2 June 2004 External T.I. 2004-0070021E5 - Special Work Site Exemption

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 subsection 6(6) of the Act would apply if the taxpayer decided to rent either the top or bottom portion of his house. In the situation presented the bottom portion of the house was previously rented, however, the taxpayer currently uses a portion of it as an office. The taxpayer has lived in the top portion of the house since it was acquired.

Position: No.

Reasons: For the special work site exclusion to apply, one of the requirements is that, throughout the period the duties of the office or employment are performed at the work location, the taxpayer maintains at another location a self-contained domestic establishment as the taxpayer's principal place of residence. In addition, the self-contained domestic establishment must be available for the taxpayer's occupancy and not rented by the taxpayer to any other person. In determining the application of subsection 6(6) of the Act in the context of this situation, consideration must be given to the availability of the taxpayer's principal place of residence both prior to and subsequent to the temporary work assignment at the special work site. It is apparent that the taxpayer currently maintains the entire house as the principal place of residence. It would seem that the taxpayer merely wants to temporarily rent a portion of the house during his assignment at the special works site and also obtain the beneficial tax treatment under subsection 6(6) of the Act. Such an arrangement will not qualify for the exemption under subsection 6(6) of the Act.

XXXXXXXXXX Randy Hewlett, B. Comm.

2004-007002
June 2, 2004

Dear XXXXXXXXXX:

Re: Special Work Site Exemption

We are writing in response to your letter of March 30, 2004, wherein you requested our opinion on the application of the special work site exemption in subsection 6(6) of the Income Tax Act (the "Act").

You inquiry relates to the requirement in subsection 6(6) of the Act that a taxpayer maintain a self-contained domestic establishment at a location other than the special work site. In the situation described in your letter, you inquired whether subsection 6(6) of the Act would apply if the taxpayer decided to rent either the "top" or "bottom" portion of his house. You indicated that the bottom portion of the house is a "full apartment" that was previously rented. However, the taxpayer currently uses a portion of it as an office. You also indicated that the taxpayer has lived in the top portion of the house since it was acquired.

Our Comments

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 offer the following general comments.

Interpretation Bulletin IT-91R4, Employment at Special Work Sites or Remote Work Locations, discusses the requirements that an individual must meet in order to exclude from income the value of a benefit or reasonable allowance for board and lodging expenses incurred in respect of employment at a special work site. If the individual meets these requirements, transportation benefits or allowances in respect of expenses incurred for travel between the individual's principal place of residence and the special work site are also excluded from employment income.

For the special work site exclusion to apply, one of the requirements is that, throughout the period the duties of the office or employment are performed at the work location, the taxpayer maintains at another location a self-contained domestic establishment as the taxpayer's principal place of residence. In addition, the self-contained domestic establishment must be available for the taxpayer's occupancy and not rented by the taxpayer to any other person. The term "self-contained domestic establishment" is defined in subsection 248(1) of the Act, and "means a dwelling-house, apartment or other similar place of residence in which place a person as a general rule sleeps and eats". As noted in paragraph 7 of IT-91R4, a taxpayer's principal place of residence will generally be considered a self-contained domestic establishment if it is a separate living unit that has restricted access and contains a kitchen, bathroom and sleeping facilities.

In determining the application of subsection 6(6) of the Act in the context of the situation described in your letter, we are of the view that consideration must be given to the availability of the taxpayer's principal place of residence both prior to and subsequent to the temporary work assignment at the special work site. It is apparent from your letter that the taxpayer currently maintains the entire house as his principal place of residence. It would seem that the taxpayer merely wants to temporarily rent a portion of the house during his assignment at the special works site and also obtain the beneficial tax treatment under subsection 6(6) of the Act. In our view, such an arrangement will not qualify for the exemption under subsection 6(6) of the Act.

We trust our comments are of assistance.

Yours truly,

Randy Hewlett, B.Comm.

for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch