17 September 1993 External T.I. 9320785 F - Shareholder Benefit Art

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.

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Attention:  XXXXXXXXXX

Dear Madam:

RE:  Request for Technical Interpretation Subsection 15(1)

This is in response to your letter of July 13, 1993 dealing with the above-captioned subject and confirms our telephone conversation of September 14, (Palamar/XXXXXXXXXX).

The situation on which you request our views is described in your letter as follows:

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You are specifically concerned about whether the location of the statues on the shareholder's premises would give rise to a benefit under subsection 15(1) of the Income Tax Act (the "Act").

Our Views

The situation you describe is not a hypothetical question but rather is a transaction that may actually take place.  The Department's policy, as described in Information Circular 70-6R2, is to only provide its views on proposed transactions when those views are given in the form of an advance income tax ruling. As you may be aware, before an advance income tax ruling can be granted all relevant facts and proposed transactions, including the identity of the taxpayers involved, must be disclosed.

In general terms, however, in any situation where a property owned by a corporation is made available to a shareholder thereof the potential exists for a benefit to have been conferred on that shareholder for the purposes of subsection 15(1) of the Act.

With respect to quantification of the amount of such a benefit, the position of the Department concerning such situations remains basically as stated in response to question number 33 of the Revenue Canada Round Table at the annual conference of the Canadian Tax Foundation held in 1987. In other words, the amount or value of the benefit conferred where corporate owned property is made available to a shareholder would generally be considered to be equal to the fair market rental of that property less any consideration paid by that shareholder with regard to the property. As noted in that response, however, where this approach is not appropriate for measuring the value of the benefit, i.e., if it does not provide a reasonable return on the cost or value of the property, the benefit would generally be determined with reference to a normal rate of return on the greater of the cost or fair market value of the property, plus any related operating costs but reduced by any consideration paid by that shareholder with regard to the property.

The foregoing comments are given in accordance with the practice of providing non-binding opinions referred to in paragraph 21 of Information Circular 70-6R2 dated September 28, 1990.

Yours truly,

for DirectorReorganizations and Foreign DivisionRulings DirectorateLegislative and Intergovernmental Affairs Branch