11 October 1995 External T.I. 9526275 - TAGS EMPLOYMENT BONUS

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.

Human Resources Development Canada
Place du Portage, Phase IV, 4th Floor
Hull, Quebec							952627
K1A 0J9								A.M. Brake

Attention: Alison Flood, TAGS Development Team

October 11, 1995

Dear Ms. Flood:

Re: Taxability of TAGS Employment Bonus

This is in reply to your letter of September 20, 1995 and will confirm the verbal opinion expressed in our various telephone conversations regarding the taxability of the above-noted bonus.

Section 56 of the Income Tax Act (the "Act") requires that certain amounts be included in computing the income of a taxpayer for a taxation year. Specifically, subparagraph 56(1)(a)(vi) states,

"except to the extent otherwise required to be included in computing the taxpayers' income, a prescribed payment...".

The TAGS payment including the "TAGS Employment Bonus" is such a prescribed payment by virtue of paragraph 5502(c) of the Income Tax Regulations. The question to be answered is whether the TAGS payment is required to be included in the computation of income by virtue of some other provision of the Act, such as section 5 as income from an office or employment or, alternatively, section 9 and/or 28 of the Act as representing self-employed earnings.

The Northern Cod Adjustment and Recovery Program ("NCARP") was established to provide benefits to self-employed fishery workers as well as employees working in the fishing industry. Self-employed persons, considered to be earning income from business, in receipt of these payments, were required to report these payments as a business receipt in computing their business income for the year. These same self-employed persons who now qualify under the TAGS program will continue to receive amounts for the same reason as replacement income as a result of their discontinuance, interruption or loss of opportunity to earn self-employed fishing income. Such amounts received would continue to be included in the computation of business income and would, therefore, not fall within the ambit of subparagraph 56(1)(a)(vi). In the event that a particular individual undertakes other activities, it is likely that it would cause him to lose his benefits. However, other activities carried on by an individual, that would not cause him to lose his benefits, would not change the nature of payments being received by former self-employed persons.

In our view, such amounts received would not be considered to be income from an office or employment. Hence, a TAGS payment including the "TAGS Employment Bonus" that does not constitute self-employed earnings, will be considered other income by virtue of subparagraph 56(1)(a)(vi) of the Act.

With regard to the tuition fees, such amounts fall within the ambit of paragraph 56(1)(n) of the Act. The scholarship or bursary treatment would allow the taxpayer to exclude up to $500 of the grant from inclusion in income and the student would be entitled to the tuition and education tax credits.

We trust that our comments will be of assistance.

R. Albert
for Director
Business and General Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch