27 February 1997 External T.I. 9700155 - PAYMENT TO FORMER EMPLOYER

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 a deduction is permitted for a payment to employer of part of the cost of training provided to the taxpayer as a result of the taxpayer leaving his employment within a certain period of having received the training.

Position:

Not deductible.

Reasons:

An amount has to be included in income of the taxpayer before 8(1)(n) can have application. This is not the case in the situation presented.

	                             	970015
XXXXXXXXXX	                            Jacques E. Grisé
(613) 957-2059

Attention: XXXXXXXXXX

February 27, 1997

Dear Sirs:

Re: Payment to Former Employer

This is in reply to your note of January 2, 1997 requesting our technical interpretation on the payment of an amount to an employer by a former employee.

You describe the situation where an employee was required to undergo training relating to a specific aircraft operated by his employer. The cost of the training was borne by the employer and you confirmed to Jacques Grisé that no amount was included in the employee's income with respect to the cost of such training. It is presumed that the course for which the fees were paid was undertaken on the employer's initiative and for the benefit of the employer rather than the employee. The employee was required to enter into a legal agreement stipulating that if he left the employ of the employer within a specified time period after the training was completed, he would be required to pay back a portion of the cost to the employer. You are concerned as to whether or not an amount paid by the employee, were he to leave the employer, could be deducted as an employment expense.

Subsection 8(2) of the Income Tax Act states that only deductions permitted in section 8 of the Act may be deducted in computing a taxpayer's income for a taxation year from an office or employment. Paragraph 8(1)(n) of the Act provides for the deduction of certain amounts reimbursed. However, the provision does not apply to the situation you have presented, since the amount paid must be a reimbursement of an amount that was previously paid to the taxpayer and the amount previously paid to the taxpayer must have been included in his employment income.

There seems to be no other provision in the Income Tax Act that would allow a deduction for the repayment of an amount in the situation you have presented.

Yours truly,

John F. Oulton
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch