27 July 1989 Ministerial Correspondence 58244 F - Home Relocation Loan

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.

July 27, 1989

Dear Sirs:

Re:  Home Relocation Loan

We are responding to your letter of June 7, 1989, concerning a home relocation loan. You have asked whether an employee would be entitled, in the appropriate circumstances, to claim a deduction under paragraph 110(1)(j) of the Income Tax Act (the "Act") in respect of a reimbursement by the employer of interest costs on a loan or mortgage taken out to acquire a residence upon relocation.

The answer to your question is dependant on whether or not the loan or mortgage in question can be considered to be received in the circumstances described in subsection 80.4(1) of the Act. It is our view that a third party loan will be considered to be received in the circumstances described in subsection 80.4(1) of the Act. It is our view that a third party loan will be considered to be received by virtue of employment and thus subject to subsection 80.4(1) of the Act, if the employer is involved in the initial granting of the loan.

In our view the employer will be considered to be involved in the initial granting of the loan if one of the following criteria is satisfied:

1)     the employer is involved in the negotiation of the loan,

2)     the employer guarantees the loan,

3)     the employer recommends in writing to the lender that the loan be made to the employee,

4)     the employer provides a letter of introduction to the lender which outlines the amount and terms of the subsidy which the employer has agreed to pay to the employee, or

5)     there is a written agreement before the loan is received that the employer will make a payment to the lender in respect of all or any part of the interest on the loan.

If the employer is involved in the initial granting of the loan and the loan meets the other requirements in the definition of "home relocation loan" as defined in subsection 248(1) of the Act, the employee will be entitled to a deduction in respect of the taxable benefit which was included in income under subsection 6(9) of the Act to the extent permitted by paragraph 110(1)(i) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

for DirectorSmall Business and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch