Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues: Instead of paying rent, a client claims a "fair rental value " for a property he owns and uses for employment purposes.
Position: No deduction for "fair rental value" allowed.
Reasons: The ITA does not provide for such a deduction.
June 16, 2000
St. John's Taxation Center HEADQUARTERS M. Shea-DesRosiers (613) 957-8953 Attention: Claudia Spence Office Exam 2000-002871
Re: Employment Expenses
XXXXXXXXXX (the "Client")
XXXXXXXXXX
This is further to your facsimile of May 30, 2000, wherein you requested our view concerning the deduction of certain employment expenses of the Client.
You describe the Client's situation as follows:
The Client has requested a deduction of $XXXXXXXXXX per year for each of XXXXXXXXXX as "rent" paid to earn income from employment. XXXXXXXXXX. The forms T-2200 provided to you state that he is required to use a portion of his home or to rent an office . The T-2200's details have been verified with the employer. Although the employer's spokesperson could not confirm the actual details for the Client, he stated that other XXXXXXXXXX are indeed renting premises and that this was considered common practice. No receipts for rent were provided with the Client's request. You therefore contacted the client's representative to obtain the rent receipts. You were told that the Client felt that it was more economical to buy a property than to actually pay rent. The Client has a single unit building for which he is claiming a "deemed fair rental value" of $XXXXXXXXXX per month. The Client is a salaried employee.
You state that if the Client were actually paying rent, the amount would be deductible. You also mention that the existing legislation indicates that the client could not deduct a "fair rental value" if he were using a portion of his home.
Our comments
Subparagraph 8(1)(i)(ii) of the Income Tax Act states that "In computing a taxpayer's income for a taxation year from an office or employment, there may be deducted .....amounts paid by the taxpayer in the year as office rent,...the payment of which by the officer or employee was required by the contract of employment". The legislation only provides for the deduction of amounts paid as office rent not for the deduction of a "fair rental value" in the case of a client who uses his own property.
Our Interpretation Bulletin IT-352R (the "Bulletin") discusses the circumstances under which a client may deduct amounts paid in the year for office rent. There is no mention of the deduction of a "fair rental value" for a property used in the course of employment. Paragraph 1 of the Bulletin enumerates the requirements that must be met to deduct amounts paid in the year for office rent.
Although it may appear harsh to disallow the deduction of a "fair rental value" in the present situation, it is still not possible to grant the Client's request since the Income Tax Act does not provide for such a deduction. However, you could inform the Client that the Canada Customs and Revenue Agency is responsible only for the administration of the Income Tax Act and not for any changes to the tax policy or for any amendment to the legislation. This is the responsibility of the Department of Finance. Accordingly, the Client could write to the Department of Finance and make representations to have the legislation amended to allow the deduction of a "fair rental value" in situations such as the one described above.
Roberta Albert, CA
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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