23 March 1999 External T.I. 9903205 - HOUSING LOSS PAYMENTS FROM XXXXXXXXXX

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: Start new job before relocating

Position: It can still be eligible relocation.

Reasons: Similar to 62(1)

XXXXXXXXXX 	D. Duff
		990320
March 23, 1999

Dear XXXXXXXXXX:

Re: Housing Loss payments from XXXXXXXXXX

This is in reply to your letter of February 8, 1999, requesting our opinion on whether certain relocated employees of XXXXXXXXXX would qualify for the grandfathering provisions under the proposed relocation legislation. We note that we also wrote to you on September 4, 1998, on this matter.

XXXXXXXXXX

Our Comments

Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R3 dated December 30, 1996. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature and are not binding on the Department.

The 1998 Federal Budget proposed to change the taxation of certain amounts paid by employers in connection with the relocation of employees to compensate them for losses on their houses. Proposed subsection 6(21) of the Income Tax Act (the “Act”) defines a housing loss basically as an actual loss or decline in value of the house, and proposed subsection 6(19) of the Act requires the employee to include such an amount in income, unless it is an eligible housing loss. An eligible housing loss is defined in proposed subsection 6(22) of the Act to be a housing loss in respect of an eligible relocation, which is basically a relocation to enable the taxpayer to be employed at a new work location; both the taxpayer's old residence and the taxpayer's new residence are located in Canada; and, the new residence is 40 kilometers closer to the new work location than is the old residence.

Where an eligible housing loss is paid to an employee, one half of the excess of the amount that exceeds $15,000 must be included in income pursuant to proposed subsection 6(20) of the Act. Any amount paid in respect of a housing loss, or an eligible housing loss where the employee commenced work at the new work location after September, 1998, must be included in income where that amount was paid after February 23, 1998. However, for eligible housing losses where the employee commenced work at the new work location prior to October 1998, no amount is required to be included in income if it is paid before the year 2001.

In your situation it would be a question of fact as to whether the payments could be considered to be an eligible housing loss. They must first meet the definition of housing loss, then they must be in respect of an eligible relocation. The proposed definition in subsection 248(1) of the Act of “eligible relocation” refers to a relocation which occurred to enable the taxpayer to be employed at a new work location. In our view, an employee may meet this criteria even though he or she starts work at the new location prior to actually relocating. However, the longer the time period between the commencement of work at the new location and the relocation, the less likely the relocation will have occurred to enable the taxpayer to be employed at the new location.

We trust our comments will be of assistance to you.

Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch