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: If a corporation rents a property to one of its directors and the director pays the fair rental value of the property to the corporation, will the director be required to include a benefit in his or her income under paragraph 6(1)(a) of subsection 15(1) of the Income Tax Act?
Position: No
Reasons: There is no basis for including a benefit in the director's income,
xxxxxxxxxx 992300
M. Eisner
Attention: xxxxxxxxxx
September 17, 1999
Dear Sir:
Re: Benefits
This is in reply to your letter of August 17, 1999, in which you asked us about the above noted-subject.
You have indicated that a corporation, which owns a residential property, would like to rent the property to one of its directors. The director will pay the fair rental value of the property to the corporation. You have asked us whether the rental of the property will result in a benefit being included in the director's income.
Written confirmation of the tax implications inherent in particular transactions are given by this Directorate only where the transaction are proposed and are the subject matter or an advance income tax ruling request. The procedures for requesting an advance income tax ruling are outlined in Information Circular 70-6R3 dated December 30, 1996. However, we are providing you with the following comments which are of a general nature and are not binding on the Department.
Paragraph 6(1)(a) and subsection 15(1) of the Income Tax Act (the "Act") respectively deal with benefits received or enjoyed by employees, and benefits conferred on shareholders.
The determination of the fair rental value of a rental property involves a question of fact. However, it is our general view that if a director of a corporation rents a property from the corporation and pays the corporation the amount of the fair rental value of the property, the director would not be subject to tax in respect of employment benefits under paragraph 6(1)(a) (or under subsection 15(1) of the Act if the property was rented to the individual in his or her capacity as a shareholder).
We trust that our comments will be of assistance to you.
Yours truly,
John Oulton
for Director
Business and Publications Division
Income Tax Rulings
and Interpretations Directorate
Policy and Legislation Branch
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