24 June 1996 Internal T.I. 9612837 - HOME RELOCATION LOANS

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:

Loans made in respect of dwellings more than one year after the employee commences work at the new location - whether there are timing restrictions involved in a home relocation loan as defined in subsection 248(1) in relation to such loans

Position:

None in the law - a review of facts surrounding significant delays could put the loan off side

Reasons:

In the most common situation, there is a delay between the relocation to a new city and purchase of home (the employee lived in temporary accommodation during the delay) - if it can be said that the employee ordinarily resided at that other place then the loan to purchase any other home will not be a home relocation loan because the home purchased is not the new residence; it would, accordingly, seem that if an employee purchased a dwelling more than a year following the commencement of his employment duties, it would be unlikely that the dwelling would be considered to be the residence at he or she ordinarily resided after the move - Two other timing delays were also noted: (i) a delay between the commencement of work at the new work place and the relocation to that place, and (ii) the granting of the loan and the purchase of the dwelling

 		June 24, 1996

	Sudbury Taxation Centre	HEADQUARTERS
Ms. Mae Steck	M. Eisner
T. C 99	(613) 957-8953
		961283

Home Relocations Loans

This is in reply to your memorandum of April 10, 1996, concerning the above-noted subject.

You have enclosed correspondence submitted to your office by XXXXXXXXXX In the correspondence, XXXXXXXXXX has indicated that if a residence is purchased by an employee within one year of the commencement of employment duties, the loan is considered to qualify as a "home relocation loan" (HRL), as defined in subsection 248(1) of the Income Tax Act. XXXXXXXXXX has now raised the issue concerning whether a loan can qualify as an HRL when it is made to an employee more than a year following the commencement of employment duties.

Our Comments

Although the definition of a HRL has no specific time limit within which an employee must purchase a residence at the new work location, it is our opinion that a significant timing delay will normally prevent the loan from qualifying as a HRL. Timing delays may arise, for example, between: (i) the granting of the loan and the purchase of the dwelling, (ii) the employee's move to a new work location and the purchase of the dwelling, and (iii) the change in work location and the employee's move. Thus, in each case where there is a delay, the surrounding facts and circumstances must be examined before a final decision can be made.

A common type of delay in purchasing a dwelling occurs when the employee rents accommodation at the new work location prior to the purchase of the dwelling. Under the definition of a HRL, an employee must move from the "old residence" to the "new residence" where, after the move, he will ordinarily reside. Accordingly, if the employee establishes a settled routine of life in a rental accommodation for some time (e.g., one year), it is quite probable that a loan to later acquire a dwelling would not qualify as a HRL because the employee ordinarily resided in the rental accommodation "after the move."

Generally, when an employee purchases a dwelling more than one or more years following the commencement of his employment duties at the new location, doubts arise as to whether the dwelling could be considered to be the "new residence" at which he or she ordinarily resided after the move. Further, it should be noted that there is no connection between the timing of deductions for moving expenses under section 62 of the Act and the timing of the receipt of a HRL by an employee who has changed work locations.

Based on the above general comments, it will be necessary to review all of the facts and circumstances relating to XXXXXXXXXX before deciding whether the particular loan received by him qualified as an HRL. Similarly, any questions on this issue in regard to other employees of XXXXXXXXXX will have to be reviewed individually.

If you require further technical assistance, we would pleased to provide our views.

John F. Oulton
Section Chief
Business, Property & Personal Section
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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