23 October 1989 Internal T.I. 74167 F - Northern Residence Deduction and Moving Expenses Available to Students

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.

SUBJECT: Northern Residents Deduction and Moving Expenses Available to Students

We are replying to your memorandum dated July 20, 1989, in which you requested our views on the factors which determine the residency of a student.

Before providing comments on the specific questions raised in your memorandum, some general comments on the subject of residency in the context of section 110.7 are in order.

First, the deduction is intended for individuals who reside in a prescribed area for not less than six months.  The implication of the relatively short six month test is that there is not the requirement for permanence in the established residency, i.e., severance of self and family from the other or former place of residence.  It is our opinion therefore, that an individual may have more than one place of residence at the same time.

Second, as noted in the Northern Residents Deductions Tax Guide, continuity is not considered to be broken by short term absences from the prescribed area such as vacations and temporary work assignments.  This point perhaps requires some clarification.  There are individuals who reside in a prescribed area on a permanent basis, i.e., "in the settled routine" of their lives, that is here they "regularly or customarily" reside, and there are those individuals who reside in the prescribed area on a temporary basis (although for at least six months) who may even maintain another residence in a non-prescribed area where they or their families "regularly or customarily" reside.  It is our view that for those individuals in the former category a temporary absence (where the individual intends and ultimately does return to his "customary" residence) will not break the continuity of his residence.  For those individuals in the latter category whose temporary absences consist of returning regularly to their other permanent residence each such absence is considered to be a break in the continuity of his residency in the prescribed area.

Third, the question of residency, whether permanent or temporary, is a question of fact and we are unable to provide guidelines which will apply to all situations.  For students in the situation you describe who have two places of residence, some may have their permanent place of resident in the prescribed area and a temporary residence at the place where they attend school while others may have their permanent residence in the non-prescribed area and a temporary residence in the prescribed area.  The same general criteria used in establishing residency as described in IT-22lR2 will apply in determining the student's "permanent" place of residence.

Finally, we assume that your questions relate to the problems of establishing the residency of a single student who may change his residence simply by moving himself and his possessions.  A married student would normally be considered a continuing resident in the place where his spouse and dependants reside.

With respect to your questions, we offer the following comments:

1.     In your first question, you ask for confirmation of your understanding of the views we had expressed in a previous response we had given to Assessing and Enquiries Directorate.  It is your understanding that a student who lives away from his parents (who live in a prescribed area) in order to attend a university or school in a non-prescribed area would be a continuing resident of that prescribed area if the student returns to that prescribed area during school holidays and summer vacation.  Yet you believe that a student who remains in the non-prescribed area during the summer vacation would be considered to have broken his residence in the prescribed area even though he may visit family in the prescribed area on some or all of the school holidays.

     Although we would generally agree with your understanding as expressed above, no one factor can be used to determine residency.  In your second statement, you suggest that the absence or presence of the student in the prescribed area during the summer is the determining factor. We agree that it would be more difficult for a student who does not return to the prescribed area for the summer vacation to establish that the prescribed area residence continues to be the place where he regularly and customarily resides in the "settled routine of his life".  However in some situations such as a co-op degree program, a permanent resident of the prescribed area may not be able to return to the prescribed area during the summer as well as during the school term.  Similarly, there may be a situation where a student who does return to the prescribed area in the summer and during school holidays, is considered a permanent resident of the non-prescribed area.

2.     You ask whether the length of the student's schooling has any bearing on whether the student continues to reside in the prescribed area while attending a school located outside the prescribed area.  As stated in the memorandum from Assessing and Enquiries Directorate dated July 21, 1988, the longer the absence from the prescribed area, the more difficult it would be for a taxpayer to show that the settled routine of his life still included residence in the prescribed area. However, this is not to imply that a student in a program such as law or medicine would be considered to have given up his residency in the prescribed area solely because his program was longer than an undergraduate program.  In fact a program of longer duration would be one of the many factors used to make the determination of residence.

3.     For your third question, you present a situation where a student resided in a prescribed area before 1987.  We assume the residence had been continuous and permanent as discussed above.  In January of 1987, the student leaves the prescribed area to attend university in a non-prescribed area until nay, 1987 when he returns to the prescribed area for summer employment.  In September 1987, the student returns to the university.  The student is allowed moving expenses for two out of three moves (none were claimed for the third move).  You have asked whether the student is eligible for both a deduction for moving expenses and the northern residents deduction.  

     For the purpose of our response, we assume all other factors support both the moving expense claim and the claim for the northern residents deduction.  You are concerned about the inconsistency involved in considering that the prescribed area residence is the student's residence throughout a six month period (which includes the period while attending university) and considering that the student has moved to a residence in the non-prescribed area where he ordinarily resides.  As stated above it is our view, as supported by a Supreme Court decision (Thompson v. M.N.R. 2 DTC 812), that a taxpayer can be "ordinarily resident" in two places at the same time.  Based on British precedent, the Court held that the term ordinarily resident had the same meaning as "resident" and was contrasted with "sojourn".  In the case of a single student who maintains a residence with his parents as well as a residence at university, there would be no inconsistency in accepting that he is resident in the prescribed area and that he has moved to another residence where he also ordinarily resides. In fact, it would be difficult to justify our position of allowing moving expenses in respect of a student's summer employment if we did not accept the concept of two places of ordinary residence. In other situations, we have stated that moving expenses are not deductible where the taxpayer merely sojourns in the new area.

We trust these comments will be of assistance to you.

P.D. FUOCOfor DirectorBusiness and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch