In Canada Revenue Agency Document no. 2006-0191571I7 dated August 10, 2006, the CRA deals with the issue involving a taxpayer residing in City A and owning two adjacent rental properties in City B located 100 kilometres from City A. According to the Technical Interpretation that was issued, the CRA was asked if the two properties should be considered one or two properties for the purpose of interpreting the administrative policy outlined under Line 9281 of Guide T4036 “Rental Income–Includes Form T776”. Based on the summary provided, the policy essentially gives authorization to “taxpayers owning at least two rental properties to deduct reasonable motor vehicle expenses incurred to collect rents, supervise repairs, or manage the properties”. The CRA takes the position that only taxpayers that own more than one rental property can benefit from this policy. This is because it is the CRAs view that a taxpayer owning only one rental property does not carry on a business. Therefore, if a taxpayer is not carrying on a business they cannot claim the motor vehicle expenses as a deduction pursuant to paragraph 18(1)(h) of the Act, which provides:
In computing the income of a taxpayer from a business
or property no deduction shall be made in respect of …
personal or living expenses of the taxpayer, other than
travel expenses incurred by the taxpayer while away from
home in the course of carrying on the taxpayer’s business.
Accordingly, any motor vehicle expenses incurred in circumstances other than to carry on a business would be considered personal and not deductible. In the CRAs opinion, the rental properties must be located in at least two different sites away from the taxpayer's principal residence, even if they are close to each other. The CRA takes this position because practically speaking “the collection of rents, the supervision of repairs and the general administration of the properties may require separate punctual traveling for each property”.