| 912666 | |
| A.W. Larochelle | |
| (613) 957-2140 |
24(1)
Attention: 19(1)
January 13, 1992
Dear Sirs:
Re: Allocation of Taxable Benefits
This is in reply to your letters of September 17, and November 12, 1991. The latter provided the material requested in our telephone conversation of October 8,1991.
Your question concerns how the taxable benefit taxable under section 80.4 of the Income Tax Act (the "Act") arising from one low-interest rate loan granted to two employees of the lender who are spouses would be allocated under the following hypothetical situation:
Facts:
Employees A and B are spouses. Each is an employee of 24(1) You further state that each employee is entitled to a low- interest rate loan up to the amount of his or her salary. Employee A earns $100,000. while Employee B earns $50,000. They are therefore entitled to a joint loan with a low-interest rate on the first $150,000.
It is your contention that as section 80.4(1) does not address how a taxable benefit is to be allocated when one low-interest loan is granted by virtue of the employment of two individuals such as described in your example, the taxable benefit should be split evenly between the two individuals involved.
Our Comments:
In a situation where two employees are granted a loan jointly, such as described in your example, it is our view that the benefit, if any, to be calculated pursuant section 80.4 of the Act is generally to be reported on a 50-50 basis, as referred to in paragraph 20 of the attached Interpretation Bulletin IT-421R. However, as discussed in our telephone conversation of December 9, 1991 we recognize that there may be circumstances where the benefit to be reported would be split differently depending upon the facts of the particular situation. Accordingly, we are unable to agree with the suggestion made in your letter that the taxable benefit should be split evenly in all cases.
Your letter of November 12, 1991 advised that your query related mainly to low-interest loans granted to employees to assist them to purchase or refinance a home. It is our view that the above comments apply equally to a loan granted for any other purpose.
The above comments are only expressions of opinion on the application of the Income Tax Act and as such should not be construed as an advance income tax ruling, nor are they binding on the Department.
We trust our comments are of assistance to you.
Yours truly,
J.A. Szeszyckifor DirectorBusiness and General Division Rulings DirectorateLegislative and IntergovernmentalAffairs Branch
Attachment