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:
Home Relocation Loan. Can an employee in receipt of a home relocation loan who is subsequently transferred and pays it off, receive another loan which would qualify as a home relocation loan and be deductible under subparagraph 110(1)(j)?
Position TAKEN:
Provided the original home relocation loan is paid, if the new loan gives rise to a taxable benefit under section 80.4 of the Act and is determined to be a "home relocation loan" as defined in subsection 248(1) of the Act, then the transferred employee would be entitled to a deduction from taxable income under paragraph 110(1)(j) of the Act in respect of the new home relocation loan .
Reasons FOR POSITION TAKEN:
Nothing in the legislation which would preclude back to back home relocation loans if an employee is indeed transferred and a new loan entered into after the previous one is extinguished.
941081
XXXXXXXXXX D. Zion
Attention: XXXXXXXXXX
May 25, 1994
Dear Sirs:
Re: Home Relocation Loans - Deemed Interest Deduction
We are writing in reply to your letter of April 20, 1994, wherein you request confirmation of your opinion concerning the home relocation loan deduction provided by paragraph 110(1)(j) of the Income Tax Act (the "Act"). The facts as we understand them are as follows:
1. XXXXXXXXXX
2.From time to time XXXXXXXXXX will transfer an employee ("transferred employee") from one geographic location in Canada to another.
3.XXXXXXXXXX will provide a loan at below market rates of interest to the transferred employee to acquire a dwelling for his habitation. The loans are secured by a mortgage on the dwelling.
4.On occasion, XXXXXXXXXX will transfer the same employee to a new geographic location. In such a case, the employee will repay the original loan, secured by the mortgage at the former location and the mortgage is discharged. XXXXXXXXXX will then provide a new loan to the employee to assist in the purchase of a new home at the new location. The new home relocation loan will be secured by a mortgage on the new home.
You also indicate that it can be assumed that, for the purposes of this enquiry, the provisions of section 80.4 apply to each loan and that each loan qualifies as a "home relocation loan" within the meaning of subsection 248(1) of the Act.
You are of the opinion that the employee is entitled to claim the appropriate deduction under paragraph 110(1)(j) in respect of the benefit included in his income under section 80.4 of the Act for the new home relocation loan.
In the comments that follow unless otherwise stated, all statute references are to the Income Tax Act S.C. 1970-71-72, c.63 as amended, consolidated to June 10, 1993.
It is our view that provided the original home relocation loan is paid, if the new loan gives rise to a taxable benefit under section 80.4 of the Act and is determined to be a "home relocation loan" as defined in subsection 248(1) of the Act, then the transferred employee would be entitled to a deduction from taxable income under paragraph 110(1)(j) of the Act in respect of the new home relocation loan .
These comments represent a general interpretation of the law and, as such, may not be applicable in every situation. The determination of the tax consequences of a particular situation can only be made following a review of all the relevant facts and documentation.
We trust our comments will be of assistance to you.
Yours truly,
J.A. Szeszycki
for Director
Business and General Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch
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