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: A job relocation package offers a benefit whereby the relocating employee who chooses not to sell his home will receive a lump sum payment of 80% of the real estate commission that would otherwise have been payable. If a status Indian employee changes job location and as a result, his employment income will be 100% tax-exempt rather than partially exempt (prorated), will the aforementioned employment benefit be subject to the prorated exemption or the 100% exemption?
Position: The benefit is taxed in the year of receipt under paragraph 6(1)(a) of the Act. It should be taxed in the same proportion as the subsequent / resulting employment income.
Reasons: The amount is payable because of the change in job location. It should be taxed in accordance with the treatment of his employment income received for the new employment. This is also supportable by the wording of subsection 6(1)(a) of the Act, which provides that an individual's income from employment includes "benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of.... employment".
March 30, 2004
XXXXXXXXXX Tax Services Office HEADQUARTERS
Attention: XXXXXXXXXX , Technical Advisor (613) 948-5273
Taxation of Relocation Assistance Paid to Status Indian Employee
This is in response to your memorandum of February 4, 2004 inquiring about the taxability of a particular relocation assistance payment made to a status Indian employee.
We understand that employees of Indian and Northern Affairs Canada ("INAC") are eligible for the "National Joint Council (NJC) Integrated Relocation Program" (the "Program"). One element of the Program is the "Real Estate Commission Savings - Not Selling Principal Residence" incentive (the "Incentive"). Under the Incentive, an employee who relocates for employment purposes and who chooses not to sell his or her residence at the prior location can receive 80% of the estimated amount of real estate commission that would otherwise have been payable.
We understand that the individual in the situation you are examining (the "Employee") has not yet received the Incentive pending receipt of your comments by the Program representative handling the file. The Employee is a status Indian employee of INAC who worked in XXXXXXXXXX (the "Original Job") and was transferred to XXXXXXXXXX effective XXXXXXXXXX (the "New Job"). In his Original Job, the Employee lived off the reserve and was based in an off-reserve office. However, because his duties took him to reserves, his employment income was partially tax-exempt under the proration rule of Guideline 1 of the Indian Act Exemption for Employment Income Guidelines (the "Guidelines"). In his New Job, the Employee is living on the reserve and also performing 100% of his employment duties on the reserve. In such a situation, Guideline 1 would exempt 100% of his employment income from tax. The question has arisen whether the Incentive should be partially tax-exempt in accordance with the treatment of employment income from his Original Job or entirely tax exempt in accordance with the treatment of employment income from his New Job.
Paragraph 6(1)(a) of the Income Tax Act (the "Act") provides that a taxpayer's income for a taxation year from an office or employment includes "benefits of any kind whatever received or enjoyed by the taxpayer in the year in respect of ...employment." It is our opinion that the Incentive is a taxable employment benefit within paragraph 6(1)(a) of the Act. This position is supported by the Federal Court of Appeal case of The Queen v. William R. Phillips (94 DTC 6177) which held that a $10,000 lump sum paid by an employer to assist its employee purchase a new home in a new job location was a taxable employment benefit under paragraph 6(1)(a) of the Act.
Having determined that the Incentive is a taxable employment benefit within paragraph 6(1)(a) of the Act in the year of receipt, it is our opinion that because receipt of the Incentive can be causally connected to the New Job, it should be given the same tax treatment as the employment income from the New Job (i.e. 100% exempt pursuant to Guideline 1, based on the facts provided).
We trust that these comments will be of assistance.
For your information a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. 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 electronic library version, or they may request a severed copy using the Privacy Act criteria, which does not remove client identity. You should make requests for this latter version to Mrs. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
Roxane Brazeau-LeBlond, C.A.
Financial Industries Division
Income Tax Rulings Directorate
Policy and Planning Branch
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