19 June 1994 Internal T.I. 9413156 - CANADIAN RESIDENT STATUS OF U.S. VISA HOLDERS (7576-1)

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:

Canadian residence status of U.S. Visa holders.

Position TAKEN:

It may be possible for an individual to sever his residential ties with Canada but not be considered a "resident alien" for U.S. tax purposes.

Reasons FOR POSITION TAKEN:

The U.S. do not have a common law "question of fact" test.

				July 19, 1994

	International Tax Programs		Rulings Directorate
	Carole Gouin		Jim Wilson
	Director General		(613) 957-2123

Attention: D. Buchanan

									941315

Residence Status of U.S. Visa Holders

This is in reply to your memorandum dated May 16, 1994 regarding the Canadian residence status of certain "Canadians" who enter the United States temporarily on a U.S. visa. The United States uses a statutory residence test under the Internal Revenue Code whereas Canada's concept of residence, subject to subsection 250(1) of the Income Tax Act ("Act"), is based on common law and is purely a question of fact. You are concerned with those individuals who have severed their residential ties with Canada but are not considered residents of the United States for U.S. tax purposes.

We are in agreement with you that it may be possible for an individual to sever his residential ties with Canada and not become a resident of the United States for U.S. tax purposes. However, it should be noted that it is commonly recognized that one must be resident somewhere. One of the leading Canadian cases on residence is Thomson v. M.N.R., 2 D.T.C. 812, (1946) C.T.C.(S.C.C.), affirming 2 D.T.C. 684, (1945) C.T.C. 63 (Ex. Ct.). In the Exchequer Court judgement, Thorson P., in adopting some of the United Kingdom jurisprudence as being relevant in Canada, stated the following:

"....there is a dearth of Canadian authority on the question under review. There are, however, many cases in the United Kingdom, in which the terms, as they appear in the Income Tax Act of Great Britain, have been considered, that are helpful...."

In reviewing the English jurisprudence, Thorson P. adopted several principles including the principle "that a person must reside somewhere", Rogers v. I.R.C. (1879), 1 T.C. 225 (Scot. Ct. of Exch).

An individual may very well be a resident of the United States under the Canadian concept of that term but not resident therein for purposes of the U.S. Internal Revenue Code (the "Code"). However, we would suggest that before the Department could make a determination of non-resident status for an individual described above, we must be satisfied that the individual is not sojourning in the United States but is in fact a factual resident there as that term is understood from a Canadian context.

Even though an individual has only been lawfully admitted into the United States on a temporary basis, it may be his intention to stay permanently. All the facts must be looked at to determine the purpose of the move to the United States and the degree of permanence to it (see paragraph 4 of Interpretation Bulletin IT-221R2). Any minor or secondary residential ties that the individual has not severed with Canada, along with evidence that there was no real intended degree of permanence to his relocation to the United states, may be enough to conclude that the individual is "ordinarily resident" in Canada while temporarily abroad. We acknowledge, however, particularly where the individual is single and his ties to Canada were tenuous to begin with, that it may be possible to sever all ties with Canada even though they have only been granted temporary visiting rights in the United States.

Where an individual has severed his residential ties with Canada and is also a "non-resident alien" of the United States for purposes of the Code, he will not be considered a resident of a contracting state for purposes of Article 4 of the Canada-United States Income Tax Convention and will not be entitled to any treaty relief. Accordingly, all Canadian source income will likely remain taxable in Canada under subsections 115(1) or (2) or Part XIII of the Act, as the case may be, and any U.S. source income will likely be taxable under the Code.

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch