7 July 2004 External T.I. 2004-0069781E5 - Executor Fees

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.

Principal Issues: A lawyer in public practice is engaged to perform executor services for the estate of a family member. Whether the executor fees would be considered income earned for services performed in the course of the business or are income from an office and whether the time spent, the complexity or the size of the estate would factor into the determination.

Position: Question of fact.

Reasons: The fees earned for the administration of an estate by an executor will be treated either as income from a business or income from an office. Fees earned by a taxpayer for acting in the capacity of an executor in the course of a business are included in the business income of the taxpayer under subsection 9(1). Where the taxpayer does not act in the course of carrying on a business, the executor fees are included in income under paragraph 6(1)(c). Where the lawyer's practice includes providing executor services, such services are performed in the course of earning income from the business and therefore, the executor fees are business income.

XXXXXXXXXX
2004-006978
Kathryn McCarthy, CA
July 7, 2004

Dear XXXXXXXXXX,

Re: Executor Fees

We are writing in response to your letter of March 30, 2004, concerning the above-noted issue.

Your letter described a situation in which a lawyer who is in public practice is engaged to perform executor services for the estate of a family member. You inquired whether the executor fees would be considered income earned for services performed in the course of the business or income from an office. You also inquired whether the time spent, the complexity or the size of the estate would factor into the determination.

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 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. We are, however, prepared to provide the following general comments.

Generally, the fees earned for the administration of an estate by an executor will be treated either as income from a business or income from an office. Fees earned by a taxpayer for acting in the capacity of an executor in the course of a business are included in the business income of the taxpayer under subsection 9(1) of the Income Tax Act. Where the taxpayer does not act in the course of carrying on a business, the executor fees are included in income under paragraph 6(1)(c). Paragraph 6(1)(c) may apply where the executor is a lawyer, provided the normal practice of the lawyer does not include executorships and the lawyer was appointed on personal grounds (e.g. because he or she was a friend or relative of the deceased). However, where the lawyer's practice includes providing executor services, it is our view that such services are performed in the course of earning income from the business and therefore, the executor fees are business income.

The publication described herein is available on our website at www.cra-arc.gc.ca. We trust our comments will be of assistance to you.

Yours truly,

Randy Hewlett, B. Comm.

for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch