13 March 2002 External T.I. 2002-0124945 - GIFTS RECD BY MISSIONARY WHETHER TAXABLE

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 gifts of money received by a taxpayer in the course of her missionary work teaching the word of God in XXXXXXXXXX are taxable.

Position: Question of fact.

Reasons: The gifts may be taxable as employment income or business income, or they may be exempt, depending on the facts.

XXXXXXXXXX J. Gibbons, CGA
2002-012494
March 13, 2002

Dear XXXXXXXXXX:

We are replying to your letter, which you faxed to us on February 22, 2002, wherein you requested our views concerning the taxability of gifts received by XXXXXXXXXX (the "Taxpayer"). The Taxpayer is a missionary who, in XXXXXXXXXX, taught the word of God in XXXXXXXXXX and received gifts of money from individuals and church groups to help support her in her cause.

As indicated in paragraph 22 of Information Circular 70-6R4, a request for a written opinion on a completed transaction is generally considered by a taxpayer's local tax services office. Accordingly, you may wish to submit all relevant facts and documentation to the appropriate Tax Services Office for their comments. However, we have provided some general comments which we hope will be of some assistance to you.

Our Comments

As indicated in paragraph 4 of IT-334R2, "Gifts and Other Voluntary Payments" amounts received as gifts (i.e., voluntary transfers of property without consideration) are not subject to tax in the hands of the recipient. However, when gifts are received by virtue of an office or employment, whether from an employer or from some other person, the amount of the payment or the value of the benefit is generally included in income pursuant to subsection 5(1) or paragraph 6(1)(a) of the Income Tax Act (the "Act"). In this regard, if you have any concerns whether the Taxpayer is an employee of a particular organization, you can refer to the pamphlet RC4110, "Employee or Self-Employed?", published by the Canada Customs and Revenue Agency.

If gifts are received by virtue of a profession or by virtue of carrying on a business, they are also taxable receipts as indicated in paragraph 4 of IT-334R2. In order for any activity or pursuit to be regarded as a source of income, there must be a reasonable expectation of profit. Where such an expectation does not exist, neither amounts received nor expenses incurred are included in the income computation for income tax purposes, and any excess of expenses over receipts is a personal or living expense, the deduction of which is denied by paragraph 18(1)(h) of the Act. On the other hand, if an activity results in receipts of revenue in excess of expenses, that fact is a strong indication that the activity is a venture with an expectation of profit. If so, the gifts may be taxable as income from a business.

We trust that these comments will be of assistance.

Yours truly,

John Oulton, CA
for Director
Business and Partnerships Division
Income Tax Rulings Directorate

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