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 there are timing restrictions involved in a home relocation loan as defined in 248(1)
Position TAKEN: effectively yes
Reasons FOR POSITION TAKEN:
3 possible timing delays noted: a delay between granting of loan and purchase of home suggests that loan was not used for the purpose of acquiring the home, a delay between the relocation to new city and purchase of home suggests that employee lived in another place during the delay - if it can be said that the employee ordinarily resided at that other place then the loan to purchase any other home will not be a home relocation loan because the house purchased is not the new residence & finally, a significant delay between the commencement of work at the new workplace and the relocation to that place might suggest that the eventual relocation is not occasioned by the change in workplaces (although we have acknowledged that we would accept the causal relationship if the relocation occures within 1 year of the change in workplaces)
June 21, 1994
HEAD OFFICE
WINNIPEG TAXATION CENTRE Rulings Directorate
T1 Client Services A. Humenuk
957-8953
Attention: Heather Molyneux
Team Co-ordinator
940808
Home Relocation Loans
We are replying to your memorandum of March 22, 1994 in which you ask whether there are any time limitations during which an employee must purchase a dwelling in order for an employer-provided loan to be considered a "home relocation loan" as defined in subsection 248(1) of the Act. We apologize for the delay in responding.
A timing delay may arise between
i)the granting of the loan and the purchase of the dwelling,
ii)the employee's relocation to a new city and the purchase of the dwelling and
iii)the change in work location and the employee's move.
In each case, the facts and circumstances surrounding the timing delay are significant in determining whether the delay would prevent the employee from designating an employer-provided loan as a home relocation loan which otherwise qualifies as such. For example, a delay between the granting of the loan and the purchase of the dwelling would normally indicate that the loan was not used for the purpose for which it was granted. However, in a particular set of circumstances you may determine that the loan was used to purchase the dwelling despite any minor delays that may have occurred in closing the purchase of the dwelling.
With respect to the second example cited, it is significant to note that an employee must move from the residence in Canada at which he ordinarily resided to a residence in Canada at which, after the move, he ordinarily resided in order for the loan used to acquire that second residence to be considered a home relocation loan. Where an employee is unable to purchase suitable long term accommodation at the new location, the employee might obtain short-term accommodation while actively seeking to find more permanent accommodation. However, where the employee establishes a settled routine of life at the first location, the employee is considered to ordinarily reside at that location even though the employee intends to move to another location at the earliest opportunity. If the employee establishes that place to be his ordinary place of residence, a subsequent loan to acquire a different residence would not qualify as a home relocation loan because the residence acquired with the loan would not be the new residence referred to in paragraph b) of the definition of home relocation loan. Nevertheless, it is a question of fact as to whether the employee has established an ordinary routine of life at a particular location and caution should be used in denying a deduction under paragraph 110(1)(j) of the Act by reason of the employee's habitation at a temporary location.
In the third example where the timing delay occurs between the time the employee commences to work at the new work location and the employee's move to that location, the loan will only qualify as a home relocation loan where the reason for the relocation of the employee's residence is the change in the employee's place of work. As in the other examples, it is a question of fact as to whether the employee's move to the new residence is a result of the change in work locations. In our opinion however, the greater the length of time that separates the employee's change in work location and his or her move, the less likely it is that the employee's move arises as a result of that change. Nevertheless, we acknowledge that where the employee's relocation occurs within one year of the change in work locations, it is reasonable to assume that the cause of the relocation of the employee's residence was the relocation of the workplace. However, in an actual situation, the ultimate determination of whether any particular loan qualifies as a home relocation loan can only be ascertained upon a review of all the relevant facts.
In summary, while the Act does not set out any specific time restrictions with respect to the occurrence of events involved in a home relocation loan, one would not normally expect to find any significant delays between the commencement of work at the new workplace, the relocation of the employee, the granting of the loan and the occupation of the property acquired with the loan.
P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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