22 March 1995 External T.I. 9414435 - RESIDENCE IN A PROVINCE (HAA 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.

		941443
XXXXXXXXXX		S. Leung

Attention: XXXXXXXXXX

March 22, 1995

Dear Sirs:

Re: XXXXXXXXXX
Residence in a Province

We are writing in response to your letter of May 26, 1994 in which you requested our view as to which province that XXXXXXXXXX would be considered to be resident of and the consequential tax effects of such a determination of residence.

The facts of the case as described in your letter of May 26, 1994 and the telephone conversation of June 7, 1994 between XXXXXXXXXX and Ken Major of our office are as follows:

XXXXXXXXXX

XXXXXXXXXX

Since the situation outlined in your letter relates to an actual situation involving identifiable taxpayers, the applicable District Taxation Office should be consulted with respect to the income tax consequences which would arise from such situation. However, we can offer the following general comments.

Based on the relevant jurisprudence a person can have more than one residence at a particular time. Therefore, if two persons have a permanent home available for them to occupy and use at any time in each of two provinces and have personal ties with both provinces, they could be considered to be residents of both provinces. However, to determine which province in Canada a person is resident of, section 2607 of the Income Tax Regulations ("ITR") states that where an individual was resident in more than one province on the last day of the taxation year, for the purposes computing income earned in a province, he or she shall be deemed to have resided on that day only in that province which may reasonably be regarded as his or her principal place of residence. The determination of the principal place of residence is a question of fact and all the facts and circumstances surrounding a particular situation have to be examined before a final determination can be made. Generally, the principal place of resident of a person is the province where the person ordinarily resides in a permanent home and with which he or she has closer social and economic ties. In the situation described in your letter, it appears that the principal place of resident of

XXXXXXXXXX

This is so notwithstanding that on that date they had a common-law relationship and were considered, for income tax purposes, to be spouses to each other, as discussed in the following paragraph.

Under the Income Tax Act (the "Act"), applicable after 1992, the term "spouse" of a taxpayer at a particular time includes a person of the opposite sex who is cohabiting with the taxpayer in a conjugal relationship and has cohabited with the taxpayer throughout a 12-month period ending before that time or is a parent of a child of whom the taxpayer is also a parent. Two persons would be considered to be spouses to each other under the extended definition of "spouse" in subsection 252(4) of the Act if they cohabited throughout a 12-month period in the past and have not ceased cohabiting for a period of at least 90 days due to a breakdown of their conjugal relationship. Therefore, even though at the present time they may maintain separate residences in different provinces, they would still be considered to be spouses to each other for the purposes of the Act.

If two persons are considered to be spouses to each other for purposes of the Act, all provisions of the Act regarding spousal transfers would be available and the income of their spouse would be included in the calculation of their total family income for purposes of certain provisions of the Act. In addition, they would be allowed only one principal residence for the purpose of the principal residence exemption under paragraphs 40(2)(b) or (c) of the Act. Consequently, if one of their residences has been designated as a principal residence in the year of sale (one would only designate a dwelling to be a principal residence in the year when there is a capital gain realized on its disposition), no other residence could be designated as principal residence for those years where a principal residence has already been designated.

We are not aware of any provisions in the Act that allow the Minister of Revenue Canada to waive the liability of a director where the director is liable under sections 227.1 (failure to withhold and remit source deductions) and 242 (corporation committing an offense) of the Act.

The above comments represent our general views with respect to the subject matter of your letter. These comments do not constitute an advance income tax ruling and therefore, as described in paragraph 21 of Information Circular 70-6R2, are not binding on the Department. Also, nothing in this letter should be construed that the Department has reviewed or agreed to the residency status of XXXXXXXXXX while they were living abroad.

Yours truly,

for Director
Reorganizations and Foreign Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch