18 June 2003 External T.I. 2003-0015615 - SELF-EMPLOYED COMMISSION INCOME

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 a self-employed commission salesperson, who earns and receives a commission on the sale of a product that is used personally, must include the amount in income.

Position: No.

Reasons: Position in paragraph 27 of IT-470R with respect to employees who are insurance salespersons that purchase insurance products for personal purposes, has been extended to self-employed commission salespersons.

Randy Hewlett, B.Comm.

XXXXXXXXXX 613-957-8973
2003-001561
June 18, 2003

Dear XXXXXXXXXX:

Re: Reporting of Commission Income Earned
By A Self-Employed Insurance Agent

We are writing in response to your letter of April 23, 2003, wherein you requested our opinion on the above noted issue. We also acknowledge the additional information obtained in our telephone conversation of June 11, 2003 (Hewlett/XXXXXXXXXX).

You indicated that in 2002 your client, who is a self-employed insurance agent, purchased a critical illness insurance plan for himself from a company for which he sold insurance products. He paid the premium for his plan personally and received a $2,000 commission from the company with respect to the purchase. The company included this amount in total commission income on his T4A slip for the year. You have inquired whether your client must include the amount in his commission income for 2002.

Our Comments

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 an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant Tax Services Office. However, we offer the following comments.

It is our view that a self-employed insurance salesperson in the situation you described is not required to include in business income the commission received on the purchase of his own critical illness insurance plan (see our document number 9410837). This is similar to the position in paragraph 27 of Interpretation Bulletin IT-470R, Employees' Fringe Benefits, accorded to an employed insurance salesperson who acquires a life insurance policy for personal purposes, for which he or she received a commission and is required to make the premium payments.

We trust our comments will be of assistance to you.

Yours truly,

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

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