30 November 1996 Ruling 9629743 - CEILING PAYMENTS MADE BY DOCTORS TO XXXXXXXXXX

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:

tax consequences relating to the payment by an association\partnership of salaried doctors to XXXXXXXXXX where the doctors carry on the practice of medicine

Position:

the payment to XXXXXXXXXX by the partnership will be deductible in computing the income of the partnership of doctors with the result that each partner's income from the partnership will be nil and the gross salary paid to the doctors by XXXXXXXXXX will constitute the full amount of their income from the duties of employment which includes the practice of medicine

Reasons:

the payment is required of the partnership under the terms of the agreement with XXXXXXXXXX - while the duties of employment include the practice of medicine, the amount received from the province is not salary income but income of the partnership - note that no deduction would have been available under section 8 in respect of a repayment of salary to XXXXXXXXXX

XXXXXXXXXX
									962974

Attention: XXXXXXXXXX

XXXXXXXXXX, 1997

Dear Sirs:

Re: XXXXXXXXXX
Advance Income Tax Ruling

We are replying to your letter of XXXXXXXXXX in which you requested an advance income tax ruling in respect of a proposed agreement to be made between XXXXXXXXXX and the partnership of the above noted individuals. Reference is also made to the additional information and documentation submitted on XXXXXXXXXX.

Our understanding of the facts and proposed transactions is as follows:

Facts

XXXXXXXXXX

The members of the Association are salaried employees of XXXXXXXXXX.

XXXXXXXXXX

Under the terms of the Loi sur l'assurance-maladie du Québec R.S.Q., ch. A-29 and the Loi sur la Régie de l'assurance-maladie du Québec R.S.Q., ch. R-5, only a doctor or an association of doctors may bill the Régie de l'assurance-maladie du Québec (the Régie) for medical services performed in the province of Quebec. Accordingly, the Association bills the Régie directly for medical services performed by its members at the Hospital. Each doctor also receives a salary from XXXXXXXXXX.

To the best of your knowledge, none of the issues involved in this request is presently being considered by a tax services office or taxation centre in connection with a tax return already filed nor are any of the issues under objection or appeal.

Proposed Transaction

XXXXXXXXXX

The agreement will include a clause under which the Association agrees to account for and remit to XXXXXXXXXX such portion of the amount received from the Régie as agreed upon annually less an amount, as agreed upon annually, in respect of the administration expenses incurred by the Association. The amounts agreed upon will be put in writing and filed with the agreement as attachments.

Purpose of the Proposed Transaction

The purpose of the proposed transaction is to recognize that the salary paid by XXXXXXXXXX to the members of the Association is intended to compensate them for medical services performed as well as other duties rendered in the course of their employment, and to enable XXXXXXXXXX to lower the cost of operating the Hospital.

Rulings Given

Provided that the above facts and proposed transactions are accurate and constitute a complete disclosure of all the relevant facts and proposed transactions, that the executed agreement is drafted in substantially the same form as that submitted with your letter of XXXXXXXXXX, and that the transaction is carried out as described herein, we confirm that:

the amount paid to XXXXXXXXXX as a result of the agreement referred to in paragraphs 6 and 7 above, will be deductible in computing the business income or loss of the Association under section 9 of the Act, and

subsection 245(2) of the Act will not be applied as a result of the proposed transaction, in and by itself, to redetermine the tax consequences confirmed in this ruling.

These rulings are given subject to the general limitations and qualifications set forth in Information Circular 70-6R3 dated December 30, 1996, issued by Revenue Canada, and are binding on the Department provided the agreement is executed on or before XXXXXXXXXX.

Yours truly,

for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch