19 September 2000 External T.I. 2000-0038295 - EMPLOYEE BENEFITS - GIFTS

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 the presence of a corporate logo on a non-cash gift to an employee reduces the fair market value of the gift for purposes of computing the taxable benefit to the employee.

Position: Question of fact.

Reasons: The effect of a corporate logo on a non-cash gift will have to be determined after reviewing all of the facts related to a particular situation.

XXXXXXXXXX 2000-003829
A. Seidel
Attention: XXXXXXXXXX

September 19, 2000

Dear Sir:

Re: Employee Benefits - Non-cash Gifts

This is in reply to your letter dated July 13, 2000 in which you requested our views as to whether the fair market value of a non-cash gift in recognition of long service would be reduced if a corporate logo is engraved on the gift.

The particular circumstances in your letter on which you have asked for our views appears to be a factual situation involving a specific taxpayer. As explained in Information Circular 70-6R3 ("IC-6R3"), 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 district tax services office for their views. However, we are prepared to offer the following general comments which may be of assistance.

A gift, either in cash or in kind, from an employer to an employee, is a benefit derived "in respect of, in the course of, or by virtue of" an office or employment and is required to be included in income by virtue of paragraph 6(1)(a) of the Income Tax Act (the "Act"). Similarly, when an employee is rewarded by an employer with merchandise or other non-cash item, the fair market value of the award must be included in the employee's income. If an item is personalized with a corporate or departmental logo or engraved with the employee's name or a message, the fair market value of the item may be negatively affected. In such cases, the amount to be included in the employee's income may be reduced by a reasonable amount, having regard to the circumstances. Depending on the value of a particular award, the existence of the employer's logo may have little, if any, impact on the fair market value of the item. Each situation of this nature should be considered on its own merits.

In the situation where the award given is a plaque, trophy or other memento of nominal value for which there is no market, it is not necessary to include any amount in an employee's income as a taxable benefit. The onus rests with the employer to reasonably determine when a market for a nominal item does not exist.

In your letter you indicate that the long service award could be a gift in the form of a watch, necklace, ring, pen set, clock, binoculars, crystal vase, picture, bronze sculpture clock, globe or silver tea set. The onus rests with the employer to determine the fair market value of the above gift items, with or without a logo, and to include this amount in the employee's income for the year in which the gift is received.

Yours truly,

John Oulton
for Director
Business and Publications Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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