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:
Is an amount taxable employment income in a situation where an individual academic staff member at the University of XXXXXXXXXX forgoes his or her entitlement to directly receive honorarium for assuming extra duties, in lieu of the amount being deposited in a research account?
Position:
Yes - (reply to the TSO, representative of taxpayer forwarded a copy; see 2002-012314)
Reasons:
Contrary to our previous memo (2001-009429), which indicated that subsection 5(1) of the Act included the amount in income in the taxation year in which it was earned (supported by the doctrine of constructive receipt, and subsection 56(2) of the Act), the better legal view is that the amounts reimbursed to Professors from the research account constitute salary, wages or other remuneration in the taxation year in which they are received, pursuant to subsection 5(1) of the Act, augmented by the deeming provision in subsection 6(3) of the Act, in particular, paragraphs (a), (b) and (d).
June 18, 2002
XXXXXXXXXX Tax Services Office HEADQUARTERS
Verification & Enforcement Division Randy Hewlett, B.Comm.
XXXXXXXXXX 613-957-8973
2001-011587
University of XXXXXXXXXX - Professor Research Accounts
We are writing further to our memorandum of December 6, 2001 (2001-009429) concerning the above-noted issue. As discussed, we received representations from the University's representative, XXXXXXXXXX, concerning our December 6, 2001 memo (copies attached). XXXXXXXXXX.
In our December 6, 2001 memorandum, we indicated that the honorarium that a Professor at the University directs to his or her research account is regular employment income under subsection 5(1) of the Income Tax Act (the Act) in the taxation year in which the amount was earned. We expressed the view that this was supported by the doctrine of constructive receipt, and subsection 56(2) of the Act, either of which supported the assertion that the amount was income under subsection 5(1).
It is now our view that the conditions for reimbursement established under the procedures and regulations governing this arrangement do not support the inclusion of the amounts in income in the year in which they were entitled thereto and transferred to the research account because they would not be received, constructively or otherwise. In our opinion, the better legal view is that the amounts reimbursed to Professors from the research account constitute salary, wages or other remuneration in the taxation year in which they are received, i.e., as amounts are paid out of the research accounts for a particular Professor, pursuant to subsection 5(1) of the Act. This position is augmented by the deeming provision in subsection 6(3) of the Act.
Where an amount is reimbursed from the research account that relates to a Professor's employment duties, a deduction may be available under section 8. In accordance with the requirement in subsection 8(2) of the Act, a specific provision must provide for the deduction.
We trust our comments are satisfactory.
John Oulton, CA
Manager
Individual and Business Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Legislation Branch
Enclosure
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