7 October 2016 APFF Roundtable, Q.8

A timesharing condo of Corporation A is provided through the property manager to the public at $150 per day, with the manager then paying rent of $100 per day of use to Corporation A. The services contract with the manager provides that Mr. A (a shareholder-employee of Corporation A) can reserve the condo for personal use for up to 30 days per year. When this occurs, Mr. A pays Corporation A $70 per day, equalling its costs. How is any taxable benefit computed to Mr. A under s. 6(1)(a), or s. 15(1)? CRA responded:

[T]he condominium is not merchandise that Company A sells at a discount to its employee. Thus, the administrative policy regarding discounts on merchandise stated in T4130…does not apply… .

[T]he value of a benefit corresponds to the price that an employee would have to pay, in similar circumstances, to obtain the same benefit from the corporation if he or she were not an employee. …

After indicating that the policy in Guide T4130, that the sale of “merchandise” by an employer will not give rise to a benefit from employment in a wide range of specified circumstances, does not extend to condos rented by an employer to an employee at its “costs,” CRA also went on to state (having regard to the employee in question also being a shareholder):

The Income Tax Act does not specify how to calculate the value of a benefit that a corporation confers on its shareholder for purposes of subsection 15(1).

Generally, the value of the benefit to a shareholder corresponds to the price that the shareholder would have to pay, in similar circumstances, to obtain the same benefit from the corporation if it were not a shareholder.