1999 Ruling 9827713 - EMPLOYEE HOUSING REPURCHASE REMOTE

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: 1. Whether reimbursement of a particular housing loss would be required to be included in income under paragraph 6(1)(a) as determined under paragraph 6(20)?

Position: 2. No.

Reasons: 3. The situation involved a move to, and commencement of work in, a remote location many years before under a housing plan by which an employee bought a house under a buy-back guarantee. The original move met the criteria in the definition of an eligible relocation. The new housing loss rules only apply to amounts paid after 2000 in this situation. Accordingly, the old rules apply to payments made before then. Payments under this buy-back arrangement, without retirement from employment in this remote region, were determined not to result in a taxable benefit.

XXXXXXXXXX 982771

Attention: XXXXXXXXXX

XXXXXXXXXX, 1999

Dear XXXXXXXXXX:

Re: XXXXXXXXXX
XXXXXXX
Employee Housing Repurchase

This in reply to your letter of XXXXXXXXXX and your subsequent correspondence of XXXXXXXXXX, in which you requested an advance income tax ruling on behalf of the above-noted taxpayers. We also acknowledge numerous telephone conversations on this issue.

We understand that to the best of your knowledge and that of the taxpayers, none of the issues involved in this ruling request:

(a) are in an earlier return of the taxpayers or a related person;

(b) are being considered by a tax service office or taxation centre in connection with a previously filed tax return of the taxpayers or a related person;

(c) are under objection by the taxpayers or a related person;

(d) are before the courts; nor

(e) are the subject of a ruling previously issued by this Directorate to the taxpayers or a related person.

Our understanding of the relevant facts, proposed transactions and purpose thereof is as follows:

FACTS

1. XXXXXXXXXX are taxable Canadian corporations as that term is defined in section 89 of the Income Tax Act (the "Act").

2. XXXXXXXXXX owns a XXXXXXXXXX % interest in XXXXXXXXXX.

3. The XXXXXXXXXX is owned and operated by XXXXXXXXXX under a joint venture agreement.

4.

XXXXXXXXXX.

5. The XXXXXXXXXX is located in a remote area in XXXXXXXXXX.

6. XXXXXXXXXX, articulated a detailed housing policy. At least since XXXXXXXXXX, the policy has been as set out in accordance with the following excerpt from its housing policy:

A major concern of the employees is, should they decide to leave XXXXXXXXXX, will they be able to sell their house? XXXXXXXXXX addresses this issue in a number of different ways.

• XXXXXXXXXX Management has stated that employee houses will be repurchased for the same price as XXXXXXXXXX sold the house to the employee, subject to normal wear and tear.

XXXXXXXXXX

1. XXXXXXXXXX
2. XXXXXXXXXX
3. XXXXXXXXXX

• *

XXXXXXXXXX

XXXXXXXXXX

7.

XXXXXXXXXX

The cost of these houses to the employees is about $XXXXXXXXXX. XXXXXXXXXX is making an offer to each employee who currently owns a home governed by the above-noted housing policy, to repurchase the home from the employee for the employee's cost (in accordance with the repurchase clause of the current housing policy). These homes are all in respect of an eligible relocation as defined in subsection 248(1) of the Act in connection with which the employees began employment at XXXXXXXXXX prior to October 1998. The employee may then repurchase the house at its fair market value. Employees who purchase under this offer will not be entitled to the benefit of the existing housing policy.

PROPOSED TRANSACTIONS

8. Employees who purchased their homes under the existing housing program will sell their homes to XXXXXXXXXX for an amount equal to their original purchase price.

9. Some employees may repurchase the homes from XXXXXXXXXX for an amount equal to their fair market value, and XXXXXXXXXX will no longer be obliged to repurchase them as described in paragraph 6.

10. Some employees may rent the homes from XXXXXXXXXX for a rental amount of fair market value.

PURPOSE OF THE PROPOSED TRANSACTIONS

11. The purpose of the proposed transaction is to allow employees who relocated to the XXXXXXXXXX area in reliance on the existing housing program to be reimbursed for their loss accrued to date in respect of their home, while bringing to an end XXXXXXXXXX obligation to reimburse the employees for any future losses.

RULING

Provided the above statements of facts and proposed transactions are accurate and constitute complete disclosure of the facts and proposed transactions, and that the proposed transactions are completed as declared herein, we rule as follows:

A. No amount will be required to be included in the income of the employees of XXXXXXXXXX pursuant to paragraph 6(1)(a) of the Act as a result of the proposed transactions in paragraphs 8, 9 and 10 above.

This ruling is given subject to the general limitations and qualifications set forth in Information Circular 70-6R3 issued by Revenue Canada, Taxation on

December 30, 1996 and is binding provided that payments with respect to the sales described in paragraph 8 above are made by XXXXXXXXXX on or before December 31, 2000. This ruling is based on the Act in its present form.

COMMENT

You have asked for our comments on the reimbursement of housing losses to these employees who began employment at XXXXXXXXXX prior to October 1998, if payments were to be made by XXXXXXXXXX after December 31, 2000. We are prepared to provide the following comment which is not a ruling and is not binding on the Department. In our view, provided that the criteria in the definition of eligible relocation were met on the move to XXXXXXXXXX and that the employee began employment at XXXXXXXXXX prior to October 1998, any housing loss as described in paragraph 6(21) on a house that was purchased by an employee from XXXXXXXXXX under the detailed housing policy described in paragraph 6 above, would be an eligible housing loss as described in subsection 6(22), if the house is designated according to that subsection, and any amount paid by XXXXXXXXXX after December 31, 2000 in respect of that eligible housing loss would be a benefit to be included in income under paragraph 6(1)(a) as determined under paragraph 6(20).

Yours truly,

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate