Principal Issues: [TaxInterpretations translation]
Can the taxpayer claim a remote area deduction for the 2003 and 2004 taxation years while resident in Ontario but maintaining a work residence in XXXXXXXXXX, Quebec?
Position: No
Reasons: The taxpayer does not satisfy the conditions in subsection 110.7(1) that the taxpayer be resident for a period of at least six consecutive months.
2005-014724 XXXXXXXXXX Anne Dagenais, M. Fisc. (613) 957-2121 June 13, 2006
Dear Madam,
Subject: Remote Residents Deduction
Request for technical interpretation
This is in response to your letter of August 11, 2005, in which you asked for our opinion on the deduction for people living in remote areas.
Unless otherwise indicated, all statutory references herein are to provisions of the Income Tax Act (the "Act").
Facts
You presented us with the following facts:
The taxpayer has been a resident of Ontario since January 2003. He owns a residence in Ontario and his wife and son, who are his dependants, live there. He considers himself to have been a resident of Ontario since that date.
At about the same time, he started working XXXXXXXXXX which is a prescribed area as defined by section 7303.1 of the Income Tax Regulations.
The taxpayer has accommodation provided by his employer for which he has a taxable benefit. His employer reimburses the taxpayer for travel to his Ontario residence. The taxpayer also has a taxable benefit for travel to remote locations.
The taxpayer travelled to his residence in Ontario when he was on extended leave during the following periods:
XXXXXXXXXX.
For the 2003 and 2004 taxation years, the taxpayer filed a tax return as a resident of Ontario.
You wish to know if the taxpayer can claim the remote work location deduction for 2003 and 2004, when he was a resident of Ontario but maintained a residence for his work in XXXXXXXXXX, province of Quebec.
Our Comments
As stated in paragraph 22 of Information Circular 70-6R5 dated May 17, 2002, it is the practice of the Canada Revenue Agency (the "CRA") not to issue written opinions on proposed transactions otherwise than by way of advance rulings. Furthermore, when it comes to determining whether a completed transaction has received appropriate tax treatment, that determination is made first by our Tax Services Offices as a result of their review of all facts and documents, which is usually performed as part of an audit engagement. However, we can offer the following general comments that we hope may be helpful to you. These comments may, however, under certain circumstances, not apply to your particular situation.
The preamble to section 110.7(1) reads as follows
“Where, throughout a period (in this section referred to as the “qualifying period”) of not less than 6 consecutive months beginning or ending in a taxation year, a taxpayer who is an individual has resided in one or more particular areas each of which is a prescribed northern zone or prescribed intermediate zone for the year and files for the year a claim in prescribed form, there may be deducted in computing the taxpayer’s taxable income for the year…”
There is no restriction in the Act to prevent a taxpayer from claiming a deduction for residents of prescribed areas if the taxpayer is resident in one province while living in another province for work. The province of residence and work are not relevant in determining eligibility for this deduction on the federal income tax return.
However, a taxpayer must satisfy the requirements of section 110.7 to qualify for the deduction. The taxpayer must live permanently in a prescribed zone for a continuous period of at least six months beginning or ending in the year.
The question of determining residence in a particular region is a question of fact. It goes without saying that the application of section 110.7 does not require the taxpayer to reside in a single area. However, the taxpayer must demonstrate, for the purposes of subsection 110.7(1), that the taxpayer has resided in a prescribed zone (and not merely sojourned) for a period of at least six consecutive months.
In general terms, absence from a prescribed zone does not automatically change the period of residence in that zone if the taxpayer lives there permanently. As stated above, this is a question of fact. Other relevant factors to be analyzed are the number of times the taxpayer has been absent from the prescribed zone, and the purpose and duration of the absences.
It is possible that individuals may live in a prescribed zone and maintain a self-contained domestic establishment for themselves or any other dependents in a non-prescribed zone. We are of the view that the absences of those individuals from the prescribed zone result in a break in the continuity of residence in the area. Thus, for those individuals, we are of the view that the principal place of residence is not in such a prescribed zone. In summary, a person who returns to the individual’s principal residence outside a prescribed zone is generally considered to have stayed but not resided in the zone.
In conclusion, since a taxpayer who claims the deduction referred to in subsection 110.7(1) must reside in a prescribed area throughout a period of at least six consecutive months, we are of the view, based on the facts obtained, that the taxpayer in this case cannot benefit from this deduction since he did not reside in a prescribed area for a continuous period of at least six months.
This decision is based on the current Act and does not take into account the proposed amendments.
These comments are not advance income tax rulings and do not bind the CRA with respect to any particular factual situation.
We hope you find these comments of assistance. If you require any additional information regarding the content of this document, please do not hesitate to contact us.
Best regards,
Phil Jolie
Director
Business and Partnerships Division
Income Tax Rulings Directorate