Principal Issues: 1. Would the CRA consider a repayment to constitute an amount paid out by a corporation to earn income from its business and therefore, be deductible by the corporation?
2. In the event CRA considers that the repayments are not deductible by the corporation,
(a). Would they be deductible by the individual?
(b). Would qualifying tuition amounts repaid be eligible for the tuition tax credit?
(c). If yes, would it be eligible for the tuition tax credit for the year in which the amount is repaid, or alternatively, for the year in which the original tuition costs arose?
Position: 1. No.
2(a). Yes to the extent that the repayments are made by the individual, the amounts were previously included in computing the individual's income from an office or employment, and the total of repayments does not exceed the total of amounts received by the individual.
2(b). Yes, providing the tuition fees meet the requirements provided under subparagraphs 118.5(1)(a)(i) or 118.5(1)(a)(ii) of the Act.
2(c). The year in which the original tuition costs arose.
Reasons: 1. The repayment is considered a personal expense of the shareholder rather than a business expense of the corporation.
2(a). Pursuant to paragraph 8(1)(n) of the Act.
2(b). The student/employee has in effect paid the tuition fees.
2(c). Section 118.5 of the ITA provides credits for tuition fees paid "in respect of the year" in which the student enrolled in an educational institution.