25 June 1996 External T.I. 9613155 - GRANTS AS TAXABLE 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 or not a payment under the XXXXXXXXXX is taxable

Position:

yes per 12(1)(x) or section 9 as reduction of expenses depending on how the expense is required to be treated under GAAP by the recipient

Reasons:

ITA, position taken in previous letters

XXXXXXXXXX 5-961315

Attention: XXXXXXXXXX

June 25, 1996

Dear Sirs:

Re: Grants as Taxable Income

This is in reply to your letter of March 28, 1996 requesting confirmation on whether or not grants offered to employers for the hiring of students under the XXXXXXXXXX are taxable.

Our understanding of the XXXXXXXXXX is that it provides grants to eligible employers who create summer jobs for XXXXXXXXXX students. Eligible employers are businesses, farms, municipal governments and incorporated or publicly accountable non-profit organizations. It is also our understanding that the grants are calculated at $XXXXXXXXXX.

Paragraph 12(1)(x) of the Income Tax Act (the "Act") generally provides that certain inducements, reimbursements, contributions, allowances and assistance received by a taxpayer in the course of earning income from a business or property will be included in income. Based on the limited information included in your letter, in our opinion the XXXXXXXXXX grants would fall within the provisions of paragraph 12(1)(x) of the Act and any grant received would have to be included in income in the year it is received by the eligible employer unless one of the exclusions in subparagraphs 12(1)(x)(v) through (viii) applies. The exclusion contained in subparagraph 12(1)(x)(v) provides that paragraph 12(1)(x) will not apply to an amount that was otherwise included in income or deducted in computing any balance of undeducted outlays, expenses or some other amounts, for the year or a preceding taxation year under some other provision of the Act, such as subsection 9(1) of the Act in accordance with generally accepted accounting principles ("GAAP"). The Department's position is that in general a taxpayer should apply GAAP in determining profit unless a provision of the Act permits a departure from GAAP.

We trust that our comments will be of assistance to you but caution that they are not binding on the Department.

Yours truly,

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