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: Has there been a change to the CRA's administrative position with respect to the transfer of commission income by a mutual fund salesperson to his/her corporation?
Position: No.
Reasons: If a mutual fund salesperson is legally, whether contractually or by statute, precluded from assigning commissions to his/her corporation, then the commission income must be reported by the individual. If there is no such legal preclusion, the income must be reported by the corporation provided the corporation is actively carrying on the business. The salesperson should consult with the provincial governing body to which they are a member to determine whether the corporation is legally permitted to carry on the business.
XXXXXXXXXX
2004-008070
August 12, 2004 Luisa A. Majerus
(613) 957-2138
Dear XXXXXXXXXX:
Re: Transfer of Commission Income to a Corporation
This is in reply to your facsimile dated June 9, 2004, requesting an update on the Canada Revenue Agency's ("CRA's") position in Income Tax Technical News #22 regarding the transfer of commission income by an individual to a corporation. Specifically, you inquired whether there has been a change to the CRA's position with respect to the transfer of such commission income by a mutual fund salesperson to his/her corporation, notwithstanding the prevailing securities law.
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.
If an insurance agent, realtor, mutual fund salesperson, or other professional is legally, whether contractually or by statute, precluded from assigning commissions to his/her corporation, then the commission income must be reported by the individual, and cannot be reported through the corporation. Where there is no such legal preclusion and the corporation is actively carrying on the business, the income must be reported by the corporation. You should consult with the provincial governing body to which the salesperson is a member, to determine whether the corporation is legally permitted to carry on the business.
We trust this information is helpful.
Yours truly,
Randy Hewlett, B. Comm.
Manager
Business and Individual Section
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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