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.
XXXXXXXXXX
932574
January 13, 1994
Dear Sir:
RE: Housing Loans
This is in reply to your letter of September 7, 1993 and further to our telephone conversation of December 10, 1993 (Larochelle/XXXXXXXXXX) regarding the application of subsection 15(2) of the Income Tax Act (the "Act") to the following hypothetical situation:
(a) An individual owns all the shares of a rental corporation.
(b) The rental corporation has real estate consisting of apartment buildings and one house.
(c) The individual shareholder receives a nominal wage from the corporation.
(d) The individual shareholder presently lives in the home that is owned by the corporation.
(e) The individual shareholder receives a loan from the corporation which he then uses to purchase the home from the corporation.
You ask if a loan made in the above circumstances would qualify as a housing loan for purposes of paragraph 15(2)(ii) of the Act.
It is your belief that this loan is used to enable or assist an employee to acquire a dwelling even though the person lived in the dwelling prior to the purchase of it.
Our Comments:
The determination of whether a particular loan is an exclusion contemplated by subparagraph 15(2)(a)(ii) of the Act must be made on a case by case review based on all the relevant facts of the situation.
Such determinations are generally made by District Taxation Office personnel. We do, however, make the following comments based on the limited information in your letter.
In our telephone discussion, we had indicated that the application of paragraph 15(2)(ii) of the Act may be impacted by the Federal Court of Appeal decision in the case of The Queen v Silden (93 DTC 5362) and that, as a result, we would likely not be able to provide a definitive response until the issues could be resolved. Upon further review we find that your query can indeed be addressed on a general basis.
It is our view that where a shareholder of a corporation, who is also an employee of that corporation, uses the proceeds of a loan from the corporation to purchase a housing unit in which s/he already resides on a rental basis, subsection 15(2)(a)(ii) of the Act would apply. The loan would be considered to have been provided to enable or assist the shareholder/employee in acquiring a dwelling for his or her habitation.
We hope that our comments will be of some assistance to you.
Yours trulyP.D. Fuocofor DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
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