13 September 2010 External T.I. 2010-0372541E5 - Taxable benefits - teachers

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.

Principal Issues: Whether reduced tuition fees for teachers at a private elementary/secondary school give rise to a taxable benefit.

Position: Generally taxable.

Reasons: Question of fact.

XXXXXXXXXX
									2010-037254
									Rita Ferguson
									519-645-5261
September 13, 2010

Dear XXXXXXXXXX :

Re: Reduced tuition for employees at a private elementary and secondary school.

This is in response to your letter of May 11, 2010 inquiring about the taxability of a 50% tuition discount provided in respect of the children of teachers at a private elementary and secondary school.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Subject to certain exceptions, paragraph 6(1)(a) of the Income Tax Act (the "Act") requires that the value of any benefits received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of an office or employment be included in the taxpayer's income from employment. The broad wording of this provision means that a taxable benefit may exist where there is any connection between the particular payment or benefit and the particular office or employment.

Keeping the broad wording of paragraph 6(1)(a) of the Act in mind, the CRA considers that where an employer provides free or reduced tuition to a family member of an employee for attendance at an elementary or secondary school (whether private or otherwise) such amount will be treated as a taxable employment benefit to the particular employee. The value of the benefit received is a question of fact that should take into account all the circumstances of the particular situation. Support for this position can be found in Detchon v The Queen, 1996 DTC 2032 (TCC).

In Detchon, the taxpayers were teachers employed at a private secondary school which provided free tuition for their children. The issues considered in this case were whether the free education provided to the teachers' children constituted a taxable benefit to the teachers and, if so, what was the value of the benefit. The Court held that the determination of the value of a benefit for tax purposes is a question of fact, however, confirmed the teachers had received a taxable benefit from employment pursuant to paragraph 6(1)(a) of the Act.

We trust that these comments have been of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch