4 December 1995 External T.I. 9526155 - CASH GIFTS AND PRESENTS BUSINESS OR EMPLOYMENT INCOME

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:

Whether cash gifts and presents constitute employment or business income.

Position:

Yes either employment or business income depending on the facts.

Reasons:

Cash gifts and presents received by virtue of office or employment included in income under 5(1) or 6(1)(a). If received by virtue of carrying on a business, included in income under 9(1).

5-952615
XXXXXXXXXX M. Shea-DesRosiers

Attention: XXXXXXXXXX

December 4, 1995

Dear Sir/Madam,

Re: Whether cash gifts and presents to be considered "business income"

This is in reply to your letter of September 26, 1995 concerning the above-mentioned subject.

You ask whether cash gifts and presents, received by an ordained minister employed with a church, as a guest speaker at various religious organizations, for providing eulogies at funerals and officiating at marriages and other religious ceremonies without any fee having been requested, can be considered business income.

We do not have sufficient information to determine whether the ordained minister is an employee or self-employed. You state in the first paragraph of your letter that the ordained minister is "employed with a church" and in the last paragraph of your letter you enquire as to whether the gifts and presents should be considered "business income".

"Office" is defined in subsection 248(1) of the Income Tax Act (the "Act") to mean" the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration and includes ...." "Employment" is defined in subsection 248(1) of the Act to mean "the position of an individual in the service of some other person ... and "servant" and "employee" means a person holding such a position". The definition of "business" in subsection 248(1) of the Act specifically excludes an office or employment. Whether a taxpayer is an independent contractor or an employee will depend upon the facts of each particular case.

Paragraph 4 of Interpretation Bulletin IT-334R2 gives the following explanation concerning "Gifts and Other Voluntary Payments":

"Amounts received as gifts, that is, voluntary transfers of real or personal property without consideration, are not subject to tax in the hands of the recipient. However, when by virtue of an office or employment a voluntary payment or other valuable transfer or benefit is received by an employee from an employer, or from some other person, the amount of the payment or the value of the transfer or benefit is generally included in income pursuant to subsection 5(1) or paragraph 6(1)(a). .... Similarly, voluntary payment (or other transfers or benefits) received by virtue of a profession or by virtue of carrying on a business are taxable receipts."

Paragraph 11 of IT-334R2 states that "In order for any activity or pursuit to be regarded as a source of income, there must be a reasonable expectation of profit."

It is to be noted that while the payments to the individual may be voluntary, it is the services provided by the individual that give rise to the payments.

Consequently, it is our view that cash gifts and presents made to an ordained minister who is either an employee or self-employed, in the circumstances described above, would constitute employment income or business income and would therefore have to be included in the income of the ordained minister under subsection 5(1) or paragraph 6(1)(a) of the Act as employment income or subsection 9(1) of the Act as business income.

We trust the above comments will be of assistance to you.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch