22 August 1990 Ruling 9016033 F - Remuneration Paid to Spouse

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.

August 22, 1990

Dear Sir:

Re: Remuneration Paid to Spouse

This will reply to your letter of July 13, 1990 requesting an advance income tax ruling concerning the proposed payment of "remuneration" to your wife.

24(1)

Your concern is whether such a payment would be deductible by you for income tax purposes.

We are unable to rule in this matter, as what constitutes a deductible expense in any particular circumstance is a question of fact.  Based on the particular information provided we would be unable to give you a favourable ruling in any case.  Your  advance fee of $325.00 will therefore be returned to you under separate cover.

For your information we offer the following general comments.

OUR COMMENTS

In order for an expenditure to be deductible from the income of a business, it must be laid out to earn income from the business, as required by paragraph 18(1)(a) of the Income Tax Act.  A further question regarding the deductibility of remuneration paid is the reasonableness of the remuneration, since any portion thereof which is not "reasonable in the circumstances" would be disallowed by section 67 of the Income Tax Act.  These are questions of fact which must be determined for each particular actual case, based on a thorough review of all its relevant circumstances.  Such a review is generally performed by the local District Taxation Office.

We can provide you with the following general guidelines.  A determination of the reasonableness of the amount of remuneration paid to any particular employee requires consideration of the duties performed by the individual, as well as the time spent in carrying out those duties.  Furthermore, where possible, comparisons should be made between the remuneration paid to the individual and the remuneration paid to employees who perform similar services for employers of similar size in similar businesses.  Also the reasonableness of a salary to an employee who is the spouse of, or a member of the immediate family of, the employer would be subject to question where it is felt that income-splitting is involved.

We hope these comments will be helpful.

Yours truly,

E.M. Wheeler for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch