13 April 1999 External T.I. 9904855 - TAXABLE BENEFIT - 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:

Whether XXXXXXXXXX would be a taxable benefit pursuant to paragraph 6(1)(a) of the Act.

Position:

Whether or not the definitions of "employee" or "office", as defined in subsection 248(1) of the Act, apply to XXXXXXXXXX is a question of fact, which can only be resolved after a review of the relevant documentation and circumstances. However, the Department maintains its position that the fair market value of XXXXXXXXXX given to a select group of former employees or officers would be a taxable benefit pursuant to paragraph 6(1)(a) of the Act.

Reasons: Similar position taken in other files

XXXXXXXXXX 990485
G. Moore
April 13, 1999

Dear XXXXXXXXXX:

Re: Taxable Benefit - XXXXXXXXXX

This is in reply to your letter of February 10, 1999, wherein you requested an advance income tax ruling.

As we understand the situation,
XXXXXXXXXX

The City has been issuing T4 slips, in an amount equivalent to the price of the actual use of the XXXXXXXXXX. This has been done based on the understanding that their former appointed/elected service constituted an employee relationship with the City.

XXXXXXXXXX In the recent court case of Merrill M. Gordon v. The Queen, the Tax Court of Canada ruled that the benefit received by virtue of a complimentary park pass by Mr. Gordon, who was a former Alderman of the City of Burnaby, as well as a volunteer for the City, was not taxable.

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In accordance with Information Circular 70-6R3, Advance Income Tax Rulings, advance income tax rulings are not issued on transactions that are already completed or on a series of transactions that are significantly advanced. Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transactions are proposed and are the subject matter of an advance ruling request submitted in the manner set out in Information Circular 70-6R3. Where the particular transactions are completed, the enquiry should be addressed to the relevant Tax Services Office. However, we are prepared to provide the following comments which are of a general nature only and are not binding on the Department.

Our Comments

Under the Informal Procedure of the Tax Court of Canada, in the case of Merrill M. Gordon v. The Queen, (98-347(IT)I), heard on September 25, 1998, the taxpayer appealed his 1995 and 1996 assessments in which the Minister of National Revenue added $2,086.60 and $760.50, respectively, to his income. The taxable benefit was in respect of a complimentary pass given to the taxpayer by the City of Burnaby that permitted him and a guest to play golf on three of Burnaby's golf courses. For a one year period in the 1970's, the taxpayer served as an Alderman for the City of Burnaby for which he was remunerated and after that time, he held many volunteer positions without compensation for the benefit of the City of Burnaby. The taxpayer contended that the complimentary pass was given to him as a direct result of his being an Alderman. The Minister considered the value of the golf pass as a retiring allowance, pursuant to paragraph 56(1)(a) of the Income Tax Act ("the Act") or alternatively, that the taxpayer received the amount as employment income, pursuant to paragraph 6(1)(a) and subsection 6(3) of the Act. The Court found that since the taxpayer was an Alderman for only one year in the 1970's, the amount did not meet the definition of "retiring allowance" in subsection 248(1) of the Act because it was not in recognition of the taxpayer's long service. The Court also found that as a City Councillor, he was an independent representative of the people and not an employee. As well, the Court noted that the taxpayer's volunteer services with the City of Burnaby did not meet the definitions of "office" or "employment" in subsection 248(1) of the Act. Accordingly, since the Court found that the taxpayer was not an employee of the City of Burnaby during 1995 and 1996, the taxpayer was found not to have received the amounts as employment income, pursuant to paragraph 6(1)(a) and subsection 6(3) of the Act. We would like to point out that the Tax Court of Canada Act provides that a judgment under the Informal Procedure shall not be treated as a precedent. As the case of Merrill M. Gordon v. The Queen was under the Informal Procedure of the Tax Court of Canada, the judgment is not treated as a precedent and therefore, would not apply XXXXXXXXXX

With respect to the Court's comments that, as a City Councillor, Mr. Gordon was an independent representative of the people and not an employee, paragraph 6(1)(a) of the Act taxes the value of benefits of any kind whatever received or enjoyed by the taxpayer in the year, in respect of, in the course of, or by virtue of an office or employment. An "office" is defined in subsection 248(1) of the Act as the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration and includes a judicial office, the office of a Minister of the Crown, the office of a member of the Senate or House of Commons of Canada, a member of a legislative assembly, or a member of a legislative or executive council and any other office, the incumbent of which is elected by popular vote or is elected or appointed in a representative capacity and also includes the position of a corporation director and "officer" means a person holding such an office." In the court cases of Hubert Badanai v. Minister of National Revenue, 51 DTC 378, and Frederick John Mitchell v. Minister of National Revenue, 51 DTC 380, the Income Tax Appeal Board found that the office of Mayor of the city of Fort William and the office of Alderman of the City of Fort William, respectively, fell within the definition of "office", as defined in former subsection 127(1) of the Act and therefore, the remuneration Mr. Bandanai and Mr. Mitchell received as Mayor and Alderman, respectively, from the City of Fort William was taxable as income from an office. In our view, the position of XXXXXXXXXX would fall within the definition of "office" in subsection 248(1) of the Act, and accordingly, paragraph 6(1)(a) of the Act would apply to tax the fair market value of a benefit such as XXXXXXXXXX.

In Mr. Gordon's case, the Court found that because he was a City Councillor for only one year in the 1970's, the amount was not a retiring allowance paid in recognition of long service and that Mr. Gordon's work as a volunteer for the City of Burnaby did not fall within the definition of "employee" in subsection 248(1) of the Act.

XXXXXXXXXX

It is still the Department's position that, in order for the use of an employer's recreational facilities at nominal charge or no charge not to be considered a benefit in the hands of a particular employee or officer, those same facilities must be available to employees or officers generally. Where certain select groups or categories of employees or officers are given the privilege of using the employer's recreational facilities at no or low cost for which other employees or officers in the organization would be required to pay full price, then the Department considers that a benefit is being conferred on those employees or officers that have been given that advantage.

In summary, in our view, the findings of the Court in the Gordon case would not apply to XXXXXXXXXX for the reasons explained above. Whether or not the definitions of "employee" or "office", as defined in subsection 248(1) of the Act, applies to XXXXXXXXXX is a question of fact, which can only be resolved after a review of the relevant documentation and circumstances. However, the Department maintains its position that the fair market value of XXXXXXXXXX given to a select group of former employees or officers would be a taxable benefit pursuant to paragraph 6(1)(a) of the Act.

We trust that our comments, which are not binding on the Department, will be of assistance to you. Your deposit will be returned to you under separate cover.

Yours truly,

R. Albert, C.A.

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

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