21 May 1998 External T.I. 9807325 - EMPLOYER PROVIDED ICE STORM RELIEF

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

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: employee loan for ice storm assistance

Position: benefit under 80.4, unless remission applies

Reasons: wording is clear.

XXXXXXXXXX 980732
D. Duff
(613) 957-8953

Attention:XXXXXXXXXX

May 21, 1998

Dear XXXXXXXXXX:

Re: Taxation of Employer Provided Benefits with respect to the Ice Storm

We have been asked by XXXXXXXXXX to respond directly to you regarding the taxation of benefits provided by XXXXXXXXXX to its employees with respect to damages and inconveniences resulting from the Ice Storm in 1998.

Our understanding is that XXXXXXXXXX has provided interest free loans to XXXXXXXXXX of its employees in XXXXXXXXXX, Quebec, to assist them with heating costs and to repair property damaged from the ice storm. You questioned whether employees would be taxed on these benefits and whether XXXXXXXXXX could claim a deduction for such benefits.

Our comments

Where an individual receives an interest free loan because of his or her employment the individual shall be deemed by subsection 80.4(1) of the Income Tax Act (the “Act”) to have received a benefit equal to the amount of interest that would be paid at a prescribed rate for the period the loan is outstanding. Subsection 6(9) provides that such a benefit is to be included in computing the individual’s income for the year from employment. There is no provision in the Act that would provide the employer a deduction with respect to this deemed benefit.

The Department had considered a general remission order with respect to benefits received from employers in respect of damages from the ice storm. Although it was not issued it would only have applied to certain benefits included in income pursuant to paragraphs 6(1)(a) and (b) of the Act, so it would not have applied in your situation. Should you wish to have the Department consider whether remission can be applied to your situation the following information would be helpful:

- the number of employees and the number who received loans,
- the amount of the loans,
- the terms of the loans, such as repayment terms, and any other information on them,
- the criteria for eligibility for obtaining a loan, especially whether it is based on employment factors such as performance,
- details on the purposes of the loans and whether they are made voluntarily,
- whether any employees receiving a loan is also a shareholder of XXXXXXXXXX or a related corporation, or is related to such a shareholder, and
- any other information you might consider would be helpful.

As this applies only to federal income tax, you should also contact Revenue Quebec for their position on the taxation of these benefits.

We trust our comments are satisfactory and we look forward to hearing from you.

Roberta Albert, C.A.

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch

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