Principal Issues: Whether a person residing in a hotel room would qualify to claim the additional northern residents deduction.
Position: It is a question of fact to be determined by the circumstances. In this case, a person is residing in a hotel room under circumstances similar to that of residing in an apartment and thus would meet the requirement for the additional northern residents deduction.
Reasons: Due to a housing shortage, the hotel was being operated similar to an apartment building. The resident was paying rent monthly, had a separate entrance and could cook and eat in her room.
2005-012764
XXXXXXXXXX Charles Rafuse
613-957-8967
May 20, 2005
Dear XXXXXXXXXX:
Re: Northern Residents deduction
This is in reply to your fax of April 27, 2005, regarding the additional northern residents deduction.
Specifically, you have indicated that due to a housing shortage in XXXXXXXXXX, many hotels have been converted to long-term rentals. In this regard, you have a client, XXXXXXXXXX who lived in a hotel all of 2004. She paid rent monthly, had her own entrance, bath and had a cooking facility in her room. You have asked if these circumstances would qualify her to claim the additional northern residents deduction.
Our Comments
Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following general comments.
There are two parts to the northern residents deduction for those who lived, on a permanent basis, in a prescribed northern or intermediate zone for a continuous period of at least six consecutive months. There is the basic residency amount that can be claimed for the days in the year that one lived in a prescribed zone. An additional residency amount can also be claimed for those days where a person maintained and resided in a self-contained domestic establishment and was the only person claiming the basic residency amount for living in that same dwelling for that period.
The definition of the term "self-contained domestic establishment" contained in the Income Tax Act means "a dwelling-house, apartment, or other similar place of residence in which place a person as a general rule sleeps and eats". Accordingly, a hotel room is not usually considered to be included in the term "self-contained domestic establishment". However, in the case of XXXXXXXXXX, while she resides in a hotel it is being operated similar to an apartment building since she pays monthly rent, has her own entrance, and can cook and eat in her room. Accordingly, it is our view that her circumstances meet the test of residing in a self-contained domestic establishment for claiming the additional northern residents deduction.
We trust this information is helpful.
Yours truly,
Phil Jolie
Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch