19 March 1999 External T.I. 9906685 - NON-RESIDENTS 115(2)(E)(I)(B)

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: Non-resident can not claim non-capital loss if no income pursuant to 115(2)(e)(i)(B).

Position:

Reasons: If no income included , no deductions can be allowed against it.

XXXXXXXXXX 						990668
J. Stalker
March 19, 1999

Dear XXXXXXXXXX:

Re: International Development Research Centre (IDRC) and deductions

We are writing in response to your facsimile transmission of March 12, 1999, in respect of IDRC employees and the filing of their Part I returns.

Provided that clause 115(2)(e)(i)(B) of the Income Tax Act (Canada) (the “Act”) is applicable to an IDRC employee who is not resident in Canada, the income should not be reported on the Canadian income tax return. Since no income is included, no deductions can be allowed against it. Consequently, a non-capital loss can not be created by deducting contributions to a registered pension plan, for example. Similarly, if the income is included on the T1 return for administrative purposes, it should be offset with a complete deduction of that amount, so that again there is no income against which to claim a deduction.

We note that it is our position that residency, whether it be for the purposes of the Act or for the purposes of a particular income tax convention, is a question of fact, and in each case, a determination of whether a taxpayer is a resident of Canada must turn on its own facts. We also note that, in examining cases involving the question of carrying on business, the department is not bound by the 1974 letter (a copy of which you faxed to us with your November 16, 1998 letter) issued by the then Assistant Deputy Minister of this Branch expressing the opinion that clause 115(1)(e)(i)(B) of the Act applied to the non-resident employees of the IDRC. As with residence, each case that regards the carrying on of business should be examined on its own facts and it is not clear depending on the facts that the same decision would be made today with respect to employees of IDRC.

We hope our comments are of assistance.

Yours truly,

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

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