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:
basis for rates in Regulation 7306 (automobile allowances)
Position TAKEN:
determination of rates responsibility of Dept of Finance.
Referred t/p.
Reasons FOR POSITION TAKEN:
XXXXXXXXXX 941017
SandraShort
Attention: XXXXXXXXXX
April 25, 1994
Dear Sirs:
Re: Interpretation Bulletin IT-522, Paragraph 45
This is in reply to your letter of April 20, 1994 (your file T5-13-3) wherein you have requested background information
relating to Regulation 7306 of the Income Tax Act which is applicable in respect of automobile allowances paid after 1987. As you are aware, the rates referred to by you are determined by the Department of Finance. Accordingly, we have forwarded your correspondence to the Department of Finance, Tax Policy Branch, 140 O'Connor Street, Ottawa K1A 0G5.
As noted in paragraph 45 of Interpretation Bulletin IT-522, any allowance received in respect of a motor vehicle must be
reasonable in order to be excluded from an employee's income by virtue of subparagraph 6(1)(b)(v) or (vi), or "not be in
excess of a reasonable amount" for the purposes of subparagraph 6(1)(b)(vii.1) of the Act. Paragraph 18(1)(r) of the Act denies a payor a deduction from income in respect of automobile allowances to the extent that the amount paid or payable exceeds an amount determined in accordance with prescribed rules, except where the amount so paid or payable is required to be included in computing the individual's income. While the reasonableness of an allowance is normally decided based on the facts of a particular case, the Department will generally accept as reasonable an allowance determined in accordance with Regulation 7306 where such allowance is not materially different from that which would otherwise be considered reasonable.
Yours truly,
P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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