Principal Issues: Two questions are posed:
1) if a status Indian incorporates a reserve-resident company and employs himself to perform duties off-reserve, is his employment income tax-exempt?
2) if a status Indian operates a farm on a reserve, can he deduct farm losses from other taxable business income earned off-reserve?
Position: 1) Income from the corporation to the individual might be tax exempt. It will be a question of fact
2) A farming loss is unlikely to arise, therefore would not be available to offset taxable business income
Reasons: 1) It will be a question of fact whether the individual receives amounts from a corporation in his capacity as shareholder or in his capacity as an employee. If the amount is determined to be employment income, then Guideline 2 will likely have application.
2) Business income from a farm operated on a reserve by a status Indian is likely tax-exempt. As such, paragraph 18(1)(c) provides that no deduction may be taken for expenses incurred to earn that income. It is therefore not likely that a loss could arise in this situation.
XXXXXXXXXX Renée Shields
February 13, 2006