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: Is the administrative position described in paragraphs 3 and 4 of IT-404R to be sustained?
Position: No
Reasons: The law.
July 5, 2013
Mike Warren, Manager Headquarters
Small and Medium Enterprises Directorate IT Rulings
112 Kent Street Directorate
Ottawa ON K1A 0L5 Katie Robinson
(613) 948-2233
2013-049199
IT-404R "Payments to Lottery Ticket Vendors"
We are writing to advise you of a change to the administrative position described in paragraphs 3 and 4 of IT-404R "Payments to Lottery Ticket Vendors", dated March 31, 1981, and that we are also planning on cancelling IT-404R on December 31, 2013. The change will take place effective January 1, 2014.
Paragraph 3 of IT-404R indicates that where a distributor or retailer (of lottery tickets) is awarded a prize in respect of tickets sold to customers and the prize is awarded solely on the basis of chance (e.g., being the seller of a winning ticket) the CRA considers the amount or value of the prize as not being taxable in the recipient's hand. Paragraph 4 also indicates that this would be the case even if the probability of winning is influenced by the volume of (ticket) sales as long as the selection of the winner is based solely on chance and not the volume of tickets sold.
The amount or value of any prize or award received by a distributor or retailer from the provincial lottery corporation is considered to form part of the consideration received for selling lottery tickets and, as such, should be treated as business income of the particular distributor or retailer. This treatment, effective January 1, 2014, is consistent with the tax treatment of the amounts described in paragraphs 2 and 6 of IT-404R.
If you would like to discuss the matter further, please contact Katie Robinson at 613-948-2233.
Sincerely,
Mickey Sarazin
Director General
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
cc: Catherine Letellier de St-Just
Director General
Tax & Charities Appeals Directorate
cc: Wayne Lepine
Director General
Client Relations Directorate
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