26 October 2010 External T.I. 2010-0373791E5 - Taxable Benefit for tuition

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 Canada Revenue Agency's ("CRA") accepted method for calculating a taxable employment benefit regarding reduced student tuitions?

Position: It is a question of fact.

Reasons: The CRA's general position on the taxable status of employee benefits is discussed in Interpretation Bulletin IT-470R (Consolidated) - Employees' Fringe Benefits and the Employer's Guide T4130. As noted in paragraph 20 of IT-470R, where an educational institution that charges tuition fees provides tuition free of charge or at a reduced amount to an employee of the institution, or to the spouse or children of the employee, the fair market value of the benefit must be included in the employee's income.

XXXXXXXXXX
									2010-037379
									Brenda White
									519-645-5454
October 26, 2010

Dear XXXXXXXXXX :

Re: Taxable Benefit for Tuition

This is in response to your letter of June 28, 2010 wherein you asked for clarification regarding the calculation of a taxable benefit for discounted tuition.

In the situation described, faculty members of a private school are allowed discounted tuition fees for their children attending the school. A taxable benefit calculated as the difference between the standard tuition fee and the reduced tuition fee is included as a taxable benefit on the respective faculty members T4. You have asked if this is the appropriate method for calculating the taxable benefit.

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 a request for an advance income tax ruling submitted in the manner set out in Information Circular 70-6R5, "Advanced Income Tax Rulings", dated May 17, 2002. This Information Circular and other Canada Revenue Agency ("CRA") publications can be accessed on the internet at http://www.cra-arc.gc.ca. Where the particular transactions are complete, the inquiry should be addressed to the relevant tax services office, a list of which is available on the "Contact Us" page of the CRA website. Although we cannot comment on your specific situation, we are prepared to provide the following comments in respect of the issues that you raised. Please note, however, that these comments are of a general nature only and are not binding on the CRA.

Subject to certain exceptions, paragraph 6(1)(a) of the Income Tax Act (the "Act") requires that the value of any benefits received or enjoyed by a taxpayer in the year in respect of, in the course of, or by virtue of an office or employment be included in the taxpayer's income from employment. The broad wording of this provision means that a taxable benefit may exist where there is any connection between the particular payment or benefit and the particular office or employment.

The CRA's general position on the taxable status of employee benefits is discussed in Interpretation Bulletin IT-470R (Consolidated) - Employees' Fringe Benefits and the Employer's Guide T4130. As noted in paragraph 20 of IT-470R, where an educational institution that charges tuition fees provides tuition free of charge or at a reduced amount to an employee of the institution, or to the spouse or children of the employee, the fair market value of the benefit must be included in the employee's income. This continues to reflect the views of the CRA. The difference between the standard tuition paid by members of the public and the discounted tuition paid by the teacher is an appropriate measure of the fair market value of the benefit.

We trust these comments will be of assistance.

Yours truly,

Renée Shields
for Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch