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: 1. Whether per diem fees paid to certain judges and justices of the peace constitute income from an office or employment or income from a business. 2. Whether these judges and justices of the peace can deduct home office expenses, supplies and administrative salaries in computing income?
Position: 1. A legal entitlement to a per diem rate of remuneration established in advance is sufficiently fixed or ascertainable to meet the definition of office. Such fees or honoraria constitute income from an office or employment. 2. Question of fact. Where an individual earns income from an office or employment and is required to incur expenses in connection with that office (such as office supplies and the use of a home office), he or she may be entitled to deductions under section 8 of the Act, where certain conditions are met.
Reasons: See response.
December 17, 20012
Re: Per Diem Fees
We are writing in response to your letter of August 7, 2012, concerning whether fees paid to certain judges and justices of the peace (herein referred to respectively as per diem judges and per diem justices of the peace) of the XXXXXXXXXX, constitute income from an office or employment or income from a business.
It is our understanding that per diem judges and per diem justices of the peace are former full-time judges and former full-time or part-time justices of the peace of the XXXXXXXXXX, that were appointed by XXXXXXXXXX. The XXXXXXXXXX remains applicable once the judge or justice of the peace becomes a per diem judge or per diem justice of the peace.
Per diem judges and per diem justices are paid a fixed rate per day of work, and are not provided with an office space, office supplies or secretarial/administrative assistance. While per diem judges and per diem justices of the peace are permitted to use vacant and available office space, those maintaining a home office do so at their own expense. Per diem judges and per diem justices of the peace are also responsible for providing office supplies and paying for secretarial/administrative staff at their own expense.
Written confirmation of the tax implications inherent in particular transactions is provided by this Directorate where the transactions are proposed and are the subject matter of an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Ruling, dated May 17, 2002. Where a particular transaction has already been completed, a review of the relevant facts and circumstances surrounding the situation would be required. Such review would normally be conducted by the applicable tax services office during the course of an income tax audit which, if undertaken, would be carried out after the particular taxpayer has prepared and filed his or her income tax return for the year. Notwithstanding the foregoing, we are prepared to provide the following comments that may be of assistance.
Whether an individual earns income from an office or employment or from a business is a question of fact. Subsection 248(1) of the Income Tax Act defines an "office" as being, among other things, "the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration and includes
any other office, the incumbent of which is elected by popular vote or is
appointed in a representative capacity
and "officer" means a person holding such an office". The definition of "employee" in subsection 248(1) of the Act includes an "officer".
When an individual is appointed in a representative capacity (in this case, by XXXXXXXXXX) and a fixed or ascertainable honorarium or fee is paid to that individual, it is our view that such an amount would be taxable as income from an office or employment under paragraph 6(1)(c) of the Act. This position is consistent with case law on the subject, which specifies that a legal entitlement to a per diem rate of remuneration established in advance is sufficiently "fixed or ascertainable" to meet the definition of an "office".
Where an individual earns income from an office or employment and is required to incur expenses in connection with that office or employment, he or she may be entitled to various deductions under section 8 of the Act, provided that certain conditions are met. With respect to the deductibility of expenses incurred for a work space in the home, the salary of an assistant, or office supplies consumed directly in the performance of the duties of the office or employment, an employee must be required under his or her contract of employment to use a home office and/or pay for such employment-related expenses.
Subsection 8(13) of the Act further provides that no amount may be deducted in respect of a work space in the home unless the employee principally performs (i.e. more than 50% of the time) his or her duties of the office or employment in the particular work space, or where the work space is used exclusively for the purpose of earning income from the office or employment and is used on a regular and continuous basis for meeting persons in the ordinary course of performing such duties.
Where an employee satisfies the above conditions, subsection 8(10) of the Act requires that the employee obtain a completed Form T2200, Declaration of Conditions of Employment, from his or her employer, in order to claim the above mentioned deductions. For additional information on other deductions which may be available to an individual earning income from an office or employment, please refer to Guide T4044, Employment Expenses.
In summary, it is our view that the fees earned by per diem judges and per diem justices of the peace are sufficiently fixed or ascertainable, and therefore constitute income from an office or employment. Subject to the conditions discussed above, per diem judges and per diem justices of the peace may be entitled to deduct expenses incurred in connection with that office or employment, under section 8 of the Act.
We trust these comments will be of assistance to you.
Business and Employment Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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