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.
Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:
Paragraph 27 of IT-470R indicates that certain commissions received by a life insurance salesperson who are employees are non-taxable. Would this position also apply to life insurance salesperson who are self-employed?
Position TAKEN:
Yes
Reasons FOR POSITION TAKEN:
The Department's position in paragraph 27 of IT-470R on commissions is consistent with non-taxable merchandise discounts described in that paragraph. In the case of self-employed individuals who acquire business merchandise, it is the Department's position that no profit arises for income tax purposes with respect to personal use (Page 9 - "Business and Professional Income" pamphlet). Accordingly, the above view is congruous with the comments in paragraph 27 and the position on self-employed individuals.
September 6, 1994
Ottawa District Office Head Office
Gabor Obert Rulings Directorate
Client Assistance M. Eisner
Directorate (613) 957-8953
941083
Commissions - Life Insurance Salespersons
This is in reply to your memorandum dated April 25, 1994 in which you asked us for our comments on the tax treatment of a commission described in paragraph 27 of Interpretation Bulletin IT-470R "Employees' Fringe Benefits" except that it is received by a self-employed life insurance salesperson rather than an employee.
With respect to the above issue, paragraph 27 states the following with respect to a life insurance salesperson who is an employee:
"Similarly, where a life insurance salesperson acquires a life insurance policy, a commission received by that salesperson on that policy is not taxable provided the salesperson owns that policy and is obligated to make the required premiums thereon."
The above position represents a longstanding position of this Department which is based on the premise that the commission is akin to non-taxable discounts on merchandise described in paragraph 27.
In the case of self-employed individuals who acquire merchandise for his or her business, page 9 of the pamphlet entitled "Business and Professional Income" sets out three methods for accounting for the personal use of such merchandise. The effect of these methods is that the self-employed individual does not make a profit on such goods for the purposes of computing his or her profit from the business for income tax purposes. Consistent with this position and the above comments in respect of paragraph 27 of IT-470R, it is our view that a commission described in the above excerpt, except that it is received by a self-employed salesperson, would be treated for income tax purposes as being non-taxable.
If further technical assistance is required, we would be pleased to provide our views.
P.D. Fuoco
Section Chief
Personal and General Section
Business and General Division
Rulings Directorate
Policy and Legislation Branch
Client Assistance Directorate
Assessment of Returns Directorate
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