10 March 2010 External T.I. 2009-0349531E5 - Northern residents deduction

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: Meaning of the term "member of a taxpayer's household". Does it only include related persons?

Position: No.

Reasons: Question of fact. However, where individuals are not related and living in the same SCDE they must be living together as a family unit (i.e., they must have some close connection to each other) so that it is reasonable to conclude that such persons are members of the taxpayer's household.

XXXXXXXXXX 							2009-034953
								Michael Cooke, C.A.
March 10, 2010

Dear XXXXXXXXXX :

Re: Technical Interpretation Request - Northern Residents Deduction

This is in response to your correspondence dated November 25, 2009, wherein you asked whether the reference to "a member of the taxpayer's household" in paragraph 110.7(1)(a) of the Income Tax Act (the "Act") requires the particular household member to be related to the particular taxpayer claiming a deduction for travel expenses under this provision 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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Our Comments:

Where an individual residing in a prescribed zone receives a taxable travel allowance from his or her employer, paragraph 110.7(1)(a) of the Act permits a deduction in respect of travel to which the allowance relates. The deduction is determined by multiplying the maximum amount otherwise permitted by a specified percentage, which varies depending on the particular prescribed area in which the taxpayer resided.

In accordance with the rules in subparagraphs 110.7(1)(a)(ii) and (iii) of the Act, the travel expenses must be incurred in respect of trips made in the year by the taxpayer or another individual who was a "member of the taxpayer's household" during the part of the year in which the taxpayer resided in the particular area. Moreover, neither the taxpayer nor a "member of the taxpayer's household" can at any time be entitled to a reimbursement or any form of assistance (other than a reimbursement or assistance included in computing the income of the taxpayer or the household member) in respect of such travel expenses.

The term "member of the taxpayer's household" is not specifically defined in the Act. However, the Concise Oxford dictionary defines a "household" as, "the occupants of a house regarded as a unit" while a "member" is defined as "a person belonging to a society, team, etc." Similarly, Black's Law (8th ed.) defines a "household" as, "A family living together" or "A group of people living under the same roof."

It is our view that "a member of a taxpayer's household" for the purposes of subsection 110.7(1)(a) of the Act should only include individuals who are living together as a family unit (i.e., the individuals must have some close connection with one another) in the same self-contained domestic establishment. While in most cases such individuals would be "related persons" within the meaning of paragraph 251(2)(a) of the Act, we also recognize that a taxpayer's household might, in some circumstances, include individuals who do not meet this definition. For instance, an individual who is cohabiting in a conjugal relationship with a taxpayer in a particular taxation year might be a member of that taxpayer's household even though they are not "common-law partners", as that term is defined in subsection 248(1) of the Act, because the one year continuous period has not yet been met at that time.

Whether an individual can reasonably be considered as being a member of a taxpayer's household for the purposes of paragraph 110.7(1)(a) of the Act in a particular situation would involve questions of fact that can only be determined after a review of all of the relevant circumstances and such a review must be considered by the appropriate Tax Service Office.

We trust our comments will be of assistance to you.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch