3 December 2010 External T.I. 2010-0389101E5 - One-Time Payments

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.

Principal Issues: What is the tax treatment of the one-time payments made to XXXXXXXXXX under the XXXXXXXXXX ?

Position: Question of fact but likely not taxable.

Reasons: The payments seem to constitute a windfall in accordance with the factors listed in IT-334R2.

XXXXXXXXXX
									2010-038910

December 3rd, 2010

Dear Sir:

Re: One-Time Payments made under the XXXXXXXXXX

We are writing in reply to your recent request where you ask for the position of the Canada Revenue Agency on the tax treatment of certain payments that are made to XXXXXXXXXX under the XXXXXXXXXX . From the information that we have, these are one-time payments that are often made to cover the cost of purchasing a vehicle and/or a house for the XXXXXXXXXX .

All statutory references in this letter are references to the provisions of the Income Tax Act (the "Act"), R.S.C. 1985 (5th supp.) c. 1, as amended.

Our comments

The particular situation outlined in your fax appears to relate to a factual one, involving a specific taxpayer. Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. We are, however, prepared to offer the following general comments, which may be of assistance.

Generally, an amount is taxable under the Act if it is caught by a specific provision of the Act or if the amount constitutes income from a source.

In your situation, we do not believe that the amounts are taxable under a specific provision of the Act nor do we think that they represent income from a source. We do not think that these amounts are social assistance payments pursuant to paragraph 56(1)(u) as such payments must be made on the basis of a means, needs or income test. From the information you have communicated to us, this does not seem to be the case.

Furthermore, an amount is not taxable under the Act if it constitutes a windfall for the person receiving it. Factors indicating that a particular receipt is a windfall include the following:

(a) the taxpayer had no enforceable claim to the payment;

(b) the taxpayer made no organized effort to receive the payment;

(c) the taxpayer neither sought after nor solicited the payment;

(d) the taxpayer had no customary or specific expectation to receive the payment;

(e) the taxpayer had no reason to expect the payment would recur;

(f) the payment was from a source that is not a customary source of income for the taxpayer;

(g) the payment was not in consideration for or in recognition of property, services or anything else provided or to be provided by the taxpayer, and

(h) the payment was not earned by the taxpayer as a result of any activity or pursuit of gain carried on by the taxpayer and was not earned in any other manner.

In conclusion, from the information available to us, we are of the opinion that the one-time payments in question made to XXXXXXXXXX are not social assistance payments for the purposes of paragraph 56(1)(u) nor are they to be considered a source of income for the purpose of section 3, as they appear to constitute a windfall. Consequently, the XXXXXXXXXX in receipt of such payments would not be required to report such one-time payments in the calculation of their income.

We trust that you will find the above satisfactory.

François Bordeleau, LL.B.
Manager
Business and Partnerships Section
Income Tax Rulings Directorate
Canada Revenue Agency

c.c.: Louis Garneau
Assessment and Benefit Services Branch
Canada Revenue Agency