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 CCRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.
Principal Issues: Whether real estate commissions are received as income or reduce the cost of the property acquired.
Position: Commission income.
Reasons: The cost of the property is the amount actually paid therefore. The amount of commissions paid by the vendor is based on this selling price. The amount received by a real estate broker would therefore be received as commissions and therefore included in income.
2002-015331
A. Seidel, CMA
(613) 957-2058
September 9, 2002
Dear XXXXXXXXXX:
Re: Real Estate Commissions
We are writing in response to your letter, dated May 25, 2002, concerning the appropriate tax treatment of commissions received by a real estate broker in respect of real property transactions where the real estate broker is the purchaser of the real property.
The particular circumstances in your letter, on which you have asked for our views, appear to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R5, it is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advance income tax ruling. Should your situation involve a specific taxpayer and a completed transaction, you should submit all relevant facts and documentation to the appropriate tax services office for their views. However, we are prepared to offer the following general comments which may be of assistance.
Where a real estate broker acquires real property for himself/herself, the cost of the real property will be equal to the amount actually paid for the real property. The real estate commissions paid to a real estate broker are based on the sale price of the real property. It is our view that the real estate commissions paid to a real estate broker in respect of real property acquired for himself/herself would not reduce the amount paid for the real property but would be included in computing the broker's income for tax purposes.
Yours truly,
John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
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