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:
This is a follow-up to our reply in file 5-961997. The self-employed B.C. real estate salespeople wish to incorporate their proprietorships. In the scenario now presented, the B.C. Real Estate Act and/or the Superintendent of Real Estate would allow the licensing of the corporations in question to sell real estate, with the requirement that the individual realtor remain personally liable for any damages resulting from such sale of real estate. Who will be considered to be carrying on the real estate sales business, and will subsection 56(4) apply (i.e., will the commission income be considered as being earned by the corporations or the salespeople)?
Position TAKEN:
We cannot provide assurance that the individual or the corporation will always be considered to be carrying on the real estate sales business, or whether subsection 56(4) will apply.
Reasons FOR POSITION TAKEN:
Subsection 56(4) will apply if the individual salesperson, and not the corporation which he or she controls, is carrying on the real estate sales business and the individual assigns his or her business income (i.e., his or her commission income) to the corporation. It is a question of fact whether a business is carried on by an individual or a corporation, and such a determination is dependent on a review of all specific details and circumstances of each particular case.
5-970715
XXXXXXXXXX M. Azzi
Attention: XXXXXXXXXX
September 8, 1997
Dear Sirs:
Re: Corporations of B.C. Real Estate Salespeople
This is in reply to your letter of March 16, 1997, concerning the incorporation of proprietorships of B.C. real estate salespeople. You enquire whether the views expressed in our letter of March 4, 1997 (our file 5-961997), regarding the application of subsection 56(4) of the Income Tax Act (the "Act"), would apply if the B.C. Real Estate Act and/or the Superintendent of Real Estate allowed the licensing of the corporations in question to sell real estate, with the requirement that the individual realtor remain personally liable for any damages resulting from such sale of real estate.
In our view, subsection 56(4) of the Act will apply if the individual salesperson, and not the corporation which he or she controls, is carrying on the real estate sales business and the individual assigns his or her business income (i.e., his or her commission income) to the corporation (this was the case under alternative (b) of your previous letter). As previously indicated, it is a question of fact whether a business is carried on by an individual or a corporation, and such a determination is dependent on a review of all specific details and circumstances of each particular case. Thus, we cannot provide you with assurance that, in the above-described scenario, the individual or the corporation will always be considered to be carrying on the real estate sales business, or whether subsection 56(4) of the Act will apply.
Again, we stress that this letter does not address the issue of whether the above-noted salespeople are independent contractors. This was given to us as a fact.
Yours truly,
R. Albert
for Director
Business and Publications Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch
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