Principal Issues: Whether spouses (i.e., whether legally married or common law) who are both employed in a prescribed zone and in receipt of taxable benefits for travel from an arm's length employer can each claim two trips for each family member under paragraph 110.7(1)(a) of the Act as long as the same trip is not claimed more than once?
Position: Yes. While only two trips per taxpayer per family member are allowed under subsection 110.7(3) of the Act, it is the CRA's policy to apply the two-trip limit on a taxpayer by taxpayer basis.
Reasons: The law and CRA's policy.
XXXXXXXXXX 2009-031889 Michael Cooke, C.A. February 18, 2010
Dear XXXXXXXXXX :
Re: Non-medical travel deductions - northern residents
We are writing in response to your correspondence of April 22, 2009, wherein you asked for our views on the proper application of subsection 110.7(3) of the Income Tax Act ("Act") where a taxpayer and the taxpayer's spouse or common-law partner both receive taxable travel benefits from their respective employers and make claims for non-medical related travel under paragraph 110.7(1)(a) of the Act.
The situation described in your correspondence appears to involve completed transactions involving specific taxpayers. As described in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002, inquiries on the income tax consequences of completed transactions involving specific taxpayers should be handled by the relevant Tax Services Office. Notwithstanding the foregoing, we are prepared to provide the following general comments.
Where an individual residing in a prescribed zone receives a taxable travel allowance from his or her employer, paragraph 110.7(1)(a) of the Act permits a deduction in respect of the travel to which the allowance relates. The deduction is determined by multiplying the maximum amount otherwise permitted by a specified percentage, which varies depending on the particular prescribed area in which the taxpayer resided. When calculating the amount of the deduction available to a taxpayer under paragraph 110.7(1)(a) of the Act, consideration must also be given to the limit described in subsection 110.7(3) of the Act. Read together, these provisions state that each taxpayer is entitled to a deduction in respect of two non-medical trips made by the taxpayer and any individual who is a member of that taxpayer's household.
It is our view that the two non-medical trip limit described in subsection 110.7(3) of the Act is to be applied on a taxpayer-by-taxpayer basis. The application of these provisions is probably best explained by the following hypothetical example.
Example:
Mr. X and Mrs. X are spouses or common-law partners who live in a prescribed zone.
Mr. X works for Employer A in the prescribed zone and Mrs. X works for Employer B in the prescribed zone.
During the year the following non-medical trips were taken:
Destination Persons who travelled
Location A Mr. X and Mrs. X.
Location B Mr. X and Mrs. X.
Location C Mr. X and Mrs. X.
Location D Mr. X and Mrs. X.
Assume that Mr. X has received taxable travel benefits (i.e., included in Box 32 of his T4) from Employer A in respect of the total cost of the trips to Location A and Location B. Similarly, assume that Mrs. X has received taxable travel benefits (i.e., included in Box 32 of her T4) from Employer B in respect of the total cost of the trips to Location C and Location D.
Subject to the other rules and limits that apply for the purposes of paragraph 110.7(1)(a) of the Act, it is our view that Mr. X would be able to claim the cost for his portion of the trips to Location A and Location B (listed as Mr. X's trip 1 and trip 2 on the T2222 filed with Mr. X's T1 return for the year) as well as the cost for Mrs. X's portion of the trips to Location A and Location B (listed as Mrs. X's trip 1 and trip 2 on the T2222 filed with Mr. X's T1 return for the year).
In addition, and again, subject to the other rules and limits that apply for the purposes of paragraph 110.7(1)(a) of the Act, it is our view that Mrs. X would be able to claim the cost for her portion of the trips to Location C and Location D (listed as Mrs. X's trip 1 and trip on the T2222 filed with Mrs. X's T1 return for the year) as well as the cost for Mr. X's portion of the trips to Location C and Location D (listed as Mr. X's trip 1 and trip 2 on the T2222 filed with Mrs. X's T1 return for the year).
We trust our comments will be of assistance.
Yours truly,
Renée Shields
Manager
Business and Personal Section
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch