29 May 1997 External T.I. 9706615 - GIFTS BY EMPLOYER TO EMPLOYEE

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:

(1) whether dept.'s admin position re. gifts extends to non-taxable entities, (2) whether the $100 ceiling on admin position has been increased and (3) if award on retirement is a "gift" or long-service award (i.e. if $100 limit applies)

Position:

(1) yes. (2) no and (3) award on retirement is in recognition of long service, is not a gift.

Reasons: 971069

970661
XXXXXXXXXX Sandra Short

Attention: XXXXXXXXXX

May 29, 1997

Dear Sirs:

Re: Gifts by Employer to Employee

This is in reply to your correspondence of March 5, 1997, concerning the Department's administrative position in paragraph 9 of Interpretation Bulletin IT-470R.

You have asked whether, given the level of inflation over the last several years, it is the Department's practice to accept amounts greater than $100 as falling within the same policy guidelines. You have also queried whether the policy applies to both taxable and nontaxable entities. Thirdly, you have asked for the Department's policy with respect to reporting, as income, the value of a gift given to an arm's length employee upon that employee's retirement.

Our Comments:

A gift, either in cash or in kind, from an employer to an employee, is a benefit derived "in respect of, in the course of, or by virtue of" an office or employment and is required to be included in income by virtue of paragraph 6(1)(a) of the Income Tax Act (the "Act"). However, as provided in paragraph 9 of Interpretation Bulletin IT-470R, when the value of a gift commemorating a wedding, Christmas or similar occasion does not exceed $100 and if the employer does not claim its cost as an expense in computing income, the gift is not required to be reported as income of the employee. This practice only applies to one gift to an employee in a year except in the year that an employee marries in which case it applies to two gifts if one of the gifts is a wedding present.

The Department's position relating to gifts, as summarized above, applies equally to taxable and nontaxable entities. There are no policy guidelines or practices which expand the ceiling to an amount above $100.

As discussed in our telephone conversation of May 27 (XXXXXXXXXX/Short), the Department distinguishes between gifts and performance, incentive or other awards to employees. Long-service awards given to employees are taxable under either paragraph 6(1)(a) or subparagraph 56(1)(a)(ii) of the Act, depending upon whether the award is given during the continuing employment of the employee or upon or after retirement. Such awards, whether in cash or in-kind, are not considered "gifts" as they are given in recognition of long service.

We trust our comments will be of assistance to you.

Yours truly,

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