Principal Issues: [TaxInterpretations translation] Can the home office of a real estate agent in Quebec be considered the place where the individual principally performs the duties of the office or employment?
Position: Question of fact.
Reasons: It is necessary to refer to the time the employee physically spends in the premises of the employee’s home set aside for the purpose of the work. If more than 50% of the time spent on all of the agent’s employment-related duties is attributable to time spent at those premises, an amount may be deducted pursuant to subparagraph 8(13)(a)(i).
June 18, 2007
Montreal Tax Services Office Headquarters Business and Partnerships Division Attention: Michel Robert François Bordeleau, Advocate
2007-023186
Determining the principal place of business
This is further to your fax of April 13, 2007, requesting our opinion on the application of subparagraph 8(13)(a)(i) of the Income Tax Act (the "Act") to home office expenses incurred by real estate agents in Quebec under a contract of service.
More specifically, you wish to know whether the office that a real estate agent maintains at home can be considered to be the place where the agent principally performs the duties of the employment.
Unless otherwise indicated, all statutory references herein are to the provisions of the Act.
In your request, you expressed the opinion that the expression found in subparagraph 8(13)(a)(i), "the place where the individual principally performs the duties of the office or employment", should be interpreted to mean the place where the individual performs the most important tasks of the office or employment. Following an analysis of the provisions of the Real Estate Brokerage Act in Quebec, R.S.Q. c. C-73.1, and the By-law of the Association des courtiers et agents immobiliers du Québec, R.Q. c. C-73.1, r.2, you concluded that real estate agents in Quebec perform the most important duties of their office at the real estate broker's office and, consequently, that no amount could be deducted.
Our Opinion
In computing income from an office or employment, paragraph 8(13)(a) provides that a taxpayer may deduct an amount in respect of a self-contained domestic establishment in which the taxpayer resides only if, inter alia, the work space is the place where the taxpayer principally performs the duties of the office or employment. As stated in paragraph 2 of Interpretation Bulletin IT-352R2, Employee’s Expenses, Including Work Space in Home Expenses, "principally" is interpreted as more than 50% of the time.
Consequently, we are of the view that the test you applied is not the one to be utilized in this analysis. In order to determine whether a real estate agent's home office meets the requirement set out in subparagraph 8(13)(a)(i), it is necessary to refer to the amount of time that the agent physically spends in the premises of the agent’s home set aside for the purpose of his or her work. Thus, if more than 50% of the time spent on all of the agent’s employment-related duties is attributable to time spent in those premises, subject to paragraph 8(13)(b), an amount may be deducted. That analysis will need to be made in the light of the particular circumstances of each situation. However, please note that time spent on the road, on the premises of properties for sale, and at the real estate broker's place of business cannot be assimilated to time spent working at the home office.
Access to Information
For your information, unless exempted, a copy of this memorandum will be severed using the Access to Information Act criteria and placed in the Canada Revenue Agency's electronic library. A severed copy will also be distributed to the commercial tax publishers for inclusion in their databases. The severing process will remove all material that is not subject to disclosure, including information that could disclose the identity of the taxpayer. Should your client request a copy of this memorandum, the electronic library version can be provided. Alternatively, the client may request a severed copy using the Privacy Act criteria, which does not remove client identity. Requests for this latter version should be made by you to Ms. Jackie Page at (819) 994-2898. A copy will be sent to you for delivery to the client.
We hope that these comments are of assistance.
Louise J. Roy, CGA
Interim Manager
Business and Partnerships Section
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs.