12 March 2001 Internal T.I. 2001-0066387 - SPECIAL WORK SITE

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 the value of a luxurious house in downtown XXXXXXXXXX exempt under subpar. 6(6)(a)(i).

Position: It may be, provided that the conditions in subpar. (6)(6)(a)(i) apply. However, if the employee is a shareholder, it is likely that the benefit was received qua shareholder rather than qua employee. If the benefit was received by the employee qua shareholder, it is subject to tax under subsection 15(1) of the Act and the exemption in subparagraph 6(6)(a)(i) would not apply. In our view, the more exclusive or luxurious the property, the stronger the presumption is that the executive received the benefit qua shareholder.

Reasons: It is our view that downtown XXXXXXXXXX , may qualify as a special work site if it is a location at which the duties performed by the employee are of a temporary nature. However, in our view, it is unlikely that an employee would be provided with a luxurious home in downtown XXXXXXXXXX .

		March 12, 2001

	XXXXXXXXXX  Tax Services Office	HEADQUARTERS
	Employer Compliance Audits	J. Gibbons, CGA
(613) 957-2135
	Attention: XXXXXXXXXX
		2000-006638

Special Work Site Exemption

We are replying to your memorandum, which we received January 17, 2001, concerning the application of the special work site exemption in subparagraph 6(6)(a)(i). XXXXXXXXXX, may obtain the use of a company-owned property in downtown XXXXXXXXXX without having to include a taxable employee benefit in income, assuming that the requirements of subparagraph 6(6)(a)(i) are otherwise met.

Subparagraph 6(6)(a)(i) of the Act provides that the value of or an allowance (not in excess of a reasonable amount) in respect of a taxpayer's board and lodging at a special work site, "being a location at which the duties performed by the taxpayer were of a temporary nature," is not included as a taxable benefit under subsection 6(1) of the Act, if the taxpayer maintained at another location a self-contained domestic establishment as his or her principal place of residence. The latter must be available to the taxpayer throughout the period, not rented to any other person, and be a sufficient distance away that he or she could not be expected to return home on a daily basis.

As we see it, the purpose of the special work site exemption is to recognize that no benefit is received by an employee if the employer provides or pays for the costs incurred in respect of a temporary residence at a special work site, sufficiently distant from where the employee ordinarily resides, if the employee continues to incur the cost of maintaining his principal place of residence, without any offsetting rental revenue for the period. Thus, it is our view that downtown XXXXXXXXXX may qualify as a special work site for purposes of subparagraph 6(6)(a)(i), if it is a location at which the duties performed by the employee are of a temporary nature. In this regard, we refer you to paragraphs 5 and 6 of IT-91R4, "Employment at Special Work Sites or Remote Work Locations." According to paragraph 5, the phrase "duties performed by the taxpayer were of a temporary nature" refers to the duration of the duties performed by the individual employee, not the expected duration of the project as a whole. Paragraph 6 states that, where the duties are expected to provide the individual with continuous employment beyond two years, as determined at the outset, those duties are generally not considered to be of a temporary nature.

It should be noted that when a high-ranking executive who is a shareholder obtains the use of a company-owned luxury property, it is likely that the benefit was received qua shareholder rather than qua employee. If the benefit was received by the employee qua shareholder, it is subject to tax under subsection 15(1) of the Act and the exemption in subparagraph 6(6)(a)(i) would not apply. In our view, the more exclusive or luxurious the property, the stronger the presumption is that the executive received the benefit qua shareholder.

For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Legislation Access Database (LAD) on the Agency's mainframe computer. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, they can be provided with the LAD version, or they may request a copy severed using the Privacy Act criteria, which does not remove client identity. You may request this latter version by contacting Jackie Page at 613 957-0682, who will send the severed copy to you for delivery to the client.

John Oulton, CA
Manager
Business and Individual Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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