A member of the Canadian armed forces was assigned to the U.S. and occupied an apartment there for several years and did not maintain a residence in Canada. While in the U.S., he received a (i) rent allowance which paid him for the excess of his actual rent expense minus a deduction for the notional cost of accommodation in Canada, but without this deduction having been indexed over the years for inflation, (ii) a similar utilities allowance, and (iii) a Foreign Service Premium to compensate for other financial detriments of a foreign posting.
Before finding that the rent allowance gave rise to a taxable benefit based onthe deduction for comparable accommodation in Canada being understated, the Directorate stated:
[A]n employee does not become economically enriched where the employee’s employer reimburses the employee, on a temporary posting, for the higher cost of housing comparable relative to what the employee occupied in the employee’s region of origin before assignment ("Comparable Housing"). However, there may be situations where an employee occupies a higher class of accommodation during the employee’s assignment than Comparable Housing, for example, due to the employee’s level of security and location in the city. In those situations, the employee’s employer pays the employee more than the cost of Comparable Housing. In those situations, we are of the view that the employee has not been economically enriched if it is the employer who requires the taxpayer to occupy that housing of a higher class.