6 October 1997 Ruling 9715333 - RELOCATION BENEFIT, MORTGAGE I SUBSIDY ATR

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:

request to rule on an employee relocation assistance plan to provide mortgage interest subsidies to relocating employees. Employer is a financial institution who is in the business of mortgage lending to the public on a for-profit basis. Plan provides for provision of split-level mortgages, primary financing and relocation assistance portion, issue is whether assistance portion will be subject to tax

Position:

refuse to rule as it appears that the transaction is the same in character as completed transactions previously entered into by the employer, the tax effect which may be under discussion with the taxpayer (para 15(a) of IC70-6R3).

Reasons:

see position

	                               	971533
XXXXXXXXXX                            	Sandra Short
(613) 957-2136

Attention: XXXXXXXXXX

October 6, 1997

Dear Sirs:

Re: Advance Income Tax Ruling Request - XXXXXXXXXX

This is in reply to your June 2, 1997, request for an advance income tax ruling for your client, XXXXXXXXXX. The subject matter of the requested ruling relates to the provision of mortgage interest subsidies to relocating employees.

Paragraph 15 of Information Circular IC70-6R3 discusses circumstances under which the Department may refuse to rule. It is our opinion that subparagraph 15(a) of the Circular may apply to the transaction which is the subject of the ruling request. As a result, we decline to rule on the proposed transactions outlined in your June 2, 1997, request. Your deposit will be returned to you under separate cover. The following general comments may be assistance to you.

Our Comments:

As noted by you, the Supreme Court of Canada denied the Department's request for leave to appeal the 1995 decision in A.G. of Canada v. Hoefele et al and the Federal Court of Appeal recently dismissed the Crown's application for judicial review in the Rick S. Siwik decision (96 DTC 1678). The Hoefele situation involved a mortgage interest subsidy offered by an employer to a relocating employee and Siwik deals with the situation of an interest-free home relocation loan provided directly by the employer.

The Federal Court of Appeal found that the Siwik and Hoefele cases cannot be distinguished on the basis that in Siwik the loan was received directly from the employer. As a result, in fact situations similar to those found in Hoefele or Siwik, i.e. where:

(a)an employee is transferred to an area with higher housing costs;

(b)the employee owns a house immediately prior to relocation and purchases a house at the new location; and

(c)the amount of the loan is based on a reasonable market differential between the locations for comparable houses,

no benefit will be assessed in the employee's hands under paragraph 6(1)(a) or subsection 6(9) as a benefit determined under section 80.4 of the Income Tax Act. This position will not extend to situations which do not meet conditions (a) through (c) above.

We trust that the criteria above will enable you to distinguish which interest subsidy situations result in tax consequences to relocating employees.

Yours truly,

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