2 September 2009 External T.I. 2009-0320591E5 - Employer-provided Free Tuition - Private School

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: The taxability of employer-provided free tuition to a private elementary/secondary school.

Position: Generally taxable.

Reasons: Question of fact.

XXXXXXXXXX 								2009-032059
									Michael Cooke, CA
September 2, 2009

Dear XXXXXXXXXX :

Re: Employer-Provided Free Tuition at Private Elementary and Secondary School

We are writing in response to your letter of April 23, 2009, wherein you asked for our opinion on the taxability of free tuition provided by your employer in respect of your children. In your letter you also indicate that your children are required to attend the private elementary/secondary school where you are employed as a teacher.

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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advanced Income Tax Rulings, dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, such as in your situation, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website.

Notwithstanding the above, we are prepared to provide the following comments.

Subject to certain exceptions, paragraph 6(1)(a) of the Income Tax Act (the "Act") requires that the value of any benefits received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of an office or employment be included in the taxpayer's income from employment. The broad wording of this provision means that a taxable benefit may exist where there is any connection between the particular payment or benefit and the particular office or employment.

Keeping the broad wording of paragraph 6(1)(a) of the Act in mind, the CRA considers that where an employer provides free or reduced tuition to a family member of an employee for attendance at an elementary or secondary school (whether private or otherwise) such amount will be treated as a taxable employment benefit to the particular employee. Support for this position can be found in Detchon v The Queen, 1996 DTC 2032 (TCC).

In Detchon, the taxpayers were teachers employed at a private secondary school which provided free tuition for their children. The issues considered in this case were whether the free education provided to the teachers' children constituted a taxable benefit to the teachers and, if so, what was the value of the benefit. The Court held that the determination of the value of a benefit for tax purposes is a question of fact, however, confirmed the teachers had received a taxable benefit from employment pursuant to paragraph 6(1)(a) of the Act.

We trust our comments will be of assistance to you.

Yours truly,

Rob Ferrari
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch