(613) 957-2135 MAR 11 l988
Dear Sirs:
Re: Interest-free bridge financing
This is in reply to your letter of December 23, 1987, in which you requested a technical interpretation concerning the income tax implications of an Interest-free bridging loan provided by an employer in the following circumatanceas
1. The usual employer-employee relationship exists.
2. The employer requires the employee to move to another city.
3. The homes in the other city are significantly more expensive than comparable homes in the current city.
4. The old home is listed on the market but due to the winter season has not been sold at the time of the move.
5. To assist the employee in acquiring a new home, the employer provides Interest-free bridge financing to the employee until the old home is sold.
6. The amount of the bridging loan equals the fair market value of the new home.
In our view section 80.4 of the Income Tax Act could be applicable in the above situation. However, generally the Department does not impute a taxable benefit where an employer provides interim financing to a relocated employee to enable him to purchase a new residence before the old residence is sold, provided the employee is using all reasonable efforts to sell the old residence.
We trust this information will be of aasiatance to you.
Yours truly,
ORIGINAL SIGNED BY
ROBERT H. JOYCE for Director Small Business and General Division Specialty Rulings Directorate Legislative and Intergovernmental Affairs Branch