18 May 1999 External T.I. 9908375 - EMPLOYER REIMBURSEMENT OF MORTGAGE INSURANCE

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: Is employer payment of cost of "mortgage default insurance" a taxable benefit?

Position: Yes

Reasons: Not specifically exempted by 98-99 Employers' Guide to Payroll Deductions; Taxable benefits:

Discussed with Trust Accounts, and they are not willing to expand list of exemptions at this point.

Amount is included as a benefit by legislation.

XXXXXXXXXX 	D. Duff
		990837
May 18, 1999

Dear XXXXXXXXXX:

Re: Employer Reimbursement of Mortgage Default Insurance

This is in reply to your letter of March 24, 1999 requesting our position on whether a taxable employment benefit would result from an employer paying the cost of mortgage default insurance on behalf of an employee who has acquired a new house pursuant to an eligible relocation.

You described the situation where an employee was transferred because of his employment, sold his former house and invested all of the equity in the new home. When financing the new house, he is required to pay for mortgage default insurance. The employer either pays it on his behalf or reimburses him for it. You asked whether the Department would consider such a reimbursement or payment to be a benefit pursuant to paragraphs 6(1)(a) or (b) of the Income Tax Act (the "Act") or proposed subsection 6(23) of the Act.

Our comments

As you indicated, this amount is not listed as a non-taxable item in section 2.13, Moving expenses and relocation benefits, of the 98-99 Employers' Guide to Payroll Deductions- Taxable Benefits, and the Department is not prepared to expand this list to include mortgage insurance. Proposed subsection 6(23) of the Act provides that "... an amount paid or the value of assistance provided ... in respect of, the financing of ... a residence is ... a benefit received by the individual because of the office or employment." As stated in Nowegijick v. The Queen, 83 DTC 5041, at p. 5045, "The words "in respect of" are, in my opinion, words of the widest possible scope. They import such meanings as "in relation to", "with reference to" or "in connection with". The phrase "in respect of" is probably the widest of any expression intended to convey some connection between two related subject matters." Consequently, in our view, where an employer pays or reimburses the cost of mortgage insurance for an employee's house, such a payment would be in respect of the financing of the residence and would be included as a benefit from employment.

We trust our comments will be of assistance to you.

Yours truly,

Roberta Albert, C.A.

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch