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.
Principal Issues: Whether subparagraph 6(1)(b)(ix) of the Act excludes from inclusion in an employee's income, an allowance received from the employer in respect of the schooling of a child of the employee, in a situation where the child does not board in a facility operated by the school
Position: Question of fact. However, there is no requirement in subparagraph 6(1)(b)(ix) of the Act that requires the child to actually board in a facility that is operated by the school attended.
Reasons: Subparagraph 6(1)(b)(ix) of the Act.
Randy Hewlett, B.Comm.
XXXXXXXXXX 613-957-8973
2003-005350
February 12, 2004
Dear XXXXXXXXXX:
Re: Subparagraph 6(1)(b)(ix) of the Income Tax Act (the "Act")
We are writing in response to your letter of December 12, 2003, wherein you requested our view on the above noted provision, as it pertains to school allowances provided by employers that are member organizations of the XXXXXXXXXX.
In your letter, you indicated that when an employee's child boards at the facility operated by the school attended, the amount of the allowance that must be paid by the employer is often beyond its resources. In such a case, the employer would rather pay an allowance for the use of a less expensive boarding facility under its control, which is located in the community of the school attended. You inquired whether an allowance that includes an amount in respect of the costs incurred by the employee to board his or her child at the less costly facility would qualify for the exemption under subparagraph 6(1)(b)(ix) of the Act.
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we are prepared to offer you the following comments on the general position of the Canada Revenue Agency regarding the application of subparagraph 6(1)(b)(ix) of the Act, discussed in paragraph 21 of Interpretation Bulletin IT-470R, Employees' Fringe Benefits (Consolidated).
Subparagraph 6(1)(b)(ix) of the Act excludes from inclusion in an employee's income, an allowance received from his or her employer in respect of the schooling of a child of the employee, provided:
(a) The allowance is not in excess of a reasonable amount;
(b) The child is living away from the place of the employee's domestic establishment where the employee is required to live by reason of employment;
(c) The child is in full-time attendance at a school where the language primarily used for instruction is an official language of Canada that is primarily used by the employee;
(d) A suitable school that primarily uses the appropriate language for instruction is not available in the place where the employee is required to live; and
(e) The school the child attends primarily uses the appropriate language for instruction and is not farther from the place where the employee is required to live than the community nearest to that place in which there is such a school having suitable boarding facilities.
In our view, an allowance that is paid could be tax-exempt under subparagraph 6(1)(b)(ix) of the Act if the child boarded in a facility that was not operated by the school attended. It should be noted, however, that all of the requirements noted above must otherwise be met. In particular, there is the requirement noted in (e), that the school attended not be further from the place where the employee is required to live than the community nearest to that place in which there is a school having suitable boarding facilities.
We trust our comments are of assistance to you.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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