| 19(1) | File No. 5-8184 |
| S. Short | |
| (613) 957-2134 |
September 7, 1989
Dear Madam:
Re: Paragraph 110(1)(j) of the Income Tax Act (the "Act")
This is in reply to your correspondence dated June 2, 1989, wherein you asked whether certain loans would qualify as "home relocation loans" as defined in subsection 248(1) of the Act and whether recipient employees of these loans would be entitled to a deduction under paragraph 110(1)(j) of the Act.
One requirement of a "home relocation loan" is that the loan be received in the circumstances described in subsection 80.4(1) of the Act. Accordingly, an individual must have "... received a loan or otherwise incurred a debt by virtue of the office or employment..".
Whether or not an employee receives a loan by virtue of his employment would be a finding of fact particular to each circumstance. You have asked us to consider a general situation where in order to assist employees in obtaining funds from a financial institution with which to purchase a new residence, the employer has agreed to reimburse the employees for interest charged on the first $20,000 of each employee's loan for a five year period. You have further stated that the employer will forward to the financial institution, on the employee's behalf, a letter confirming the individual's employment with the company and the existence of an agreement between the company and the employee to pay all interest charges on the first $20,000 of the loan for a five year period.
We consider subsection 80.4(1) of the Act to be applicable in the above described situation. Accordingly, it is our opinion that a deduction in computing taxable income to the extent permitted under paragraph 110(1)(j) of the Act would be allowed in respect of the loans described in your correspondence provided each loan met all the requirements for a "home relocation loan".
We trust the above comments are of assistance to you.
Yours truly,
for DirectorSmall Business and General DivisionSpecialty Rulings DirectorateLegislative and IntergovernmentalAffairs Branch