Income Tax Severed Letters - 2008-11-28

Principal Issues: Guidance requested with respect to the issuance of charitable donation receipts in a situation where a member donor is entitled to pay less for a cemetery plot than a non-member.

Position: The eligible amount of the gift will be reduced by the value of the advantage provided to the donor members which would include the right to purchase a cemetery plot at a discount.

XXXXXXXXXX 2008-028417
Sylvie Danis
Attention: (613) 957-3496

November 24, 2008

Principal Issues: An employee contributes to expenses of his parents' principal residence. Can this be regarded as meeting the requirement in subparagraph 6(6)(a)(i) that the employee maintained a self-contained domestic establishment at another location.

Position: No.

Reasons: For the purposes of subsection 6(6) the employee does not have any legal obligation to maintain his/her parent's home during the particular work period. Moreover, the employee does not appear to have any right or entitlement to occupy the particular property throughout the particular work period.

Principal Issues: Whether non-prescription drugs qualify for the medical expense tax credit.

Position: Insulin, oxygen, and liver extract injectible or vitamin B12 for pernicious anaemia qualify under paragraph 118.2(2)(k), notwithstanding that they can lawfully be acquired without a prescription. Pursuant to 118.2(2)(n) and proposed section 5701 of the Income Tax Regulations, a drug that may only be acquired through the intervention of a medical practitioner (a pharmacist, for example) may qualify for the METC even though it does not lawfully require a prescription to be acquired. Otherwise, drugs obtainable without a prescription do not generally qualify for the METC.

Reasons: Only those medical expenses described by paragraph 118.2(2)(a) of the Act are eligible for the METC.

Principal Issues:
1. Whether a gift received by an employee through a draw is included in income pursuant to paragraph 6(1)(a) of the Act where:
a) the prize is provided by the employer;
b) the prize is paid for and provided by a work committee that is not funded or controlled by the employer;
c) the prize is provided by a work committee, that is not funded or controlled by the employer, from donations from third parties that are unrelated to the employer (e.g., a gift certificate from a local store).
2. Would the answer to question 1 a), b) or c) change if the winner of the draw had to answer a skill testing question?

Position:
1. a) Yes, taxable to the employee under paragraph 6(1)(a) of the Act;
1. b) & c) Non-taxable to the employee;
2. No.

Reasons:
This is in line with the CRA Guidelines regarding the income tax implications for employees in receipt of gifts and awards given through prize draws and social committees on our website at http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/bnfts/gfts/wrds/twfq-eng.html.

2008 - 029378
XXXXXXXXXX Renee Sigouin
(613) 957-2128
November 17, 2008

Principal Issues: What are the tax implications to an employee receiving a one-time payment for professional development?

Position: Question of fact.

Reasons: If the amount is in respect of the cost of professional development that is primarily for the benefit of the employer then the amount should not be taxable. If the amount is paid as an allowance with no requirement that any professional development be undertaken then the amount would be taxable.

Principal Issues: Whether a taxable capital gain realized on the disposition of real property situated outside Canada by a Canadian resident individual is subject to tax in Canada

Position: Yes

Reasons: A Canadian resident individual is subject to income tax in Canada on his or her worldwide income