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: What is the nature of the payments received by the taxpayer and how will the payments be treated for income tax purposes.
Position: Business Income
Reasons: The amounts received in the year were reported on a T4A slip. The taxpayer is an independent contractor. The amounts should be included in calculating the taxpayer's business income for the taxation year in which the amounts were received.
2005-011434
XXXXXXXXXX Luisa A. Majerus, CA
(613) 957-2138
April 7, 2005
Dear XXXXXXXXXX:
Re: Nature of Payment - Capital Gain
This is in response to your letter dated September 14, 2004, requesting our views on the nature of the payments received by you in the 2004 taxation year and applicable income tax implications.
Background
You indicated that you worked as an independent contractor providing financial consulting services to clients of XXXXXXXXXX (the "Corporation") up to XXXXXXXXXX. Since then you have not provided any services to the Corporation or to any of the clients due to a disability. Since XXXXXXXXXX you have been receiving $XXXXXXXXXX per month from the Corporation. This amount is being paid monthly for a period of XXXXXXXXXX months. You have received a T4A slip reporting the total amount you received in 2004. It is your view that the amount received can be treated as a capital gain for tax purposes as you are not providing any service to the Corporation.
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.
The determination of the nature and taxability of amounts received can only be determined after a review of all the facts on a case-by-case basis. You have indicated that you were an independent contractor to the Corporation. Since you are self-employed and the Corporation reported the amounts you received on a T4A slip, you must include such amounts in your business income for income tax purposes. Should you feel that the Corporation incorrectly reported the amounts in question as taxable amounts, we suggest that you discuss your concerns with the Corporation. The Corporation would be responsible for making any amendments to the T4A slip.
If, after discussing your concerns with the Corporation, you are not satisfied with the outcome, we suggest that you contact the Client Services Division of your local tax services office. You may also wish to discuss this matter with your professional tax advisor.
We trust this information is helpful.
Yours truly,
John Oulton, CA
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Policy and Planning Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2005
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2005
Email this Content