23 October 1989 Income Tax Severed Letter AC74167 - Northern Residence Deduction and Moving Expenses Available to Students

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.

DATE: OCT 23 1989

TO: VANCOUVER DISTRICT OFFICE           FROM: HEAD OFFICE

    Public Affairs Division 106-02            Specialty Rulings
                                               Directorate
                                              A. Humenuk
    Attention: Karen Long                     (613) 957-2135

                                         FILE: 7-4167

SUBJECT: Northern Residents Deduction and
         Moving Expenses Available to Students
We are replying to your memorandum dated July 20, 1989, in which
you requested our views on the factors which determine the
residency of a student.

Before providing comments on the specific questions raised in your memorandum, some general comments on the subject of residency in the context of section 110.7 are in order.

First, the deduction is intended for individuals who reside in a prescribed area for not less than six months. The implication of the relatively short six month test is that there is not the requirement for permanence in the established residency, i.e., severance of self and family from the other or former place of residence. It is our opinion therefore, that an individual may have more than one place of residence at the same time.

Second, as noted in the Northern Residents Deductions Tax Guide, continuity is not considered to be broken by short term absences from the prescribed area such as vacations and temporary work assignments. This point perhaps requires some clarification. There are individuals who reside in a prescribed area on a permanent basis, i.e., "in the settled routine" of their lives, that is here they "regularly or customarily" reside, and there are those individuals who reside in the prescribed area on a temporary basis (although for at least six months) who may even maintain another residence in a non-prescribed area where they or their families "regularly or customarily" reside. It is our view that for those individuals in the former category a temporary absence (where the individual intends and ultimately does return to his "customary" residence) will not break the continuity of his residence. For those individuals in the latter category whose temporary absences consist of returning regularly to their other permanent residence each such absence is considered to be a break in the continuity of his residency in the prescribed area.

Third, the question of residency, whether permanent or temporary, is a question of fact and we are unable to provide guidelines which will apply to all situations. For students in the situation you describe who have two places of residence, some may have their permanent place of resident in the prescribed area and a temporary residence at the place where they attend school while others may have their permanent residence in the non-prescribed area and a temporary residence in the prescribed area. The same general criteria used in establishing residency as described in IT-22 lR2 will apply in determining the student's "permanent" place of residence.

Finally, we assume that your questions relate to the problems of establishing the residency of a single student who may change his residence simply by moving himself and his possessions. A married student would normally be considered a continuing resident in the place where his spouse and dependants reside.

With respect to your questions, we offer the following comments:

1.       In your first question, you ask for confirmation of your
         understanding of the views we had expressed in a
         previous response we had given to Assessing and
         Enquiries Directorate.  It is your understanding that a
         student who lives away from his parents (who live in a
         prescribed area) in order to attend a university or
         school in a non-prescribed area would be a  continuing
         resident of that prescribed area if the student returns
         to that prescribed area during school holidays and
         summer vacation.  Yet you believe that a student who
         remains in the non-prescribed area during the summer
         vacation would be considered to have broken his
         residence in the prescribed area even though he may
         visit family in the prescribed area on some or all of
         the school holidays.

         Although we would generally agree with your
         understanding as expressed above, no one factor can be
         used to determine residency.  In your second statement,
         you suggest that the absence or presence of the student
         in the prescribed area during the summer is the
         determining factor. We agree that it would be more
         difficult for a student who does not return to the
         prescribed area for the summer vacation to establish
         that the prescribed area residence continues to be the
         place where he regularly and customarily resides in the
         "settled routine of his life".  However in some
         situations such as a co-op degree program, a permanent
         resident of the prescribed area may not be able to
         return to the prescribed area during the summer as well
         as during the school term.  Similarly, there may be a
         situation where a student who does return to the
         prescribed area in the summer and during school
         holidays, is considered a permanent resident of the
         non-prescribed area.

2.       You ask whether the length of the student's schooling
         has any bearing on whether the student continues to
         reside in the prescribed area while attending a school
         located outside the prescribed area.  As stated in the
         memorandum from Assessing and Enquiries Directorate
         dated July 21, 1988, the longer the absence from the
         prescribed area, the more difficult it would be for a
         taxpayer to show that the settled routine of his life
         still included residence in the prescribed area.
         However, this is not to imply that a student in a
         program such as law or medicine would be considered to
         have given up his residency in the prescribed area
         solely because his program was longer than an
         undergraduate program.  In fact a program of longer
         duration would be one of the many factors used to make
         the determination of residence.

3.       For your third question, you present a situation where a
         student resided in a prescribed area before 1987.  We
         assume the residence had been continuous and permanent
         as discussed above.  In January of 1987, the student
         leaves the prescribed area to attend university in a
         non-prescribed area until nay, 1987 when he returns to
         the prescribed area for summer employment.  In September
         1987, the student returns to the university.  The
         student is allowed moving expenses for two out of three
         moves (none were claimed for the third move).  You have
         asked whether the student is eligible for both a
         deduction for moving expenses and the northern residents
         deduction.  
         For the purpose of our response, we assume all other
         factors support both the moving expense claim and the
         claim for the northern residents deduction.  You are
         concerned about the inconsistency involved in
         considering that the prescribed area residence is the
         student's residence throughout a six month period (which
         includes the period while attending university) and
         considering that the student has moved to a residence in
         the non-prescribed area where he ordinarily resides.  As
         stated above it is our view, as supported by a Supreme
         Court decision (Thompson v. M.N.R. 2 DTC 812), that a
         taxpayer can be "ordinarily resident" in two places at
         the same time.  Based on British precedent, the Court
         held that the term    ordinarily resident had the same
         meaning as "resident" and was contrasted  with
         "sojourn".  In the case of a single student who
         maintains a residence with his parents as well as a
         residence at university, there would be no inconsistency
         in accepting that he is resident in the prescribed area
         and that he has moved to another residence where he also
         ordinarily resides. In fact, it would be difficult to
         justify our position of allowing moving expenses in
         respect of a student's summer employment if we did not
         accept the concept of two places of ordinary residence.
         In other situations, we have stated that moving expenses
         are not deductible where the taxpayer merely sojourns in
         the new area.

We trust these comments will be of assistance to you. ORIGINAL SIGNED BY

P. D. FUOCO for Director Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch