16 May 2001 Internal T.I. 2001-0082207 - Impact of Shih Decision; Residency Status

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 decision in Shih v. The Queen contradicts emphasis given to spouse/dependants and family dwelling as residential ties in residency determinations.

Position: No.

Reasons: Judge in Shih made clear that those are always important factors. Case decided on its facts; also, Judge fully accepted testimony of taxpayer that his only reason for having a connection to Canada was to educate his children.

			May 16, 2001

	International Tax Directorate	International and Trusts Section
	5th  Floor, Canada Building	Eliza Erskine
	344 Slater Street

	Attention:  Ms. Teresa Eng
		2001-008220

Impact of Shih v. The Queen, 2000 D.T.C. 2072 (TCC), on Residency Determinations

We are writing in response to concerns that were raised at the most recent Regional Tax Advisors meeting, held on January 31, 2001, with regard to the decision of the Tax Court of Canada in Shih.

In the Shih decision, the Court held that the taxpayer was not a resident of Canada, despite the fact that the taxpayer's wife and dependent children resided in Canada and the taxpayer owned the dwelling place in which his family so resided. This decision appears, on its face, to cast doubt on our long-held position that a taxpayer's primary residential ties to a country are his or her spouse and dependent children, and his or her dwelling place. Generally, if a taxpayer's spouse and dependent children reside in Canada, in a dwelling place that is the family home, then the taxpayer will be considered to be factually resident in Canada.

It is the position of the Income Tax Rulings Directorate that the decision of the Court in Shih was strictly a result of the facts of that case, rather than any change in the law regarding how an individual's residency is determined. In particular, it is our view that the Shih decision does not invalidate the general presumption that an individual's spouse, dependants, and family dwelling place are his or her primary residential ties to a country. In fact, in rendering his decision in Shih, Judge Mogan commented (at paragraph 24):

"The next-of-kin and family connections of an individual are relevant and important factors in determining the residence of that individual."

Judge Mogan's subsequent comments (at paragraphs 25 and 27) further illustrate that he viewed the taxpayer's situation as unusual, and that his decision was based solely on the circumstances of that situation:

"[B]ut the situation is different in these appeals when the Appellant has never had a permanent connection with Canada but has lived all of his life in only one other country, Taiwan. ...

"When he came to Canada three or four times each year, he came to 'stay with' or 'visit' his wife and sons. Regina may have been their family home but he was not there often enough or long enough to establish any personal connections with the various communities in Regina whether they be commercial, education, cultural, recreational or social. ... On the evidence, the Appellant was a stranger to Regina (and Canada) throughout the years under appeal even though he probably was a much loved husband and father to his wife and children when he came to visit with them." [Emphasis added.]

We are aware that you have seen an increasing number of situations where the taxpayer's circumstances are similar to those of the taxpayer in Shih. In light of Judge Mogan's comments, however, and especially in light of his specific acceptance of the taxpayer's testimony that his sole reason for establishing a connection to Canada was for purpose of educating his children here, we are of the opinion that it would be unusual for a taxpayer to fit squarely within the facts that informed the Shih decision. Judge Mogan accepted as credible all of the taxpayer's testimony regarding the extent of his ties outside of Canada, noting, for example, the importance, to the taxpayer, of his cultural obligation to provide directly for his aging parents. We are of the view that it is unlikely that many taxpayers will be able to credibly establish the range of factors that were accepted by Judge Mogan in the Shih decision. Thus, we are of the opinion that the Shih decision does not have any great precedential value, and we would continue to support the position that, generally, an individual with a spouse, dependants, and family dwelling place in Canada is a factual resident of Canada and should be assessed accordingly.

We trust that this information will be of assistance to you.

Jim Wilson
for Director
International and Trusts Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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