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:
Whether the amount received by the retired member of the police for attendance at court, as a witness, is taxable in the year received.
Position:
YES
Reasons: The retired member of the police received an amount in satisfaction of an obligation arising out of an agreement made during a period of employment. The amount is deemed to be remuneration pursuant to paragraph 6(3)(b) of the Act since the obligation to appear in court as a witness, is a covenant within the purview of paragraph 6(3)(e) of the Act.
2005-015409
XXXXXXXXXX Luisa A. Majerus, CA
(613) 832-3488
March 3, 2006
Dear XXXXXXXXXX:
Re: Per Diems to Retired Police Officers
This is in reply to your memorandum dated October 3, 2005, requesting our views on the tax consequences of amounts paid by the XXXXXXXXXX (the "employer") to retired police officers (the "retirees"). We apologize for the delay in responding.
Specifically, you indicated that Article XXXXXXXXXX of the employer's collective bargaining agreement with the police officers requires that, "XXXXXXXXXX". You have asked us for our views on the taxability of these payments.
In our view, the payments received by the retirees for attendance at court as a witness are required to be included in their income under subsection 5(1) of the Income Tax Act (the "Act"), by virtue of subsection 6(3). Subsection 6(3) of the Act deems an amount received, pursuant to an agreement made immediately before, during or immediately after the period that the payee was employed by the payer, to be remuneration for services rendered during the period of employment where the amount can reasonably be considered to be received as consideration or partial consideration for a covenant with reference to what the payee is, or is not, to do before or after the termination of the employment. In our view, the obligation to appear in court as a witness is a covenant within the purview of subsection 6(3) of the Act.
It should also be noted that by virtue of subsection 153(1) of the Act, the employer will be required to withhold income tax from the amounts paid to the retirees and file an information return (T4) in accordance with the rules set out in the Income Tax Regulations.
We trust this information is helpful.
Yours truly,
Randy Hewlett
For Director
Business and Partnerships Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch
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