) that was, throughout the period, available for the employee's occupancy and not rented by the employee to any other person, and
(ii) to which, by reason of distance, the employee could not reasonably be expected to have returned daily from the special work site; and
(c) the period while the employee was required by his or her duties to be away from the employee's principal place of residence, or to be at the special work site, was at least 36 hours.
Whether an allowance pertaining to an employee's board and lodging expenses incurred is reasonable is a question of fact. This can only be determined after all the details and facts of a specific case have been established and reviewed.
It is also a question of fact whether a home was rented by an employee to another person, in a particular situation. However in our opinion, returning the rent money you received would not in and by itself change the rental arrangement to a non-rental arrangement. It should also be noted that, if your friend occupies your home during your absence there may also be a concern whether the home was in fact available for your occupancy during the same period. In addition, in order for the allowance to qualify for the exclusion from income under subparagraph 6(6)(a)(i) of the Act, the employee is required to maintain his or her home during the absence period which means payment of expenses in respect of the home such as taxes, utilities, mortgage payments, repairs, etc.
If you require any further assistance we suggest you contact the Agency's Client Services Division (telephone number 1-800-959-8281).
We trust our comments will be of assistance.
Yours truly,
John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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