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.
XXXX
A. Jane (613) 957-2126
August 13, 1986
Dear Sirs:
This is in reply to your letter of May 28, 1986 and the attached letter of April 2. 1986 addressed to the Toronto District Office regarding the income tax consequences of a relocation assistance program offered by your company to its transferred employees. We apologize for the unavoidable delay in responding.
As we understand the facts, your company's moving policy attempts to assist transferred employees who relocate to another city through a program that offers an outright cash grant rather than a loan. According to a page entitled XXXX submitted with your letter, it would appear that the company will pay a cash grant over a period of 5 years based on prevailing interest rates for a current 5 year mortgage on a principal amount determined by making a comparative study of housing costs in the new and old locations. To the extent that housing in the new area of employment costs between $5,000 to $50,000 more - than comparable housing in the old work location, the principal amount used in the above calculation is set at that amount.
You indicate that the purpose and intent of your company's relocation assistance plan is the same as the purpose and intention of the relocation assistance loan proposals in Bill C-84 (now enacted). Thus, you feel that the exemption from an imputed interest benefit for a home relocation loan on an amount up to $25,000 of principal as now provided for in the Income Tax Act (the "Act") should also apply on any taxable benefit derived by an employee from your company's plan.
Section 80.4 of the Act requires the benefit received by a person as a result of a low-interest employee loan to be included in income. As enacted by Bill C-84, paragraph 110(l)(j) of the Act provides for an offsetting deduction from taxable income of the benefit received by an employee in respect of a "home relocation loan" to the extent that the benefit is not more than the benefit that would be received in a $25,000 interest-free loan. A definition of the phrase "home relocation loan" was added to the Act in subsection 248(1) in consequence of adding the deduction provision described above. This definition in part reads as follows:
"home relocation loan" means a loan received by an individual or his spouse ... if the loan is received in the circumstances described in subsection 80.4(1) and the loan is designated by the individual to be a home relocation loan ..."
Subsection 80.4(1) of the Act, which is the provision describing the benefit, applies where a person "... received a loan or otherwise incurred a debt by virtue of the office or employment ...". Since your company's plan does not involve a home relocation loan, there is no benefit pursuant to subsection 80.4(1) of the Act. Thus, in our view, any amount paid to an employee as a relocation assistance allowance or grant is a taxable benefit from employment pursuant to paragraphs 6(l)(a) or (b) of the Act and must be reported on a T4.
Based on the foregoing provisions of the Act, we do not see any deduction available in respect of the taxable benefit inclusion derived from your company's plan without there being an amendment to the Act making such a deduction available. Should you desire that the Act be changed in this regard, we would suggest you make representations to the Department of Finance.
We trust this will be of some assistance.
Yours truly,
Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
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