Income Tax Severed Letters - 2010-11-05

Principal Issues: What is Canada Revenue Agency's ("CRA") basis for calculating the personal use taxable benefit of a corporate asset?

Position: It is a question of fact. Generally, fair market value.

Reasons: The CRA's general position on the taxable status of employee benefits is discussed in Interpretation Bulletin IT-470R (Consolidated) - "Employees' Fringe Benefits" and the Employer's Guide T4130. Generally speaking, it is accepted that the value of an employment benefit is its fair market value. As noted in paragraph 10 of IT-470R, where a vacation property owned by an employer is used for vacation purposes by an employee, the employee's family or both, there is a taxable benefit conferred on the employee under paragraph 6(1)(a) the value of which is equivalent to the fair market value of the accommodation less any amount which the employee paid to the employer.

Principal Issues: The deductibility of travel expenses (i.e., transportation, lodging and meals) by an employee or whether the employer can pay a tax-free allowance to the employee where an employee works on a construction site that is a road and is unable to return home at the end of the day.

Position: Question of fact. However, employee-paid amounts may be deductible or employer-paid amounts may be non-taxable in the particular circumstances.

Reasons: Various.

Principal Issues: What is Canada Revenue Agency's ("CRA") accepted method for calculating a taxable employment benefit regarding reduced student tuitions?

Position: It is a question of fact.

Reasons: The CRA's general position on the taxable status of employee benefits is discussed in Interpretation Bulletin IT-470R (Consolidated) - Employees' Fringe Benefits and the Employer's Guide T4130. As noted in paragraph 20 of IT-470R, where an educational institution that charges tuition fees provides tuition free of charge or at a reduced amount to an employee of the institution, or to the spouse or children of the employee, the fair market value of the benefit must be included in the employee's income.

Principal Issues: Can an individual claim a tax credit for a charitable donation made by his/her deceased spouse's will in the year in which the spouse died?

Position: Yes

Reasons: In accordance with subsection 118.1(5) of the Act, charitable gifts made by an individual in his or her will are deemed to have been made by the individual in the year of death. The CRA's administrative practice allows a taxpayer to initially choose which spouse or common law partner will report a donation or gift and allows for the subsequent transfer of any carry-forward balances from one to the other. Since the gift made by an individual's will is deemed to be made in the year of death, the donation is available for the administrative practice of spouses sharing donations.

Principal Issues: Are amounts paid to a radiation oncologist, clinical fellow included in income as employment income, research grant or fellowship?

Position: It is a question of fact. The CRA would likely consider that the amounts paid would be taxable as employment income.

Reasons: The CRA would likely consider that the amounts paid to the radiation oncologist, clinical fellow would be taxable as employment income but we do not have all the facts.