22 January 2008 External T.I. 2007-0235791E5 - Northern Residents Deduction

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.

Principal Issues: The taxpayer had asked for an advance income tax ruling in respect of his claim for the Northern Residents Deduction for the 2006 taxation year.

Position: The taxpayer's request was not in the form of a proper advance income tax ruling request as described in IC-70-6R5 and the transactions were already completed. While we had very few facts, it appears that the taxpayer did not live in a prescribed intermediate zone for a qualifying period.

Reasons: See above.

XXXXXXXXXX 								2007-023579
									Michael Cooke
January 22, 2008

Dear XXXXXXXXXX :

Re: Northern Residents Deduction

We are writing in response to your letter dated March 19, 2003, wherein you requested confirmation of your ability to claim a northern resident deduction pursuant to subsection 110.7(1) of the Income Tax Act (the "Act") for the 2006 taxation year.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, "Advance Income Tax Rulings", dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following comments.

In computing an individual's taxable income for a taxation year, section 110.7 of the Act provides a special deduction in respect of certain travel benefits and living costs where the individual resides, throughout a period of at least 6 consecutive months commencing or ending in the year (referred to as the "qualifying period"), in a "prescribed northern zone" or a "prescribed intermediate zone" as defined in section 7303.1 of the Income Tax Regulations. A listing of places that are considered to be prescribed for these purposes can be found in Guide T4039: Northern Residents Deductions - Places in Prescribed Zones.

Whether or not an individual meets the conditions of subsection 110.7(1) of the Act for a particular taxation year can only be determined after a review of all of the relevant facts. Interpretation Bulletin IT-91R4, "Employment at Special Work Sites or Remote Work Locations" discusses the conditions that must be satisfied in order to claim the northern residents deduction as well as the interaction between this deduction and the "special work site" or "remote work location" exclusions in subsection 6(6) of the Act. In order to claim the northern residents deduction, the individual must file a claim in prescribed form (Form T2222, Northern Residents Deductions) for the particular taxation year.

It is true that XXXXXXXXXX qualify as prescribed intermediate zones. However, since you regularly return to your principal place of residence, which is located outside of a prescribed intermediate zone, for a period of two weeks after every six weeks of work, it is our view that you would not be entitled to a northern residents deduction as you have not resided in a prescribed intermediate zone for any qualifying period.

A copy of the publications and forms referred to in this letter may be obtained from your local tax services office or from Canada Revenue Agency's web site at www.cra-arc.gc.ca.

We trust the above comments are of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch