5 November 1998 External T.I. E9824175 - COMMISSIONS ASSIGNED TO A CORPORATION

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: To whom should a T4A slip be made out to when a commission agent assigns his commission to a corporation? If the agent has to report the income can he or she deduct the amounts that are paid to the corporation?

Position: The T4A slip should be made out to the commission agent. The commission agent is not entitled to an expense in respect of the amounts paid to the corporation.

Reasons: The person who has earned the income should be the recipient of the T4A. Subsection 209(1) of the Income Tax Regulations refers to “forward to each taxpayer to whom the return relates”. The amounts paid to the corporations are not expenses set out to earn income.

XXXXXXXXXX 982417
J. E. Grisé
Attention: XXXXXXXXXX

November 5, 1998

Dear Sirs:

Re: Independent Agent Commissions

This is in reply to your letter of September 10, 1998 requesting interpretations on behalf of XXXXXXXXXX.

The interpretations you have requested seem to be in respect of completed or ongoing transactions. As set out in paragraph 22 of Information Circular 70-6R3, such requests are normally considered by our tax services offices. However, we are prepared to offer the following comments which may be of assistance to you.

You are concerned with the correct tax reporting obligations of XXXXXXXXXX with respect to commissions earned by its independently contracted agents (the agents) from the sale of mutual funds on behalf of XXXXXXXXXX. Commission amounts may be assigned to a corporation at the request of an agent, in which case XXXXXXXXXX makes the payments directly to the corporation. You have indicated that a corporation cannot act as a salesperson under the Securities Act of Ontario and its Regulations.

In our view, the T4A information slip required to be completed pursuant to section 200 of the Income Tax Regulations must be issued to the agent that has earned the commission, and not to the corporation that has been assigned the commission amounts. The agent would be required to report the commission earned from XXXXXXXXXX and would not be entitled to a deduction in respect of the amounts assigned to a corporation.

We hope our comments are helpful.

Yours truly,

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