13 March 1981 Income Tax Severed Letter

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.

XXXX

N.J. Bhojwani Tel. (613) 393-7295

March 13, 1981

XXXX

This is in reply to your letter of February 18 concerning the application of sections 62 and 80.4 of the Income Tax Act to situations where a person residing in a Canadian community situated next to the United States border moves to another part of Canada.

You have referred to cases where an individual residing in a border community, such as Windsor, Ontario works either wholly or partially in the U.S.A. If such an individual moves to another part of Canada, you have asked whether:

1. that individual is entitled to deduct moving expenses as provided by section 62 of the Income Tax Act, and

2. an interest free loan made by the individual's new employer to that individual would qualify as a "housing loan" as defined by paragraph 80.4(2)(b) of the Income Tax Act.

Moving Expenses

With regard to item (1) above, subparagraph 62(1)(a)(i) of the Act provides that when an individual changes residences in Canada because he

(i) ceases to be employed at his ordinary work location in Canada, or

(ii) ceases to carry on a business at his ordinary business location in Canada

and commences to be employed or to carry on a business at a new location in Canada, he may deduct eligible moving expenses incurred in the course of moving from his old residence to his new residence if it results in his residing 25 miles closer to the new work or business location.

Based on the above provision, our replies to your questions are as follows:

(1) Yes, the individual is disentitled from claiming a deduction under section 62, since by virtue of his employment in the United States, he did not cease to be employed at the location or locations in Canada at which he ordinarily was so employed.

(2) If the individual works primarily in the U.S but also works for a Canadian employer in Canada, be may still be entitled to a deduction, provided he was ordinarily employed at the Canadian location and ceased to be so employed at that location.

(3) Yes, the individual would be entitled to deduct eligible moving expenses if he ceased to be employed at the location in Canada at which he ordinarily was so employed.

Housing Loans

With regard to your questions on housing loans, the 1978 amendment to the original definition of "housing loan" in paragraph 80.4(2)(b) was intended to extend the definition of "housing loan" to include a loan made to an employee who moved from a location outside Canada. Actually, it deems an employee, who lived and worked outside of Canada, to have moved from a location in Canada. It does not, however, deem so with respect to an employee who resided in Canada and only worked outside Canada. In paragraph 80.4(2)(b), a person who is resident in Canada and moves, does in fact move from a location in Canada. Furthermore, he also has to have an entitlement to deduct moving expenses, even though he may not make any deduction in respect thereof. Therefore, a Canadian resident cannot have a housing loan unless he satisfies among other requirements of paragraph 80.4(2)(b), the aforesaid two requirements viz. an actual move from a location in Canada and an entitlement to a deduction under section 62.

In view of the above comments, our replies to your questions are as follows:

(1) Yes, because the individual, by reason of his working in the U.S.A., would be precluded from deducting the moving expenses by subparagraph 62(1)(a)(i) of the Act.

(2) & (3) the individual in these situations would not be disqualified for a housing loan provided that he was able to establish that he was ordinarily employed in Canada and was entitled to a deduction under section 62 of the Act.

(4) Assuring that this situation refers to a loan made to an individual at the time when he was both resident and employed outside Canada, the loan would not qualify as a housing loan as defined by paragraph 80.4(2) (b) of the Act unless such a loan was made to enable or assist him to acquire a dwelling for his habitation if the acquisition of that dwelling was made in the course of a change in his residence from a place outside of Canada to a place within Canada.

We trust the foregoing comments will be of assistance to you.

Yours truly,

for Director Non-Corporate Rulings Division cc. Act 62(1) 80.4