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.
XXXXXXXXXX
Attention: XXXXXXXXXX
Dear Sirs:
RE: Taxation of Commissions Earned by a Stockbroker
We are replying to your letter of December 18, 1992 concerning an apparent inconsistency, in various district taxation offices, in the tax treatment of commissions earned on the personal transactions of stockbrokers.
The issue is whether the commission earned by a stockbroker on his or her own trades is required to be included in employment income with a corresponding adjustment in the calculation of any gain or loss on the disposition of those securities or whether the amount can be omitted from both employment income and the calculation of the cost base of the securities purchased (or not claimed as an outlay on disposition for securities sold) so that the stockbroker will report a higher capital gain and incidently, a higher capital gain exemption. It is your understanding that the second alternative is permitted in some district offices but not in others.
It is a question of fact as to whether stock purchased and sold by an individual is taxed as a capital gain or on account of income. While capital gain treatment is available to stockbrokers who hold investments on account of capital, such treatment is not appropriate where the course of conduct and intent of the stockbroker indicates that the sale is on account of income. Accordingly in our view, your comments concerning the inability of the employee-stockbroker to claim a higher capital gains exemption are not relevant to the issue at hand.
It is our understanding that employee-stockbrokers earn the same commission in respect of personal security transactions as they do for other security transactions. Thus, the commission earned by an employee on personal trading in securities is properly required to be included in the employee's income from employment. This position is supported by the case of Grant v MNR (67 DTC 249), wherein the court found that a real estate agent was required to include in employment income the commission charged on the sale of his own home.
We have taken steps to ensure that all of our district taxation offices are aware of this position. We trust these comments have clarified our position in this matter.
Yours truly,
J.A. Szeszycki for DirectorBusiness and General DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch
c.c. Client Assistance c.c. Assessment of Returns
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