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: 1. Are voluntary payments made to clergyperson taxable? 2. If so, are the amounts by virtue of an office or employment or self-employment? 3. If by virtue of an office, is a deduction under 8(1)(c) allowable?
Position: 1. Income is taxable 2. Self-employment 3. No 8(1)(c) deduction available
Reasons: 1. Voluntary payments by virtue of carrying on a business are taxable 2. An office holder's remuneration has to be fixed or ascertainable 3. Since the remuneration is not by office or employment, 8(1)(c) does not apply.
March 8, 2007
XXXXXXXXXX TSO HEADQUARTERS
Income Tax Technical Advisor C. Tremblay, CMA
(613) 957-2139
Attention: XXXXXXXXXX
2007-022147
XXXXXXXXXX - Clergy Residence Deduction
This is in response to your memorandum dated January 16, 2007, requesting our comments on whether amounts received by XXXXXXXXXX during taxation years 2000 to 2003 should be considered gifts or whether they should be considered taxable income, and if taxable income, whether the remuneration is from an office such that the Clergy Residence Deduction under paragraph 8(1)(c) of the Income Tax Act (the "Act") be allowed.
The facts as we understand them:
In his request to have the Clergy Residence Deduction, XXXXXXXXXX submitted a summary of his activities that consist of an evangelist, pastor, and teacher in the local congregation. During those years, XXXXXXXXXX received unsolicited cash amounts from individuals of the local congregation as well as from abroad. These amounts were completely voluntary and came from approximately XXXXXXXXXX individuals and it was not known what amounts were to be received beforehand or at any time. The XXXXXXXXXX TSO has accepted that XXXXXXXXXX met both the status and function tests required in order to be eligible for the Clergy Residence Deduction under paragraph 8(1)(c) of the Act. The CRA rejected his request because there was no T-4 information slip provided, as he was not considered an employee. XXXXXXXXXX then wrote to the CRA requesting that the unsolicited amounts totalling $XXXXXXXXXX be deleted from his income because these amounts were gifts and that he reported them in error.
Since the XXXXXXXXXX TSO has accepted that XXXXXXXXXX has met both the status and function test, we will not comment on either test but rather we will review whether the funds received by XXXXXXXXXX were received as non-taxable amounts or as taxable income either in his capacity as a self-employed person or from holding an office and, if the latter, eligible for the clergy residence deduction.
In our view, the amounts given to the minister where given to him by virtue of his capacity as an evangelist, preacher and teacher and would constitute business income to him. In accordance with paragraph 4 of IT-334R2 entitled "Miscellaneous Receipts", the unsolicited amounts are required to be included in his income. In our view, since the amounts received by XXXXXXXXXX were not a fixed or ascertainable stipend or remuneration, the amounts received cannot be considered remuneration from an office. Further, since the amounts are not received from an office or employment, the clergy residence deduction is not available in those years. We came to that conclusion after having reviewed the following cases with respect to your inquiry.
Kenneth G. Mills v MNR 78 DTC 1851(TRB) discusses voluntary payments received. Mr. Mills was a music teacher and also became known as somewhat of a philosopher. His followings came from people he met and others whom those people brought to meetings. Mr. Mills took the position that all the monies contributed to him were gifts to him and not income for tax purposes. There was no obligation to pay anything and there was no campaign to induce the amounts received. The contributors would simply express their gratitude to the appellant for the assistance, aid and peace of mind, which he had given to them. The Minister of National Revenue contended that all the amounts were income from a business within the meaning of section 3 of the Act because a payment may be liable to income tax although it is voluntary on the person who made it. The Judge found that the amounts in question were as a result of a business operation.
Rumford v The Queen 94 DTC 6121 (FCA) is also on point. Mr. Rumford held the office of "commended worker" in the Plymouth Brethren Assembly. As well as serving to the needs of his congregation, he preached at other chapels, lectured at Bible School, counselled members of other congregations and gave sermons to other congregations. His chapel paid his regular salary plus gave him an amount equal to the voluntary contributions made by other congregation members through envelopes with the appellant's name on them. The court found that the voluntary contributions were not received as a result of his "office" because the amount was not a fixed or ascertainable stipend or remuneration. The definition of "office" in subsection 248(1) of the Act means the position of an individual entitling the individual to a fixed or ascertainable stipend or remuneration and includes a judicial office. The amount was not "fixed", each member made his or her own decisions as to what to put in the envelope. The courts have taken the word to mean that the amount to be paid is capable of being made certain, or capable of being determined, but not that a definite sum be known by the office holder at the commencement of holding office (see Merchant v The Queen 84 DTC 6215 (FCTD)).
Accordingly, in our view, the circumstances indicate that XXXXXXXXXX is not an employee and does not receive remuneration from holding an office but rather is a self-employed "evangelist", "preacher" and "teacher" with business income, and is not eligible for the clergy residence deduction for the years in question.
R.A. Albert, CA
For Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
All rights reserved. Permission is granted to electronically copy and to print in hard copy for internal use only. No part of this information may be reproduced, modified, transmitted or redistributed in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, or stored in a retrieval system for any purpose other than noted above (including sales), without prior written permission of Canada Revenue Agency, Ottawa, Ontario K1A 0L5
© Her Majesty the Queen in Right of Canada, 2007
Tous droits réservés. Il est permis de copier sous forme électronique ou d'imprimer pour un usage interne seulement. Toutefois, il est interdit de reproduire, de modifier, de transmettre ou de redistributer de l'information, sous quelque forme ou par quelque moyen que ce soit, de facon électronique, méchanique, photocopies ou autre, ou par stockage dans des systèmes d'extraction ou pour tout usage autre que ceux susmentionnés (incluant pour fin commerciale), sans l'autorisation écrite préalable de l'Agence du revenu du Canada, Ottawa, Ontario K1A 0L5.
© Sa Majesté la Reine du Chef du Canada, 2007
Email this Content