21 January 2000 Administrative Letter 1999-0005332 - EXPENSES-SALESMAN

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: Interpretation of "regular and continuous" in ITA 8(13)(a)(ii).

Position: Question of fact. Interpretation is similar to that for the same expression found in ITA 18(12)(a)(ii) and set out in paragraph 3 of IT-514.

Reasons: Paragraph 3 of IT-514

		January 21, 2000

	Appeals Branch	HEADQUARTERS
	Income Tax Appeals Division 	S. Parnanzone
L. Tremblay	(613) 957-9232
	Director

	Attention:  D. Berthelot
		1999-000533

Work space in home expenses

This is in reply to your inquiry by electronic mail dated September 30, 1999, and is further to the telephone conversation with Mr. S. Parnanzone of this office, concerning the meaning of the expression "regular and continuous" in subparagraph 8(13)(a)(ii) of the Income Tax Act.

You described a situation involving a commissioned insurance salesman who earns in excess of $450,000 per year and meets clients at his home office, the employer-provided downtown office and at the golf clubs. You advised that the taxpayer's home office is a segregated area used to earn employment income and for no other purpose; the number of clients he meets there are less than the number he meets at the employer-provided office; his employer signed form T2200 indicating that the taxpayer was required to have a home office; and, in filing his income tax return, the taxpayer claimed home office expenses the related tax of which is approximately equal to $1,500.

You have concluded that subparagraph 8(13)(a)(i) does not apply in this case, that the taxpayer's claim for home office expenses is based on his meeting the requirements in subparagraph 8(13)(a)(ii) and that the only concern with respect to subparagraph 8(13)(a)(ii) is whether the taxpayer's home office is used on a "regular and continuous" basis for meeting clients in the ordinary course of earning employment income.

You have referred to an example in a paper written by Mr. John Roy, a private tax practitioner, and published in the 1996 Tax Conference Reports. The example at page 31:10 involves a partner in a professional accounting firm who works at home two days a week, is provided with work space at his or her firm in a neighbouring community, and meets an average of one client per day at both locations. The author concluded that "(i)f, however, the partner saw fewer people in the home office than he or she would on a typical day, the "regular and continuous" basis could be challenged by the Department".

Since Mr. Roy suggested in his paper that his conclusion was informally supported by a CCRA staff member, you would like to know if his suggestion, namely that meeting fewer clients at the home office than at the employer-provided office cannot be regarded as meeting clients on a regular and continuous basis, reflects CCRA's official position on the interpretation of the expression "regular and continuous".

Our Comments

In our view, whether a taxpayer meets clients at the home office on a regular and continuous basis is a determination of fact. The meaning to be accorded to "regular and continuous" in subparagraph 8(13)(a)(ii) for the purpose of computing employment income would be similar to that given to this same expression in subparagraph 18(12)(a)(ii) for the purpose of computing business income. CCRA's position on the interpretation of the expression "regular and continuous" in subparagraph 18(12)(a)(ii) is set out in paragraph 3 of Interpretation Bulletin IT-514, Work space in home expense, as follows:

The second requirement is that the work space must be used for meeting clients, customers or patients on a regular and continuous basis. The regularity and frequency of meetings in a work space to meet the requirement of being on a regular and continuous basis will depend on the nature of the business activity and is determined on the facts of each situation. However, a work space in respect of a business which normally requires infrequent meetings or frequent meetings at irregular intervals would not meet the requirement.

Since we were not provided with complete details, we are unable to express an opinion on whether the taxpayer in your case used the home office to meet clients on a regular and continuous basis. Nevertheless, we would mention that, in our view, the fact that the number of clients met at the home office is less that the number met at the employer-provided office would not, in and by itself, be sufficient to maintain that the taxpayer was not meeting clients at his home office on a regular and continuous basis for purpose of subparagraph 8(13)(a)(ii). All the facts of a particular situation would need to be considered.

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

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