24 August 1995 External T.I. 9513365 - DISABILITY-RELATED EMPLOYMENT BENEFITS

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:

	Whether an allowance received by a person who has a 	severe and prolonged physical impairment for the 	purposes of covering the employee's costs of 	transportation to and from the workplace and workplace 	parking would be excluded under subsection 6(16) of the 	Act if computed as described.  Is such an allowance 	deductible to the employer?

Position TAKEN:

Based on the information provided the individual appears to be a qualified recipient and the allowance meets the purpose test. The only uncertainty is the reasonableness of the amount.

Reasons FOR POSITION TAKEN:

	The recipient described in the correspondence matches 	the required recipient criteria in subsection 6(16).  	Whether the allowance is reasonable is a question of 	fact.

	951336
XXXXXXXXXX			J.A. Szeszycki

Attention: XXXXXXXXXX

August 24, 1995

Dear Sirs:

Re: Disability-related Employment Benefits

This is in reply to your letter of May 15, 1995 in which you requested our views on the application of subsection 6(16) of the Income Tax Act (the Act) to an allowance received from your employer to cover the cost of transportation to and from the work place and parking at that location.

You indicate in your letter that you suffer from a severe and prolonged health impairment for the past 20 years and you are an individual described in paragraph 118.3(1)(a) of the Act for purposes of the disability tax credit. You further describe the computation of the allowance as being composed of the following elements:

a)For parking, the monthly charge of
XXXXXXXXXX

b)for transportation,
XXXXXXXXXX

You have asked us to confirm that (i) the allowance described above will be considered non-taxable and will not have to be included on the T4 information slip, (ii) the amount of the allowance provided would be considered reasonable under the circumstances, and (iii) the amounts so paid by the employer would be deductible in computing the employer's income for the year.

Our Comments

Subsection 6(16) of the Act provides, in part, for the exclusion from the income of an employee of an allowance received in respect of transportation between the individual's ordinary place of residence and the workplace (including parking at or near the workplace) as long as the allowance in question does not exceed a reasonable amount and the recipient is an individual described in paragraph 118.3(1)(a) of the Act.

The allowance that you describe appears to be one that is received for the purposes referred to in that provision. Whether an allowance is in excess of a reasonable amount is a question of fact. It is our view that a reasonable allowance is one that is designed to cover the related costs incurred by the employee. Consequently, while we can confirm that the method of computing the allowance, as outlined above is acceptable, we cannot definitively comment on the reasonableness of the rates being used.

An allowance paid by the employer that qualifies for exclusion from an employee's income by virtue of subsection 6(16) of the Act is fully deductible to the employer in computing its taxable income for the taxation year.

We trust our comments will be of assistance to you.

Yours truly,

P.D. Fuoco
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch