Principal Issues:
Whether the clergy residence deduction applies to self-employment income
Position:
No.
Reasons:
Reading of the legislation.
2006-019488
XXXXXXXXXX D Tiu
(613) 957-8961
January 15, 2007
Dear XXXXXXXXXX:
Re: Clergy Residence Deduction
We are writing in response to your July 7th, 2006 inquiry on the above subject and further to our subsequent telephone discussions (XXXXXXXXXX/Tiu). You inquired whether the portion of the calculation for the clergy residence deduction provided for under subclause 8(1)(c)(iv)(A)(II) of the Income Tax Act (the "Act") includes 1/3 of both employment and self-employment income.
The particular situation in your letter appears to relate to a factual one, involving a specific taxpayer. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an Advance Income Tax Ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate Tax Services Office for their views. However, we are prepared to provide the following general comments.
Paragraph 8(1)(c) of the Act provides a deduction in certain circumstances, to clergy, ministers and members of religious orders in respect of their residence only if they are engaged in qualifying employment. The deduction is available in respect of employer-provided housing as well as rented or owned housing. An individual's self-employment income is in no way a factor in the calculation of the deduction under paragraph 8(1)(c) of the Act. In particular, subclause 8(1)(c)(iv)(A)(II) only includes one-third of the "taxpayer's remuneration for the year from the office or employment".
A taxpayer's remuneration from an office or employment is an income included under subdivision A of the Act and the clergy residence deduction is a deduction against income included under subdivision A. A taxpayer's self-employment income is an income included under subdivision B. The clergy residence deduction does not apply to income included under subdivision B.
As requested, you may obtain information regarding the appeal process at the following site:
http://www.cra-arc.gc.ca/agency/programs_services/disagree/income_tax-e.html
A electronic copy of the Interpretation Bulletin IT-141R, Clergy Residence Deduction (Consolidated) may be obtained at the following site:
http://www.cra-arc.gc.ca/E/pub/tp/it141r-consolid/it141r-consolid-e.html
We trust that the foregoing is satisfactory.
Yours truly,
Randy Hewlett
Section Manager
For Division Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch