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: Where an individual earns executor's fees for the administration of an estate as income from an office, is the estate required to withhold CPP and tax amounts and is the estate required to report the amounts on a T4 slip?
Position: Yes
Reasons: Executor's Fees are included in income under 6(1)(c) of the Act and should be reported on a T4 slip. CPP and tax amounts should be withheld.
2005-011338
XXXXXXXXXX Luisa A. Majerus, CA
(613) 957-2138
April 5, 2005
Dear XXXXXXXXXX:
Re: Executor's Fees
This is in reply to your email dated January 27, 2005, requesting information with respect to the payment of executor's fees from an estate. Specifically, you have asked whether or not Canada Pension Plan ("CPP") and tax amounts must be withheld from the fees and whether the amount should be reported on a T4 slip.
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 general comments.
Paragraph 5 of Interpretation Bulletin IT-377R [Archived] - Director's, Executor's or Juror's Fees discusses the tax treatment of executor's fees. A fee earned for the administration of an estate by an executor thereof will be treated either as income from a business or income from an office, depending on the particular circumstances of each case.
Where a fee, earned for the administration of an estate by an executor thereof, is treated as income from an office, paragraph 6(1)(c) of the Income Tax Act (the "Act") will include the amount in computing the income of a taxpayer for a taxation year as a "director's or other fee" received by the taxpayer in the year in respect of, in the course of, or by virtue of an office or employment.
Accordingly, it will be necessary to withhold tax and CPP and to prepare a T4 to report the amount as income from an office or employment. For more information on filing a T4 slip please refer to our guide RC4120 - Employer's Guide - Filing the T4 Slip and Summary which can be found on our website at www.cra-arc.gc.ca. Also, please note that, employment insurance is not withheld from the payment of an executor's fee.
We trust this information meets your needs at the current time.
Yours truly,
John Oulton, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
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