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 an individual, who meets the requirements for claiming the clergyman’s residence deduction and who’s employer provides him with serviced accommodation (rent free parsonage), can claim, as part of this deduction, the value of the accommodation’s utilities which are paid for by his employer (and represent a taxable benefit to the individual).
Position TAKEN:
As a general rule, no.
Reasons FOR POSITION TAKEN:
Position taken in other files, and consistent with our views in paragraphs 8 and 9 of IT-141. The reference to “the value of the residence or other living accommodation”, in subparagraph 8(1)(c)(i), is the fair rental value of the residence or the living accommodation. Generally, utilities are not included in the rental value of a residence or other living accommodation provided by an owner or landlord, unless the cost of the utilities cannot separately be identified for each of the units. The usual commercial practice demands that the tenant bear the cost of utilities, which is not considered part of the value of the residence.
XXXXXXXXXX 5-980482
M. Azzi
September 9, 1998
Dear Sir:
Re: Clergyman’s Residence Deduction
This is in reply to your letter of February 17, 1998, regarding the amount of the clergyman’s residence deduction provided under paragraph 8(1)(c) of the Income Tax Act (the “Act”). Specifically, you have requested our views on whether an individual, who meets the requirements for claiming this deduction and who’s employer provides him with serviced accommodation (rent free parsonage), can deduct, as part of his clergyman’s residence deduction, the value of the accommodation’s utilities which are paid for by his employer (and represent a taxable benefit to the individual).
Where the employer provides the employee with free accommodation, the clergyman’s residence deduction provided under subparagraph 8(1)(c)(i) of the Act is equal to "the value of the residence or other living accommodation occupied by the taxpayer in the course of or by virtue of the taxpayer's office or employment...to the extent that the value is included in computing the taxpayer's income for the year..." It is our view that the value of the residence or living accommodation, in this context, is the fair rental value of the residence or the living accommodation. Generally, utilities are not included in the rental value of a residence or other living accommodation provided by an owner or landlord, unless the cost of the utilities cannot separately be identified for each of the units. The usual commercial practice demands that the tenant bear the cost of utilities, which is not considered part of the value of the residence. Accordingly, in our view, under these circumstances, an individual would normally be entitled to a deduction for the value of the residence, excluding the cost of utilities paid by the employer.
The above comments are consistent with our views on the clergyman’s residence deduction in a situation where the employee rents or owns the residence, as outlined in paragraphs 8 and 9 of Interpretation Bulletin IT-141 (enclosed). In these circumstances, subparagraph 8(1)(c)(ii) of the Act provides for a deduction (not exceeding the employee’s qualifying employment income as a clergyman) of the rent paid for living accommodation rented and occupied by the employee, or the fair rental value of living accommodation owned and occupied by the employee. Where the employee is entitled to a deduction in respect of rent, it is the amount actually paid as rent that is deductible without regard to the services or utilities that may be included. Similarly, in the case of an employee who owns his own home, the deduction is limited to the fair rental value of the unfurnished premises, excluding the cost of utilities. However, if the rental value of similar premises normally includes the cost of some utilities, as is often the case with units of an apartment building, the employee would be entitled to claim those items that do not result in a charge above the basic rent.
We thank you for your comments with respect to the issue of including the value of utilities in the paragraph 8(1)(c) deduction. However, an amendment to the Act would be required before the Department could adopt such an approach. We will, however, bring the matter to the attention of the Department of Finance.
We trust that these comments will be of assistance.
Jim Wilson
for Director
Business and Publications Division
Income Tax Rulings and Interpretations Directorate
Policy and Legislation Branch
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