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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Whether the meaning of "dwelling" includes a leasehold interest in such.
Position TAKEN:
no
Reasons FOR POSITION TAKEN:
The meaning of the word dwelling is not broad enough.
933225
XXXXXXXXXX B. Kerr
March 28, 1994
Dear Madam:
Re: Cottage Properties on Indian Reservations
This is in response to your letter of November 9, 1993, wherein you requested what the Department's position would be where a shareholder received a loan from his company for the purpose of acquiring a cottage property on an Indian reservation.
You have stated that cottage properties on Indian reservations cannot be sold directly. Rather, these lands are leased for periods ranging from twenty to one-hundred years. You have identified a situation where a taxpayer obtains a loan of $100,000 from his company for the acquisition of a long-term twenty year lease of a cottage property on an Indian reservation. You have asked if the Department would view such a loan as being acquired for the purpose of acquiring a dwelling for the purpose of the shareholder loan provisions of subsection 15(2) of the Income Tax Act (the "Act"). You have not asked for comments on the possible application of the Indian Act exemption for status Indians nor have you provided sufficient information upon which to make such a determination, so we assume that this is not an issue in your request.
Subsection 15(2) of the Act provides, inter alia, that where a person that is a shareholder of a corporation receives a loan from that corporation in a taxation year, the amount of the loan will be included in computing the person's income for the year unless it falls within one of the exceptions provided for in paragraphs 15(2)(a) or (b).
One of the exceptions provided for in subparagraph 15(2)(a)(ii) is where the loan is made in respect of an individual who is an employee of the lender to enable or assist the individual to "acquire a dwelling" for the individual's habitation.
As stated in paragraph 16 of Interpretation Bulletin IT-119R3 the word dwelling includes a cottage. However, the property that is acquired must be a cottage. In your particular situation the taxpayer has not acquired a cottage but rather a "leasehold interest" in a cottage. In our view the ordinary meaning of the word "dwelling" is not broad enough to include a leasehold interest in a dwelling and we are not aware of any provision that would allow us to look through the leasehold interest to the underlying property of the interest in order to determine whether a "dwelling" has been acquired. Consequently, your particular situation would not fall within the exception under subparagraph 15(2)(a)(ii) and therefore the amount of the loan would be included in computing the income of the taxpayer.
In order to fall within the exception the words "or a leasehold interest in a dwelling" would have to be included in the provisions of subparagraph 15(2)(a)(ii) of the Act. For example, we note that the meaning of the term "principal residence" in paragraph 54(g) includes a leasehold interest in a housing unit.
We trust that these comments will be of assistance.
Yours truly,
R. Albert
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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