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 person on leave of absence may receive income through an incorporated business which charges fees to the employer.
Position:
General explanation of 6801(a)(iii).
Reasons: N/A
961765
XXXXXXXXXX P. Spice
June 26, 1996
Dear XXXXXXXXXX:
Re: Receipt of Income During Leave of Absence
This is in reply to your letter of May 6, 1996, in which you describe your plans to start a business during your leave of absence and whether it would be acceptable for your incorporated business to receive contract fees from your employer. You would receive salary from your business as an employee.
Your enquiry relates to an actual proposed transaction and we are unable to provide a specific reply except in the context of an advance income tax ruling request. We may provide, however, the following general comments which are not binding on the Department.
The rules governing deferred salary leave plans as contained in paragraph 6801(a) of the Income Tax Regulations require that throughout the period of the leave of absence the employee cannot receive any salary or wages from the employer, or from a person or partnership which does not deal at arm's length with the employer. The employer, however, may pay the deferred amounts and the reasonable fringe benefits which are usually provided by the employer. Payments by an employer to an incorporated business owned by the employee for services or goods provided by the corporation are business income to the corporation, of course, and not salary or wages to the employee.
We trust our comments will be of assistance to you.
Yours truly,
for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
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