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 R.C. O'Byrne (613) 957-2126
MAR 3 1988
Dear Sirs:
This is in reply to your letter of December 15, 1987 in which you asked for our views on application of section 80.4 of the Income, Tax Act (the "Act") in the following hypothetical situation:
1) An employer loans funds to one of its employees to pay the applicable costs of a medical operation done in the United States until such time as the employer's insurance company and the Quebec Medicare System reimburse the employee.
2. The loan is interest free and no part of it will be included in the employee's income for tax purposes.
3. The operation could be done either
a) while the employee is in the United States on vacation, or
b) while the employee is in the United States on business for the employer.
The preamble of subsection 80.4(1) of the Act reads as follows:
"Where a person or partnership received a loan or otherwise incurred a debt by virtue of the office or employment or intended office or employment of an individual, or by virtue of the services performed or to be performed by a corporation carrying on a personal services business (within the meaning assigned by paragraph 125(7)(d)), the individual or corporation, as the case may be, shall be deemed to have received a benefit in a taxation year equal to the amount, if any, by which the aggregate of"
It is our view that subsection 80.4(1) applies in either of situations outlined in 3) above because
a) the employee received a loan from the employer, and
b) the loan was received by virtue of his office or employment (he would not have received the loan in either situation if he were not an employee).
There are no provisions in the Act that would relieve the application of section 80.4 of the Act in situations such as these.
We trust this will be of assistance to you.
Yours truly,
for Director Reorganizations and Non-Resident Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch
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© Her Majesty the Queen in Right of Canada, 1988
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© Sa Majesté la Reine du Chef du Canada, 1988
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