When the taxpayer's brother died, his pension scheme paid her a large lump sum. Boyle J. rejected the taxpayer's position that the payment was in the nature of a life insurance payment rather than an amount from a "superannuation or pension benefit" plan. He found at para. 30:

A superannuation or pension fund or plan is an arrangement which provides for payment of regular post-retirement income to employees and determines the entitlement, the amount and frequency of such payments.

The definition of "superannuation or pension benefit" under s. 248(1) includes "any amount received out of or under a superannuation or pension fund or plan." Accordingly, the one-time payment to the taxpayer was an amount from a pension benefit plan, notwithstanding that it was payable because of the contributor's death.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Superannuation or Pension Benefit		127

Watts v. The Queen, 2004 DTC 3111, 2004 TCC 535 (Informal Procedure)

Periodic disability payments received by the taxpayer under the Canada Pension Plan were not received in respect of a "disability insurance plan" and instead were taxable under s. 56(1)(a). Bowman, ACJ stated (at para. 18):

"Insurance is essentially a contractual arrangement between an insured and an insurer and involves an obligation by an insurer, upon payment of premiums, to pay an amount upon an event whose recurrence is in a certain period."

Words and Phrases

insurance

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.94		37
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(f)		71

Subparagraph 56(1)(a)(i)

Cases

Burchill v. Canada, 2010 DTC 5096 [at 6922], 2010 FCA 145

The Court rejected the taxpayer's argument that the reference in s. 56(1)(a)(i) to pension benefits "received" referred to benefits "constructively received," and that taxpayer was consequently entitled to allocate portions of a lump sum pension payment to earlier taxation years. If that argument were correct, then there would have been no need to enact s. 110.2 (allowing a deduction for prior years' accruals) and s. 120.31 (dealing with "notional tax payable" in prior years).

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - Context		93

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4)	RPP revocation beyond the normal reassessment period retroactively validated an unsupportable reassessment under s. 56(1)(a)(i)	398
Tax Topics - Income Tax Act - Section 152 - Subsection 152(9)	subsequent retroactive deregistration of RPP also retroactively validated an assessment factually made on basis of plan’s invalidity	200
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i)	subsequent retroactive deregistration of RPP would not establish carelessness in previous return filing	185
Tax Topics - General Concepts - Effective Date	subsequent deregistration of RPP retroactively validated reassessment	223
Tax Topics - Income Tax Act - Section 147.1 - Subsection 147.1(12)	subsequent deregistration of RPP beyond normal reassessment period nonetheless retroactively validated reassessment	91

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - Interpretation/Definition Provisions	"including without limitation" is expansive	159

Administrative Policy

2 April 2019 Internal T.I. 2016-0649821I7 F - Unclaimed superannuation or pension benefits

subsequent year’s payment of benefit to a previously-unidentified beneficiary is only income in that year as an “in lieu of” pension amount

A survivor benefit under a registered pension plan (“RPP”) is paid in a taxation year to the Direction principale des biens non réclamés [the Unclaimed Property Directorate] ("DPBNR") pursuant to the Québec Unclaimed Property Act (“UPA”) because the person entitled thereto (the surviving spouse or the beneficiary of a deceased RPP member) are unknown at the time. In a subsequent taxation year, the person who was entitled to receive the survivor benefit (“right-holder”), now identified, claims the amount and receives from the DPBNR the net amount that it, in turn, had received from the RPP (i.e., the survivor benefit payable under the RPP, as reduced by federal and provincial income tax withheld at source) as further reduced by its administration fee.

What amount is to be included in the right-holder’s income, and in what year? What if it is an estate that would have been entitled to receive the amount, but the administration of the estate has been completed prior to the DPBNR being in a position to make the payment?

The Rulings Directorate indicated that the amount to be included under s. 56(1)(a)(i) is the gross amount of the survivor benefit payable under the RPP, as indicated in the T4A slip issued by the RPP administrator, which should be included for the taxation year in which the DPBNR has transferred that amount to the right-holder. In this regard, CRA stated:

To the extent that, at the end of a particular taxation year in which the DPBNR receives a survivor benefit, the right-holder is not clearly identified, the facts as they exist at the end of the taxation year do not permit the inclusion of the survivor benefit in computing a taxpayer's income.

However, respecting the subsequent year of payment of the amount by the Directorate to the now-identified right-holder, CRA stated:

[T]he words "in lieu of" include not only payments having the legal character of a superannuation or pension benefit, but also payments which constitute a reasonable substitute paid instead or in lieu of a superannuation or pension benefit. … [The subsequent year’s payment] is paid to the right-holder in lieu of a superannuation or pension benefit to which the right-holder would otherwise have been entitled, had it not been for the application of the UPA … [and] is to be included in the computation of the right-holder’s income for the year in which the DPBNR pays it to the right-holder.

Where the right-holder is an estate, it should include the survivor benefit under s. 56(1)(a)(i) in computing its income for the year of receipt – but with a deduction to it and an inclusion to its beneficiaries being applicable where those amounts are distributed in accordance with the usual ss. 104(6), (13) and (24) rules. The Directorate went on to state, respecting where the administration of the estate has been completed prior to the DPBNR being in a position to pay the amount:

[T]he CRA will not object to the beneficiaries of the estate who are entitled … to all or part of the survivor benefit amounts being considered to have received those amounts directly from the DPBNR. The same applies if an heir to such an estate has also been deceased for a period of time, and the executor of that heir’s estate had been discharged from that estate’s administration before the DPBNR was able to pay to that executor the amount due. If so, it is pursuant to subparagraph 56(1)(a)(i) that the amounts received or considered received by the beneficiary(ies) of the estate are to be included in computing the beneficiary(ies)’ income.

Words and Phrases

in lieu of

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Payment & Receipt	amount received in Year 2 in lieu of pension benefit includes source deductions in Year 1	352

12 April 2018 External T.I. 2016-0640651E5 F - Swiss Pension

a Canadian resident was not subject to Canadian tax on income accruing in a Swiss vested benefits policy

The Swiss pension system has three “pillars,” the second of which consists of pension funds (run by investment foundations) to which both employers and their employees are required to contribute. When a Swiss employee left for Canada, the Swiss legislation required that accumulated funds in the plan be transferred to a vested benefits policy (which would only pay benefits to the taxpayer once retirement age was reached), and upon the taxpayer’s return to Switzerland, the Swiss legislation required that the funds accumulated in the policy be returned to the second pillar pension plan of the taxpayer’s Swiss employer.

CRA considered that, based on its brief description, this policy likely qualified as a “superannuation or pension fund or plan.” Since such a plan is effectively only subject to tax on a cash basis under s. 56(1)(a)(i), the income accruing in the policy was not taxable during the taxpayer’s Canadian residency.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - superannuation or pension fund or plan	Swiss vested benefits policy was a “superannuation or pension fund or plan”	285

10 April 2014 External T.I. 2013-0515681E5 - Death of RPP Member-56(1)(a)

beneficiary dispute/renunciation

The Manitoba Pension Benefits Act (PBA) provides that notwithstanding any beneficiary designation under a registered pension plan, a deceased RPP member's spouse or common-law partner is entitled to the pension benefit. In the context of a dispute concerning who is the deceased RPP member's common-law partner at the time of death, CRA stated:

[T]he taxpayer who is legally entitled to receive and is paid a deceased RPP member's pension benefit is required to include the pension benefit in the taxpayer's income in the year received, in accordance with paragraph 56(1)(a)…. An exception to this requirement may apply where a taxpayer is legally entitled to renounce or disclaim a legacy.

19 March 2014 External T.I. 2014-0522671E5 - HK Pension and Tax Treaty

Hong Kong pension received by Canadian resident

S. 56(1)(a)(i) of the Act extends to benefits from a foreign pension plan that are attributable to services rendered while the individual was not a resident of Canada – so that periodic amounts and a lump sum payment from a Hong Kong pension plan of a former Hong Kong government employee who subsequently became a Canadian resident were taxable in Canada.

25 June 2012 External T.I. 2011-0398691E5 - Conversion of U.S. Traditional IRA into Roth IRA

An individual who converts a traditional US Individual Retirement Account ("IRA") to a Roth IRA is allowed under the Code to spread the resulting income inclusion over the following two taxation years.

CRA confirmed that there is no such allowance under Canadian tax law, and the entire converted amount is treated as a distribution from the IRA and will be included in the year of the conversion, pursuant to s. 56(1)(a)(i)(C.1). CRA stated:

Pursuant to paragraph 1 of Article XVIII of the Convention, amounts received from a traditional IRA by a Canadian resident may be taxed in Canada. However, as an exception, amounts that would be exempt from taxation in the U.S. if paid to a U.S. resident may not be taxed in Canada. In the case at hand, the 2010 conversion amount is not exempt from taxation in the U.S., as the taxation of this amount is simply being deferred. Consequently, the Convention does not apply to prevent the 2010 conversion amount from being taxed in Canada.

CRA noted, however, that "in many cases, Article XVIII of the Convention may apply to either defer or relieve taxation in Canada." Income Tax Technical News, No. 43 describes CRA's position on Roth IRAs in more detail.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118 - Subsection 118(7) - Pension Income		51
Tax Topics - Income Tax Act - Section 60.03 - Subsection 60.03(1) - Eligible Pension Income		51
Tax Topics - Treaties - Income Tax Conventions - Article 18		206

19 June 2012 External T.I. 2011-0407461E5 - Tax on 401(k) Transfer to IRA and IRA Withdrawal

A Canadian-resident taxpayer had contributed, through his US employer, to a 401(k) plan. Because the contributions preceded 1 January 2009, he could not deduct them from income under Art. XIII(3) of the Canada-US Convention, as that provision was not yet in force. The taxpayer now intends to transfer his entire 401(k) entitlement to a US Individual Retirement Account ("IRA"). The correspondent inquired whether amounts subsequently withdrawn from the IRA could be excluded from income given that his previous contributions represented amounts already included in his income.

CRA indicated that there was no such mechanism. The amounts received out of the IRA must be included in income pursuant to s. 56(1)(a)(i)(C.1).

3 March 2004 External T.I. 2003-004715 -

Upon the death of a U.S. citizen and resident, the Canadian-resident nephew receives a lump sum distribution in the amount of $100,000 in settlement of his beneficial interest in the IRA of the deceased. The nephew will be required to include the $100,000 amount of the distribution in his gross income, but will be entitled to a $40,000 deduction under s. 691(a) of the Internal Revenue Code equal to the amount of U.S. estate taxes attributable to that amount of income.

The amount to be included in the nephew's income under s. 56(1)(a)(i)(C.1) would be $100,000, i.e., the gross amount of the distribution.

16 January 1996 T.I. 952921 (Tax Window Files "401(k), Double Tax in Canada")

Where a 401(k) plan for a commuter who is resident in Canada and who is employed in the U.S., is funded only by employee contributions, distributions from the plan will be included in the individual's income in the taxation year in which they are received. "However, should it be reasonable to consider that a portion of the amount received from the Plan is derived from contributions which have been taxed, the Department will accept a reasonable breakdown based on the terms of the Plan, of the distribution between the taxable portion and the non-taxable portion."

27 October 1994 T.I. 942712 (C.T.O. "Deferral of Lump Sum Severance Payment")

If it is a term of her employment contract that an employee has the option to take a retiring allowance in instalments or in a lump sum and such option exercised prior to retirement or termination, she is taxable on receipt of the whole or part of the retiring allowance in the year as received. If such an option is not a term of the employment contract, the whole amount is taxable in the year of termination or retirement regardless of any accommodation made by the employer to pay the retiring allowance and instalments over more than one year.

20 November 1991 T.I. (Tax Window, No. 13, p. 9, ¶1601)

An amount received out of an IRA will represent a "superannuation or pension benefit" taxable under s. 56(1)(a)(i) regardless of the original source of the funds, except to the extent that the amount would not have been subject to tax in the U.S. if the recipient were resident there. In addition, the rollover pursuant to s. 60.01 may be available.

7 March 1991 T.I. (Tax Window, No. 1, p. 21, ¶1151)

Where the pension entitlement of a spouse under a registered pension plan is divided on the breakdown of marriage under the Family Law Act (Ontario), payments made from the plan to the non-member spouse will be included in the income of that non-member under s. 56(1)(a)(i).

8 September 89 T.I. (February 1990 Access Letter, ¶1097)

The payment of the portion of a registered pension plan to a non-member spouse pursuant to the laws of a province as a result of a marriage breakdown will be included in her income pursuant to s. 56(1)(a)(i).

88 C.R. - Q.5

Where a Canadian resident rolls a lump sum payment received out of a U.S. pension fund into an individual retirement account the lump sum received by him is included in income pursuant to s. 56(1)(a)(i). If he is then permitted a deduction under s. 110(1)(f), payments received out of the IRA will be included in his income under s. 56(1)(a)(i).

Locations of other summaries		Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 18		50

Clause 56(1)(a)(i)(C.1)

Locations of other summaries		Wordcount
Tax Topics - Income Tax Regulations - Regulation 6803	an IRA which is a custodial arrangement is included	205

Administrative Policy

29 October 2018 External T.I. 2018-0750411E5 - Transfer from an IRA to a RRSP

deemed withdrawal from IRA rather than subsequent actual withdrawal included in income per s. 56(12)

A Canadian citizen who was a U.S. long term resident under the U.S. expatriation rules was deemed for Code purposes to receive a taxable distribution of his entire interest in his IRA (the “Deemed Distribution”) immediately before his relinquishing of his green card and returning to Canada. When he then made an actual withdrawal of those amounts (the “Withdrawal”) in order to contribute them to his RRSP, they were not subject to further U.S. income tax.

CRA first noted that 2017-0682301E5 essentially indicated that that s. 56(12) deemed the Deemed Distribution to be includible in the taxpayer’s income under s. 56(1)(a)(i)(C.1) and that the Withdrawal would not be so includible if it did not exceed the Deemed Distribution (because it would not be “subject to income taxation” in the U.S. respecting s. 56(1)(a)(i)(C.1).

CRA concluded that the RRSP contribution did not generate a s. 60(j) deduction. The Withdrawal did not qualify as an “eligible amount” for s. 60.01 purposes because it was the amount of the Deemed Distribution (not the Withdrawal) that was included in the Taxpayer’s income under s. 56(12) and s. 56(1)(a)(i)(C.1). Conversely, the amount of the Deemed Distribution also was not an “eligible amount” as it is not a “payment received” for the purpose of s. 60.01.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 60.01	a departing U.S. resident who has a deemed inclusion for his IRA cannot then obtain a s. 60(j) deduction for contributing actual IRA withdrawals to his RRSP	298
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(j)	failure to qualify for 60(j) deduction where deemed withdrawal from IRA followed by actual withdrawal	153

29 January 2018 External T.I. 2017-0682301E5 - Deemed Distribution and Withdrawal from IRA

the deemed U.S. income inclusion from an IRA on renouncing U.S. citizenship or relinquishing a green card also is recognized for ITA purposes

The Taxpayer, a Canadian citizen, was considered under the Code to be a U.S. long term resident and to have received a taxable distribution of her entire interest in her IRA the day before she relinquished her green card. This “Deemed Distribution” was treated as an “investment in the contract” and the return of this investment after the expatriation date (as happened here, where the Taxpayer withdrew all the funds in the IRA, but not in excess of the Deemed Distribution (the “Withdrawal”)) after the expatriation date was not included in gross income. What is the ITA treatment of the Deemed Distribution and the subsequent withdrawal (the “Withdrawal”), whether in the same or a subsequent year? CRA responded:

[A]s the Taxpayer was a tax resident of Canada at the time of the Deemed Distribution, the amount of the Deemed Distribution would be included in computing the Taxpayer’s income for Canadian tax purposes pursuant to clause 56(1)(a)(i)(C.1) and subsection 56(12).

The U.S. tax paid by the Taxpayer on the Deemed Distribution would qualify as “non-business-income tax” within the meaning of subsection 126(7). Therefore the U.S. tax paid would factor into the computation of a foreign tax credit under subsection 126(1), provided all the conditions of that subsection were otherwise satisfied. …

Clause 56(1)(a)(i)(C.1) does not apply to include an amount in income to the extent the amount would not be subject to income taxation in the U.S. if the Taxpayer were resident in the U.S. … You have indicated that [the] return of the investment in contract would be excluded from income for U.S. income tax purposes. Based on this…the amount of the Withdrawal would not be included in computing the Taxpayer’s income … .

… [T]he same [would apply] if the Withdrawal took place in a year subsequent to the Taxation Year in which the Deemed Distribution took place … [or] if the Taxpayer was a U.S. citizen, rather than a green card holder, who renounced this US citizenship after becoming a tax resident in Canada … [subject to] subparagraph 4(a) of Article XXIV of the Convention … .

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 126 - Subsection 126(1)	deemed Code taxability of IRA on renouncing U.S. citizenship generally would generate an FTC to deemed Cdn-resident recipient	119
Tax Topics - Income Tax Act - Section 56 - Subsection 56(12)	deemed ITA inclusion on deemed distribution from IRA on renouncing U.S. citizenship or relinquishing green card	76

Subparagraph 56(1)(a)(iii)

Locations of other summaries		Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Tax Court of Canada Rules (General Procedure) - Section 89 - Subsection 89(1) - Paragraph 89(1)(a)	trust return not admitted at trial opening where no previous notice and not relied upon by CRA	211
Tax Topics - Income Tax Act - 101-110 - Section 107.1 - Paragraph 107.1(a)	s. 107.1(a) in effect produced a rollover on cash distribution of mooted benefits	175
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)	a distribution from a health and welfare trust to compensate for lost insurance coverage was not a taxable benefit as it did not come within s. 6(4)	304
Tax Topics - General Concepts - Stare Decisis	Supreme Court obiter accorded deference	129
Tax Topics - Income Tax Act - Section 9 - Compensation Payments	surrogatum principle references "why the compensatory amount was paid," and not confined to business receipts	191
Tax Topics - Statutory Interpretation - Specific v. General Provisions	termination payment that did not come within s. 6(4) should be treated as excluded from s. 6(1)(a)	141

Subparagraph 56(1)(a)(ii)

Cases

Doyle v. The Queen, 83 DTC 5383, [1983] CTC 339 (FCTD)

After one company was, upon the decision of the taxpayer, wound-up, he occupied substantially the same office at a second company which he controlled and to which the assets of the first company were transferred. It could not be said that he had genuinely retired from the first company, and thus a sum received from it was not a retiring allowance.

Lawson v. The Queen, 82 DTC 6331, [1982] CTC 368 (FCTD)

An amount received in settlement of a claim for dismissal without reasonable notice was received in respect of the termination of employment rather than in respect of retirement.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		21

Administrative Policy

29 April 1991 T.I. (Tax Window, No. 2, p. 21, ¶1217)

A retiring allowance may be paid in one or more instalments over any period of time and it will not be included in the employee's income until receipt.

Paragraph 56(1)(b) - Support

Cases

Tossell v. Canada, 2005 DTC 5365, 2005 FCA 223

Even if the separated husband of the taxpayer was obliged to pay the taxpayer child support at a rate of $3,000 per month, rather than the $2000 per month that he was actually paying, so that arrears were accumulating at a rate of $1,000 per month, a lump sum payment $36,000 made by him to her pursuant to minutes of settlement dated December 16, 1996 that stated that such sum would be paid retroactively in respect of a twelve month period, was not includable in her income under s. 60(b), or deductible by him under s. 56(1)(b). Although the Sills case (85 DTC 5096) stood for the proposition that an obligation to pay an amount on a periodic basis maintained that periodic character even if several such amounts were paid late in a single sum, there was insufficient support that the lump sum was intended to be for arrears of child support and the fact that it was referred to as being "retroactive" indicated that the minutes of settlement were intended to create a new legal obligation rather than to pay arrears of child support. Sharlow J.A. stated (at p. 5370):

"In my view, a written agreement or court order cannot be interpreted as obliging a person to pay arrears of child support unless, at the time the written agreement or court order is made, there is (1) an express or implied recognition of a pre-existing obligation to pay child support for a prior period, (2) an express or implied recognition of a complete or partial or partial breach of that obligation, resulting in arrears of child support, and (3) an obligation set out in the written agreement or court order to pay the arrears in whole or in part."

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56.1 - Subsection 56.1(4) - Support Amount		271

The Queen v. Jasper, 94 DTC 6519 (FCTD)

An amended written separation agreement between the taxpayer and her former husband providing for the payment by him to her of amounts equal to one-half of the monthly mortgage payment on the home that she was occupying with her children and that was to be conveyed to her and her children as tenants in common. Such payments were income receipts to her given that: they were not substantial in relation to her living standard; they did not bear interest, were not subject to acceleration and terminated when the children completed their education or no longer resided at the home, and were non-assignable by her; their payment did not release the husband from future obligations; and their amount was unrelated to the former husband's ownership interest in the property.

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Estoppel		109

The Queen v. Sigglekow, 85 DTC 5471 (FCTD)

The taxpayer's former husband was required by a court order to pay every week the sum of $20 "tax free" for the maintenance of her son. The receipt by the taxpayer of $20 per week was taxable to her, notwithstanding the uncertain meaning of the words "tax free", which her former husband had chosen to ignore.

The Queen v. Sills, 85 DTC 5096, [1985] 1 CTC 49 (FCA)

Where a separation agreement provides that alimony and maintenance payments are payable on a monthly basis, then the alimony and maintenance paid in order to carry out the terms of the separation agreement is received by the payee "pursuant" to the agreement notwithstanding that the payments are not made on time.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) - Paragraph 15(1)(b)		51
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(b)		51

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Payment & Receipt	payment references funds transfer	94
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(b)		94

Articles

Durnford, Toope, "Spousal Support in Family Law and Alimony in the Law of Taxation", Canadian Tax Journal, 1994, Vol. 42, No. 1, p. 1.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1) - Paragraph 15(1)(b)		0
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(b)		0

Paragraph 56(1)(c)

Cases

James v. The Queen, 85 DTC 5172, [1985] 1 CTC (FCTD)

Payments were found to be received pursuant to a Court order, "even though often late and sometimes for smaller amounts."

Paragraph 56(1)(d) - Annuity payments

Cases

The Queen v. Rumack, 92 DTC 6142 (FCA)

The taxpayer won a prize of $1,000 per month for life in a lottery sponsored by the Ontario Association for the Mentally Retarded, which funded the payment of the prize through the purchase of an annuity. The annuity constituted income to the taxpayer under s. 56(1)(d), but with a deduction under s. 60(a) for the capital portion.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 52 - Subsection 52(4)		27
Tax Topics - Income Tax Act - Section 54 - Adjusted Cost Base		65
Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business		66
Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement		66

Wilder v. Minister of National Revenue, 52 DTC 1014, [1951] CTC 304, [1952] 1 S.C.R. 123

The consideration received by the taxpayer for the sale of his business included an "annuity" during his lifetime of $1,000 per month. The monthly amounts received by the taxpayer were not income to him pursuant to s. 3(1)(b) of the Income War Tax Act, which provided for the inclusion in income of "annuities or other annual payments received under the provisions of any contract". Rinfret C.J. stated (p. 1015):

"... on the proper construction of section 3(1)(b) an annuity or annual payment, received under the provisions of a contract, such as the present one, in order to be taxable must be an annual profit or gain. The whole economy of section 3 - and for that matter all of the Income War Tax Act - is that it taxes income and not capital."

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Annuity		107

Administrative Policy

30 March 2017 External T.I. 2015-0609951E5 F - Article 18 of the Canada-Turkey Income Tax Convention

capital components are not deduction of cost

The definition of “annuity” in Art. 18 of the Canada-Turkey Treaty excludes “any annuity the cost of which was deductible for the purposes of taxation in the Contracting State in which it was acquired.” Although it might be argued that where a resident of Turkey has acquired a prescribed annuity contract, the portion of each annuity payment that would be treated in the hands of a Canadian resident as a capital payment comes within the quoted exclusion. However, CRA considered that this is not the case given inter alia that the capital portion does not represent a deduction for the cost of the annuity that is available when the annuity is acquired, so that each annuity payment is subject to Part XIII tax .

Locations of other summaries		Wordcount
Tax Topics - Treaties - Income Tax Conventions - Article 18	capital portion of s. 56(1)(d) is not excluded as an annuity under Canada-Turkey Treaty/RRSP annuity payments are pensions	382
Tax Topics - Other Legislation/Constitution - Federal - Income Tax Conventions Interpretation Act - Section 5 - Pension	RRSP annuity payments to Turkish resident were subject to Pt XIII tax as pension payments	44

20 May 1994 T.I. 940504 (C.T.O. "Structured Settlement under No-Fault Insurance")

Provided that all the requirements of the Insurance Act (Ontario) and relevant regulations are complied with, periodic payments made in settlement of damages for personal injury sustained in an automobile accident will be considered as non-taxable damages. Such a settlement will be considered a structured settlement as contemplated in IT-365R2, if the requirements in paragraph 5 are otherwise met.

29 January 1993 T.I. 9200395 (Tax Window, No. 27, p. 1, ¶2360)

Where a casualty insurer acquires an annuity contract to fund a series of periodic payments to compensate an injured party for lost income and acquires a second annuity contract providing for a series of periodic and balloon payments to fund future medical and personal care expenses, with both series of payments having a guarantee period and specified beneficiaries to whom the payments are directed in the event of the injured person's death before the end of the guarantee period, RC will require the first annuity contract to be non-commutable during the guarantee period or the life of the insured person. However, RC will consider it to be acceptable for the second annuity contract to be commutable after the death of the injured person if payments made under the annuity contract after death are directed to the casualty insurer.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c)		138
Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business		138
Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement		138

22 January 1993 T.I. 9203635 (Tax Window, No. 27, p. 1, ¶2360)

A structured settlement agreement that provides for balloon payments which the injured person can elect in the future to take either as a lump sum or as a further series of periodic payments (whose terms would be determined at the time of making the election) will not comply with IT-365R2 and, therefore, will not be exempt from tax.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c)		59
Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business		59
Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement		59

29 October 1992 T.I. 922997 (September 1993 Access Letter, p. 414, ¶C56-252)

Discussion of structured settlement by a self-insurer.

21 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 28, ¶1099)

Where an insurance company discharges its obligation to the insured under a disability rider in a life insurance policy by entering into an annuity contract, the annuity payments will be included in the individual's income under ss.12.2(3) or 56(1)(d). Although the monthly payments received by a beneficiary pursuant to a group term life insurance policy are not included in the deceased policy holder's proceeds of disposition for purposes of s. 148(1), the payments constitute annuity payments which must be included in the beneficiary's income under ss.56(1)(d) or 12.2(3).

ATR-40 (18 March 1991) "Structured Settlements"

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 3		15
Tax Topics - Income Tax Act - Section 9 - Exempt Receipts/Business		15
Tax Topics - Income Tax Act - Section 9 - Expense Reimbursement		15

80 C.R. - Q.26

Where payments for damages that have been awarded by a court or resolved in an out-of-court settlement, in respect of personal injuries or death, are paid on a periodic basis, the payments will not be considered to be annuity payments for the purposes of ss.56(1)(d) and 60(a).

Paragraph 56(1)(h) - Registered retirement savings plan, etc.

Paragraph 56(1)(l.1) - Idem [Legal expenses]

Cases

Scharf v. Freure Homes Ltd., 95 DTC 5074 (Ont. Ct. J. (G.D.))

A judgement called for the payment to the plaintiff of $400,000 in damages for wrongful dismissal, and costs of $75,000 plus GST of $5,250. Somers J. found that the defendant had property withheld from the portion of judgement attributable to costs.

Administrative Policy

8 October 1996 T.I. 962701 (C.T.O. "Loss of Employment, Mental Distress, Damages")

Although reimbursement of legal costs incurred in a wrongful dismissal action are taxable under s. 56(1)(l.1), a contingency fee payable by a client to his or her legal counsel is not an "award or reimbursement in respect of legal expenses" and, instead, is included in employment income under s. 56(1)(a)(ii), to the extent that the damages relate to the loss of employment.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Retiring Allowance		109
Tax Topics - Income Tax Regulations - Regulation 100 - Subsection 100(1) - Remuneration		14

Paragraph 56(1)(n) - Scholarships, bursaries, etc.

Cases

Simser v. Canada, 2005 DTC 5001, 2004 FCA 414

Funds received by the taxpayer, who was profoundly deaf and studying to be lawyer, pursuant to the Special Opportunities Grant for Disabled Students With Permanent Disabilities, in order to help defray the costs of real time captioning and sign language interpretation during his attendance at a bar admission course, constituted a bursary for purposes of s. 56(1)(n). The reservation of the grant for students who attained a satisfactory scholastic standard (in addition to being in need of financial assistance) took the grant out of the realm of mere "accommodation", the obligation of the taxpayer to spend the funds on specific services did not alter the nature of the grant, and the grant accorded with various definitions of "bursary" which evoked the notion of financial assistance for needy students.

Words and Phrases

bursary

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(u)		106

The Queen v. Savage, 83 DTC 5409, [1983] CTC 393, [1983] 2 S.C.R. 428

$300 received by an employee of a life insurance company pursuant to its policy of paying such amounts to all of its employees who passed the difficult Life Office Management Association courses was exempt as falling within the ordinary meaning of a "prize for achievement" in the life insurance business, there being no requirement that there have been a contest with others, and it being irrelevant that the amount in the absence of S.56(1)(n) would have been taxable as employment income.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)		83
Tax Topics - Statutory Interpretation - Redundancy/reading in words	exclusion in specific provision extended to general provision to avoid redundancy	32

The Queen v. McLaughlin, 78 DTC 6406, [1978] CTC 602 (FCTD)

An award of $10,000 made by a private trust to the Chairman of the Ontario Milk Marketing Board in respect of his contributions to Canadian agriculture was not a "prize" because it was not something that was striven for in a competition or a contest.

Locations of other summaries		Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Official Languages Act - Section 13		70

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		9
Tax Topics - Income Tax Act - Section 56 - Subsection 56(3)		175

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Substance	labels not deterinative	58
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		166
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		48

Administrative Policy

22 February 2012 External T.I. 2011-0424601E5 F - Scholarships and bursaries paid by a firm

potential qualification under s. 56(1)(n) if bursary paid by employer while student not a summer student or permanent employee

Does s. 6 or 56(1)(n) apply to a student, who has been hired by a professional firm for the summer, and then is provided with a $2,500 bursary by the firm for the following year of law-school studies after being offered, at the end of the summer, a permanent position to take effect after that year? CRA stated:

If the employer-employee relationship was not established at the time of the bursary payment and the amount was not described in subsection 6(3), the bursary would not be an amount received in respect of, in the course of, or by virtue of an office or employment. If none of the other exclusions in subparagraph 56(1)(n)(i) apply, the amount of the bursary would be included under that subparagraph.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)	employer-reimbursed tuition not considered for its training benefit if incurred before employment commenced	338

S1-F2-C2 - Tuition Tax Credit

Where a student receives free tuition or a reduction in tuition fees from an educational institution, the difference between the pre-determined tuition fee established by the educational institution for the course(s) and the amount paid by the student will generally be considered a scholarship or bursary for tax purposes and included in computing the student's income under subparagraph 56(1)(n)(i), unless the amount is included in the student's employment income or the employment income of the student's family member.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 118.5 - Subsection 118.5(1) - Paragraph 118.5(1)(a) - Subparagraph 118.5(1)(a)(i)		95
Tax Topics - Income Tax Act - Section 118.5 - Subsection 118.5(1) - Paragraph 118.5(1)(a) - Subparagraph 118.5(1)(a)(i)		252
Tax Topics - Income Tax Act - Section 118.5 - Subsection 118.5(1) - Paragraph 118.5(1)(a) - Subparagraph 118.5(1)(a)(ii)		134
Tax Topics - Income Tax Act - Section 118.5 - Subsection 118.5(1) - Paragraph 118.5(1)(b)		36
Tax Topics - Income Tax Act - Section 118.5 - Subsection 118.5(1) - Paragraph 118.5(1)(b)		120
Tax Topics - Income Tax Act - Section 118.5 - Subsection 118.5(1) - Paragraph 118.5(1)(b)		68
Tax Topics - Income Tax Act - Section 118.5 - Subsection 118.5(1) - Paragraph 118.5(1)(b)		36
Tax Topics - Income Tax Act - Section 118.5 - Subsection 118.5(1) - Paragraph 118.5(1)(b)		149
Tax Topics - Income Tax Act - Section 118.5 - Subsection 118.5(1) - Paragraph 118.5(1)(d)		92
Tax Topics - Income Tax Act - Section 118.61		9
Tax Topics - Income Tax Act - Section 118.81		9

S1-F2-C3 - Scholarships, Research Grants and Other Education Assistance

Scholarships and bursaries are amounts paid or benefits given to students to enable them to pursue their education. The term bursary is not defined in the Act; however, its meaning is broad enough to encompass almost any form of financial assistance paid to enable a student to pursue his or her education. Bursaries can include amounts paid to defray living expenses, as well as amounts that are directly related to the cost of the education. The extent to which a student has discretion over the use of funds received will not effect its categorization as a bursary (see Simser v. The Queen, 2004 FCA 414, 2005 DTC 5001).

Bursaries and scholarships normally apply to post-secondary education, but can also apply below that level (para. 3.8).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		25
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		220
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		121
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		49
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		64
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		103
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		69
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		80
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)		144
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n)		145

S1-F2-C3 - Scholarships, Research Grants and Other Education Assistance

Amounts awarded to an employee are considered employment income rather than scholarships or bursaries (paras. 3.11-3.13).
Amounts awarded prior to, but in anticipation of, an employment relationship are typically scholarships or bursaries (paras. 3.14-3.16).
An amount awarded in respect of an employee's family member will typically not be an employment benefit, and the full amount may be eligible for the full scholarship exemption under s. 56(3) (para. 3.17). Amounts for elementary or postsecondary school are always an employee benefit (para. 3.18).
Amounts to an employee who is not at arm's length (e.g. a shareholder) are employment benefits or shareholder benefits, as appropriate (para. 3.19-20).
Training allowances are scholarships or bursaries if granted by certain authorities, such as provincial student assistance plans (para. 3.21-3.22).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		25
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		220
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		120
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		49
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		64
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		103
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		69
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		80
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)		144
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n)		145

S1-F2-C3 - Scholarships, Research Grants and Other Education Assistance

3.25 ... [A] fellowship generally refers to an amount paid or benefit given for the purpose of advancing a person's education. As such, it is similar to a scholarship or bursary, with the distinction that a fellowship is generally awarded to a graduate student by a university, charity, or similar body for doctoral studies or post–doctoral work.

Amounts for advancing a person's education post-degree are either employment income under s. 5(1), fellowship income under s. 56(1)(n)(i), research grants under s. 56(1)(o), or some combination thereof. An amount will be:

employment income if it arises in a relationship that is, objectively, an employment relationship (paras. 3.28-3.29);
fellowship income if "the primary purpose of the award is to further the education and training of the recipient in his or her individual capacity, such as studying for a doctoral degree" (para. 3.31); and
a research grant if "the primary purpose of the award is to carry out research for its own sake" (para. 3.32).

An example of an award with a split purpose is a sabbatical leave fellowship, which may be partly for the recipient's education and partly for the research itself. The characterization and apportionment of multi-purpose fellowships may be left to the grantor (who is in the best position to know why it awarded the fellowship), but in any case must be reasonable (para. 3.33).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		25
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		121
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		120
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		49
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		64
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		103
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		69
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		80
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)		144
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n)		145

S1-F2-C3 - Scholarships, Research Grants and Other Education Assistance

The tax treatment of a student loan depends on whether it is a "forgivable loan" or a "repayable award." CRA describes the distinction in detail.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		220
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		121
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		120
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		49
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		64
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		103
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		69
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		80
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)		144
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n)		145

6 May 2009 External T.I. 2008-0295581E5 F - Bourses et aide financière aux médecins

specialized training grants made to unlicensed medical residents to encourage them to settle in remote areas were s. 56(1)(n) fellowships

Under various programs designed to encourage physicians to settle in remote areas of Quebec, some health and social services agencies in Quebec provide grants or financial assistance to practicing physicians and to medical students respecting (a) specialized training grants awarded to medical residents (with or without a licence) during the last two years of their specialty training, (b) grants to physicians concurrently both practising medicine and serving as medical residents (with or without a licence to practise) and (c) RAMQ [Régie de l'assurance maladie du Québec] scholarship for medical students. CRA stated:

[T]he amounts paid by the Agencies in the form of specialized training, professional development and scholarships paid by the RAMQ qualify generally as fellowships under paragraph 56(1)(n) as they allow medical students and residents (without a licence to practise) to pursue education and further training. These sums must be reported on a T4A slip … .

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(x)	s. 12(1)(x) inclusion of assistance to foreign doctors to become licensed so that they will practise in a remote area	64

20 June 1994 Internal T.I. 7-940939 -

Payments out of the net income of a trust to a university to be distributed as scholarships for students selected by the university, will be taxable to them in accordance with s. 56(1)(n) and not under s. 104(13), because the amount received by the student will be as or on account of a scholarship, and not trust income. On the other hand, where an irrevocable inter vivos trust is established to provide scholarship payments to beneficiaries who are children, grandchildren or great-grandchildren of the settlor, such beneficiaries will be taxable under s. 104(13) and will not be entitled to the $500 exemption under s. 56(1)(n).

3 December 1993 T.I. 932658 (C.T.O. "Allowances Paid by CIDA to Foreign Students and Trainees")

Amounts paid to individuals from developing countries in order to come to Canada to attend school full-time (usually for a period of 1 - 3 years) would be considered taxable income under s. 56(1)(n) to the extent the amount received exceeds $500. Such amount would include payment of all living, medical and travel expenses and all allowances.

20 August 1992, T.I. (Tax Window, No. 23, p. 22, ¶2160)

A grant made to enable an artist to undertake a specific artistic project will be included in income. However, a prize prescribed in Regulation 7700 will not be included in income.

6 April 1992 T.I. 920399 (March 1993 Access Letter, p. 69, ¶C56-215; Tax Window, No. 18, p. 22, ¶1859)

Amounts paid to students under Pacific Rim Educational Initiatives constitute scholarships or bursaries pursuant to s. 56(1)(n).

84 C.R. - Q.22

An employee will qualify for the $500 exemption only if the prize is awarded for the successful completion of a course of studies or for an achievement in a field of scientific or scholarly research carried on by the taxpayer.

IT-75R3 "Scholarships, Fellowships, Bursaries, Prizes, and Research Grants".

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		0
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)		0
Tax Topics - Income Tax Regulations - Regulation 7700		0

Articles

Mark Dumalski, Dimitri Sarabalos, "Are Payments to Research Assistants Tax-Free?", Canadian Tax Focus, Vol. 3, No. 2, May 2013, p. 11

The CRA's view is that an award involving a research component should be classified as follows:

1) if the primary purpose of the award is to further the education and training of the recipient, the award will be considered a fellowship (scholarship) (paragraph 3.31);

2) if the primary purpose of the award is to enable the recipient to carry out research for its own sake, the award will be considered a research grant (paragraph 3.32); and

3) if the research is conducted in the context of a traditional employment relationship as determined by the usual factors, the award will be employment income (paragraph 3.29).

...

DiMaria v. The Queen

(2008 TCC 114) stands for the proposition that an amount need not be awarded on the basis of academic achievement in order to be classified as a scholarship; nevertheless, it leaves open the possibility that some selection process or criteria may be necessary, notwithstanding that the payer is free to establish such criteria. In Okonski v. The Queen (2008 TCC 142), decided under the informal procedure, payments were found to be scholarships, notwithstanding that an unlimited number were available. In summary, it is not clear whether payments can be treated as scholarships if they are provided to all or most students in an academic program, as might occur in PhD programs.

Jack Bernstein, "Scholarships: The Enhanced Employee Incentive", CCH Tax Topics, No. 1909, 9 October, 2008

Paragraph 56(1)(o) - Research grants

Cases

Ghali v. Canada, 2005 DTC 5472, 2004 FCA 60

The taxpayer, an associate professor at the University of Laval, received a subsidy from the University during his sabbatical year (which was mandated by the collective agreement) towards the costs of his sabbatical plan which had as its goal the bridging of research underway in the metallurgical field at the University and at other research centres including the exploration of collaboration possibilities, and also entailed his giving a large number of lectures. The subsidies thus were "grants" (any form of financial assistance paid to a person by a public agency in order to achieve an objective of public interest) (p. 54891) and "research or ... similar work" ("a set of scientific, literary and artistic works and activities having as its purpose the discovery and development of knowledge") (p. 5482).

The research grants net of expenses were includible in the taxpayer's income under s. 56(1)(o).

Words and Phrases

research grant

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		109
Tax Topics - Income Tax Act - Section 56 - Subsection 56(3)		175

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Substance	labels not deterinative	58
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		166
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		300

Administrative Policy

31 July 2014 External T.I. 2013-0509291E5 - Research grants

reduction of faculty salary and receipt of research grant

A faculty member will forgo salary and instead receive a research grant to undertake a specific research project. The research activity may be a normal part of the individual's terms of employment or if the faculty member may be on a sabbatical leave.

CRA stated that the primary purpose of the grant must to carry out research, that when the member is "retained on part salary, the research project undertaken must not be the type of research work ordinarily expected of the faculty member as part of his or her normal employment duties," and that if the member forgoes a portion of the member's salary, there should be a commensurate reduction in normal employment duties. CRA then stated "when the requirements are met, certain amounts paid to faculty members under a program such as you described could be considered a research grant for purposes of paragraph 56(1)(o)… ."

S1-F2-C3 - Scholarships, Research Grants and Other Education Assistance

CRA adopts a definition of research set out in Ghali: "a set of scientific, literary and artistic works and activities having as its purpose the discovery and development of knowledge." Research Grants do not include:

research for the sake of developing the researcher's research skills;
awards for vague grants; or
generally speaking, the work of undergraduates.

If the term of the grant does not mention research, s. 56(1)(n) applies even if a great deal of research is in fact done.

Words and Phrases

research

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		25
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		220
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		121
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		120
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		49
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		64
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		103
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		69
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)		144
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n)		145

S1-F2-C3 - Scholarships, Research Grants and Other Education Assistance

Grants given to a person outside of a corporation's or university's own organization are considered to be research grants under s. 56(1)(o) regardless of whether the research belongs to the grantor or recipient (para. 3.61).

A grant to an employee may be a research grant, but only if the research is unrelated to the recipient's ordinary duties - for example, a grant to a faculty member on sabbatical (paras. 3.62-3.63).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		25
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		220
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		121
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		120
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		49
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		64
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		103
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		80
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)		144
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n)		145

S1-F2-C3 - Scholarships, Research Grants and Other Education Assistance

For the purposes of paragraph 56(1)(o), a research grant is not considered to be received at any time if all of the following circumstances apply:

The funds are made available to an individual who holds an academic appointment at a university, hospital, or similar institution, to enable the individual to carry on research or similar work;

the funds are paid directly to the university, hospital, or similar institution;

the funds are provided only to pay for the costs of the research project; and

the funds were not used by the individual and were not otherwise available for the personal benefit of the individual.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		25
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		220
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		121
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		120
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		49
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		64
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		69
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		80
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)		144
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n)		145

S1-F2-C3 - Scholarships, Research Grants and Other Education Assistance

Payments made out of a grant to a co-researcher are research grants under s. 56(1)(o) and payments to an employee are not. Payments to a student may be either research grants or employment income, depending chiefly on the extent to which the student is supervised - The more independently the student operates, the stronger the case for the student's remuneration falling under s. 56(1)(o).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		25
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		220
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		121
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		120
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		49
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		103
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		69
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		80
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)		144
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n)		145

S1-F2-C3 - Scholarships, Research Grants and Other Education Assistance

Travel expenses are typically allowable research expenses, but if the researcher establishes a temporary base away from home then the taxpayer may be considered to be residing there - in which case many expenses that would otherwise be travel expenses, such as food and rent, would become living expenses.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		25
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		220
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		121
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		120
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		64
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		103
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		69
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		80
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)		144
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n)		145

IT-75R3 "Scholarships, Fellowships, Bursaries, Prizes, and Research Grants".

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		0
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)		0
Tax Topics - Income Tax Regulations - Regulation 7700		0

Paragraph 56(1)(r) - Financial assistance

Administrative Policy

17 July 2015 External T.I. 2014-0517091E5 - Wage Subsidies

wage subsidies or supplements to disabled

Under a wage subsidy program, the delivery organization will provide wage subsidies to employers to assist with wage costs of hiring "barriered" clients, who are paid directly by the employer. In addition, the clients may also receive additional amounts paid directly from the delivery organization or paid to a third party for the benefit of the client, for living supports, dependent care, transportation, essential work supplies, personal grooming, food, and certifications and licenses. Does s. 56(1)(r) apply?

CRA indicated that where the funding provided through a program established under the Canada-XX Labour Market Development Agreement, appeared to be includible under s. 56(1)(r)(iii). Where the funding is provided under other programs as earning supplements under a project sponsored by a government in Canada to encourage individuals to obtain or keep employment, the amounts would be included in income under s. 56(1)(r)(i). Otherwise, the amounts could be considered social assistance and included in income under s. 56(1)(u).

17 July 2015 External T.I. 2014-0517081E5 - Assistance for individuals with disabilities

federal assistance to those with disabilities

Amounts received by individuals with disabilities under a program to replace the employment programs and services funded under Part II of the Employment Insurance Act (the "EI Act") and the employment programs targeting XXXXXXXXXX recipients, for communication, hearing and assistive tools, special assessments paid to third parties, payments relating to ergonomic equipment (such as special keyboards and chairs), and assistive technical training supports (such as speech recognition software). Are the amounts taxable to the recipient?

CRA indicated that where the funding is provided through a program that is established under the Canada-XX Labour Market Development Agreement, the amounts appear to be included under s. 56(1)(r)(iii). Where the funding is provided from other programs, the amounts would likely be considered social assistance under s. 56(1)(u), but would not be included in income if the assistance falls under one of the exemptions found in Regulation 233(2)

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(u)	federal assistance to those with disabilities	143

4 March 2015 Internal T.I. 2014-0527751I7 F - Soutien de revenu accordé aux individus

includes amounts received under the active employment measures of Emploi-Québec

After describing the active employment measures of Emploi-Québec and referencing the tests in s. 56(1)(r)(iii), CRA stated:

[W]e are of the view that the XXXXXXXXXX program comes within subparagraph 56(1)(r)(iii) and that the amount received by a taxpayer under this program must be included in his or her income under this subparagraph. This is also the conclusion…in the Michaud case.

S1-F2-C3 - Scholarships, Research Grants and Other Education Assistance

The deduction [under s. 110(1)(g) by way of s. 56(1)(r)] applies only to tuition assistance and not to other types of assistance a student may receive in connection with the student's training. The deduction is restricted to instances where:

the amount of the assistance is included in the student's income;

the student is not permitted to claim a tuition tax credit under subsection 118.5(1) for the tuition fees paid under the program; and

the amount is not otherwise deductible in computing the taxpayer's income for the year.

To the extent of any amounts or benefits repaid by the taxpayer which were previously included in income under paragraph 56(1)(r) and for which a deduction was not claimed under paragraph 110(1)(g), a deduction under subparagraph 60(n)(vi) is allowed in the year of repayment.

(However, s. 60(n)(vi) does not apply to repayments of employment insurance benefits.)

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		25
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		220
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		121
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		120
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		49
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		64
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		103
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		69
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(o)		80
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(n)		145

Paragraph 56(1)(u) - Social assistance payments

Cases

Simser v. Canada, 2005 DTC 5001, 2004 FCA 414

A Special Opportunities Grant for Disabled Students With Permanent Disabilities received by the taxpayer, who was permanently deaf and applied the grant to cover part of the costs of real time captioning and sign language interpretation while attending a bar admission course, was to be characterized as a bursary for purposes of s. 56(1)(n) rather than a social assistance payment for purposes of s. 56(1)(u). Nadon J.A. stated (at p. 5013) that:

"If the true purpose of a bursary is to provide financial assistance to students, then it makes no sense to exclude from the definition thereof funds awarded on condition that financial needs be assessed."

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(n)		128

Administrative Policy

17 July 2015 External T.I. 2014-0517081E5 - Assistance for individuals with disabilities

federal assistance to those with disabilities

Amounts received by individuals with disabilities under a program to replace the employment programs and services funded under Part II of the Employment Insurance Act (the "EI Act") and the employment programs targeting XXXXXXXXXX recipients, for communication, hearing and assisting tools, special assessments paid to third parties, payments relating to ergonomic equipment (such as special keyboards and chairs), and technical training supports (such as speech recognition software). Are the amounts taxable to the recipient?

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(r)	federal assistance to those with disabilities	144

29 July 2015 External T.I. 2015-0575631E5 - social assistance

potential exclusion of payments in kind

A social assistance organization may purchase items such as cookware, cutlery, furniture and food cards to assist its clients. Funds may also be provided sporadically during the year to assist in paying rent, to purchase clothes for a job interview and for other needs. Must the value of the non-monetary items be reported on a T5007 and what is meant by a "series of payments" for reporting purposes? CRA responded:

A non-monetary item provided to an individual could be a social assistance payment if a payment was made to obtain the item for the benefit of the individual. However, if no payment was made to obtain a non-monetary item given to an individual (for example, donated household goods or furniture), the value of the non-monetary item would likely not be considered a social assistance payment for the purpose of paragraph 56(1)(u)… .

After discussion the means test, and quoting Reg. 233(2) including the reference to ""series of payments," CRA stated:

[A] series of payments…is a number of similar payments made in a particular year to an individual under the same program of a government or other organization.

…[I]f an amount is considered social assistance…but a financial "means, needs or income" test is not used to determine eligibility when assisting a client, or the amount is excluded from the reporting requirements by subsection 233(2)…, the amount does not have to be reported on a T5007 and is not included in the recipient's income under paragraph 56(1)(u)… . [I]f it is not social assistance included in income under paragraph 56(1)(u), [it] would likely not be included in income of the client under any other provision of the Act.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 3	payments in kind by social assistance organization	81
Tax Topics - Income Tax Regulations - Regulation 233 - Subsection 233(2)	potential exclusion of payments in kind	245

14 February 2014 Internal T.I. 2013-0495661I7 - Taxability of payment from US charitable trust

financial assistance to former charity employee

Monthly allowances received by a former employee of a US charitable trust is not income to him given that they are "financial assistance is based on the individual's personal financial needs" so that "the amounts received from the Fund are likely received in the individual's personal capacity rather than by virtue of the individual's employment." However, "since the criteria of paragraph 56(1)(u) appear to have been met, the financial assistance should be included in the individual's net income under that paragraph and deducted under paragraph 110(1)(f)."

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b)	financial assistance to former charity employee	86

2 September 2011 Internal T.I. 2011-0419111I7 F - Programme de compensation du MESS

social assistance payments aggregating less than $500 not required to be included in income

After noting that payments made by Ministère de l'Emploi et de la Solidarité sociale (the "MESS") to individuals, who were homeless and receiving financial assistance of last-resort represented social assistance payments described in s. 56(1)(u), CRA stated:

ITR subsection 233(2) provides that a T5007 return does not have to be filed in certain circumstances, including where: the payment is paid as a part of a series of payments, the total of which in the particular year does not exceed $500 … .

Where a social assistance payment is not required to be reported in a T5007 return by reason of ITR subsection 233(2), the Canada Revenue Agency is of the view that the benefit does not have to be included in computing the recipient’s net income under paragraph 56(1)(u). In this case, it appears that ITR subsection 233(2) applies to amounts paid under the Program. In such a case, no source deduction would be necessary.

13 January 1992 T.I. (Tax Window, No. 15, p. 21, ¶1696)

Grants made under the Home Adaptions for Seniors Independence Program are includible under s. 56(1)(u).

16 August 1991 T.I. (Tax Window, No. 7, p. 16, ¶1394)

There is no provision in the Act which permits a deduction for the repayment of social assistance payments.

7 September 89 Memorandum (February 1990 Access Letter, ¶1121)

Payments by the Quebec government to low-income workers pursuant to the Parental Wage Assistance program constitute social assistance payments. Should a beneficiary have to reimburse some of the money received under the program, he would not be entitled to a deduction.

Paragraph 56(1)(v) - Workers’ compensation

Cases

Canada v. Whitney, 2002 DTC 7145, 2002 FCA 266

Amounts received by the taxpayer from her employer (the New Brunswick government) for a work-related injury, as required by a clause in the collective agreement, did not qualify as compensation received under an employees' compensation law notwithstanding that the collective agreement required that the injury be certified by the Workers' Compensation Board.

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - Interpretation Bulletins, etc.		59

Administrative Policy

22 February 2012 External T.I. 2011-0421671E5 F - Loss of retirement income benefit - death

inclusion under s. 56(1)(v), offsetting deduction under s. 110(1)(f)(ii), for Ontario WSIB lump sum on death

A lump sum received by the estate of a deceased injured worker from the Ontario Workplace Safety and Insurance Board would be included in income under s. 56(1)(v) (which might be the return of the estate or of the survivor) but deducted under s. 110(1)(f)(ii).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 110 - Subsection 110(1) - Paragraph 110(1)(f) - Subparagraph 110(1)(f)(ii)	deduction for WSIB compensation paid to estate of deceased injured worker	152

IT-202R2 "Employees' or Workers' Compensation

13 November 1992 T.I. 922953 (September 1993 Access Letter, p. 414, ¶C56-253)

Where parents providing services as trustees or attendants receive disability payments on behalf of a disabled worker, such amounts will be included in the disabled worker's income under s. 56(1)(v), and will be deductible to the payor under s. 110(1)(f)(ii).

Paragraph 56(1)(x) - Retirement compensation arrangement

Administrative Policy

8 June 1993 Memorandum (Tax Window, No. 32, p. 17, ¶2614)

Discussion of the options available in respect of the receipt of a lump sum from a U.S. pension plan.

6 August 1991 T.I. (Tax Window, No. 8, p. 7, ¶1421)

Where funds in a foreign pension plan are transferred directly to a registered pension plan in a lump sum, the transfer will not be taxable if the employee is a Canadian resident, the terms of the registered pension plan required the transfer and the transfer did not occur at the employee's request.

Subsection 56(2) - Indirect payments

Cases

Ludmer v. Attorney General of Canada, 2018 QCCS 3381

recurring fee reduction amounts received for no work were income and taxable under s. 56(2) when directed to controlled company

Two of the taxpayers (“Ludmer” and Steinberg”) were invested along with family, friends and acquaintances (all resident in Canada) in a BVI company (“SLT”) whose investments were managed by a non-resident hedge fund manager (“GAM”). When GAM proposed that SLT be merged with another fund managed by GAM in which non-residents were investors, it was agreed that, in light of the merged fund being subject to a higher level of fees than those to which SLT had been subject, that a Bermuda company owned indirectly by two Steinberg and Ludmer non-resident trusts would receive annual “fees” from the time of the 1994 merger that effectively represented a rebate of the higher fees imposed on the Canadian investors (although they were described to be consideration for services that, in fact, were never provided). This arrangement was replaced in 2007 by a new agreement in which the “fees” were paid directly to two newly-established Canadian-resident family trusts.

In finding that it was not unreasonable for CRA to assess on the basis that these payments were includible in the income of Steinberg and Ludmer under s. 56(2), Hamilton JCS stated (at paras. 614-615):

The GAM payments were not in the nature of a windfall. They were made pursuant to a contract. They were enforceable, organized, foreseeable and customary since 1995. … [T]he contracts provided for services to be provided as consideration for the payments. …

The argument put forward ... that they are “nothings” for Canadian tax purposes because they are merely reputational payments arising in a non-business circumstance may ultimately be upheld by the Tax Court, but it is not so clear at this stage as to render the CRA’s position unreasonable.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4) - Paragraph 152(4)(a) - Subparagraph 152(4)(a)(i)	nature of the legal advice relied upon was unclear	405
Tax Topics - Income Tax Act - Section 152 - Subsection 152(1)	improper advancing of “settlement” elements that were not sustainable	43
Tax Topics - Income Tax Act - Section 94.1 - Subsection 94.1(1)	equity-linked notes held in BVI company were portfolio investments held with a tax avoidance purpose, but were not subject to 7000(2)(d) interest accrual	540
Tax Topics - Income Tax Regulations - Regulation 7000 - Subsection 7000(2) - Paragraph 7000(2)(d)	mere possibility of locking in value accretion each year did not crystallize the maximum amount of interest respecting the year	454
Tax Topics - General Concepts - Negligence and Fiduciary Duty	damages awarded against CRA for inter alia making unreasonable reassessments	252
Tax Topics - Income Tax Act - Section 3 - Business Source/Reasonable Expectation of Profit	recurring fee reduction amounts received for no work were income from a source	299

Lambert v. Canada, 2005 DTC 5499, 2004 FCA 389

A taxable benefit was earned by the taxpayer when a corporation partly owned by him funded the costs of installing a new engine in an aircraft of a corporation wholly owned by the taxpayer.

James v. Canada, 2001 DTC 5075 (FCA)

no s. 56(2) inclusion to taxpayer if recipient of the transferred property had earned it rather than the taxpayer

Amounts that had been earned for work done by the taxpayer (James) for a corporation ("K.C.R. Investments") and that were paid by K.C.R. Investments at his direction to his common-law spouse ("Kirsten") were included in his income under s. 56(2).

Counsel for the taxpayer submitted that in order for s. 56(2) to apply, there must be evidence that the actual recipient of the amounts (Kirsten) would not be subject to tax on the amounts. The Court found that this submission represented a misinterpretation of the Winter case (90 DTC 6681), which simply recognized that s. 56(2) cannot apply to an amount that is properly taxable as income in the hands of the person who actually received it and that such an amount must be an amount that only the taxpayer is entitled to receive as income.

In this regard, after referring (at para. 36) to the fourth condition for the application of s. 56(2), that “the payment would have been included in the reassessed taxpayer's income if it had been received by him or her,” the Court stated (at paras. 46-47):

It is implicit in the fourth condition that the payment in question must be an amount that only the taxpayer, in this case Mr. James, is entitled to receive as income… .

…[T]he payments made by K.C.R. Investments Ltd. to Ms. Kirsten could not be remuneration for Ms. Kirsten's services and at the same time be remuneration for the services of Mr. James. … If the payments were remuneration payable to Ms. Kirsten for her services, subsection 56(2) would not require the payments to be taxed in the hands of Mr. James. However, if Ms. Kirsten did not provide services that would justify an entitlement to the payments in question, but Mr. James did, the inescapable conclusion is that subsection 56(2) must be applied to cause the payments to be taxable in the hands of Mr. James.

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Audit Procedure		99
Tax Topics - General Concepts - Evidence		50
Tax Topics - Income Tax Act - Section 165 - Subsection 165(3)	vacating not a remedy for lack of due dispatch	84

Neuman v. M.N.R., 98 DTC 6297, [1998] 1 S.C.R. 770

inapplicable to dividends on discretionary shares paid to inactive spouse

The taxpayer transferred his shares of a commercial real estate company to a newly-incorporated company ("Melru") in consideration for 1,285.714 Class G shares of Melru. He and his wife then paid $1 and $99 as the subscription prices for one common share and 99 Class F shares of Melru, respectively. Over a year later, his wife became the sole director and dividends of $5,000 and $14,800 were declared and paid on the Class G and Class F shares, respectively. The $14,800 then was lent by her to the taxpayer.

The articles of Melru left the amount of dividends to be declared on the Class F and G shares largely in the discretion of the director, except that: dividends on the Class G shares could not exceed a return of prime + 1% on their redemption price; and after dividends of $0.01 per share were paid on the Class F share, dividends of $0.01 per share were required to be declared on the common shares before further dividends on the Class F shares could be declared.

After noting that the only relevant distinction with the facts in McClurg was that, here, the wife of the taxpayer had made no contribution to the corporation (other than paying the consideration for her shares), and before going on to find that s. 56(2) did not apply to attribute any portion of the dividend income to the taxpayer, Iacobucci C.J. stated (at p. 6304):

"I am not aware of any principle of corporate law that requires in addition that a so-called 'legitimate contribution' be made by a shareholder to entitle him or her to dividend income and it is well accepted that tax law embraces corporate law principles unless such principles are specifically set aside by the taxing statute."

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - Provincial Law		53

Jones v. The Queen, 96 DTC 6016 (FCA)

The sale of a property by a corporation ("Ascot") owned by the taxpayer to the taxpayer's father for less than the property's fair market value did not result in the application of s. 56(2) to the taxpayer given that he genuinely believed that the property was sold at fair market value. The word "desire" in s. 56(2) established a subjective test of what it was that the taxpayer wanted to achieve.

Words and Phrases

desire

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - Resolving Ambiguity		71

Smith v. The Queen, 93 DTC 5351 (FCA)

benefit concurred in by taxpayer was not taxable under s. 56(2) as it was taxable to the recipient

At a time that the taxpayer was an officer, director, and 49% shareholder of an incorporated Ford dealership ("Holiday 77"), Holiday 77 transferred a substantial portion of its business assets to a new corporation ("Holiday 80") whose shares were owned as to 20% by the taxpayer and as to the remaining 80% by Ford Motor Company of Canada. During the several weeks following the transfer, while Holiday 77 was exclusively managed by Ford Credit Canada Ltd., and prior to the appointment of a receiver of Holiday 77, Holiday 80 under the taxpayer's managment entered into various transactions whose effect was to reduce liabilities of Holiday 77 (so that effectively assets of Holiday 80 were misappropriated in favour of Holidcay 77).

Mahoney J.A. analysed the potential effect of s. 56(2) on the basis that the taxpayer was the taxpayer referred to therein, Holiday 77 ws the other person on whom benefits were conferred and Holday 80 was the source of the benefits. He found that because the amounts were clearly subject to tax in Holiday 77's hands, s. 56(2) could not be invoked by the Minister in reassessing the taxpayer. Before reaching this conclusion, he indicated his agreement with a statement by the trial judge that "the concurrence or participation of the taxpayer to the conferring of the benefit need not be active. It may well be passive or implicit and can be inferred from all the circumstances ... " and that this condition was satisfied here given that the taxpayer's exercised control over Holiday 80.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 40 - Subsection 40(2) - Paragraph 40(2)(g) - Subparagraph 40(2)(g)(ii)		37

Dixon v. Deputy Attorney General of Canada, 91 DTC 5584 (Ont HCJ.)

An allegation of the Crown that a corporation had knowingly sold land at a substantial undervalue to a corporation half-owned by its president, if established would indicate the conferral of a benefit under s. 56(2) on the president because a direct payment of the benefit to him would have been included in his income under s. 6(1)(a).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 232 - Subsection 232(1) - Solicitor-Client Privilege		158
Tax Topics - Income Tax Act - Section 251 - Subsection 251(1) - Paragraph 251(1)(c)	common directing mind	73

The Queen v. Fairey, 91 DTC 5230 (FCTD)

The taxpayer's employer, the Cancer Control Agency of British Columbia, was required by statute to deduct an amount from the taxpayer's monthly salary and pay the amount over to a pension fund operated under the provisions of that statute. Muldoon J. found that the taxpayer had concurred in such payment for purposes of s. 56(2) "because in order to accept the employment, the employee must accept the mandatory conditions of employment" (p. 5234) including, in this case, the pension arrangements.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		70

Mcclurg v. Canada, 91 DTC 5001, [1990] 3 S.C.R. 1020

Mr. McClurg and Mr. Ellis each owned 400 voting and participating Class A shares and 37,500 Class C non-voting preference shares in a trucking company and Mrs.McClurg and Mrs. Ellis each owned 100 non-voting Class B shares which had a paid-up capital of $1.00 per share and were participating where so authorized by unanimous consent of the directors (who were their husbands). Each of the three categories of shares was entitled to receive dividends exclusive of the other classes.

Messrs. McClurg and Ellis declared annual dividends of $20,000 on the Class B shares, but none on the Class A's. S.56(2) did not apply to redistribute $8,000 (= $10,000 x 400/500) of the $10,000 dividend received by Mrs. McClurg to her husband. Dickson, C.J. stated:

"The purpose of s. 56(2) is to ensure that payments which otherwise would have been received by the taxpayer are not diverted to a third party as an anti-avoidance technique. This purpose is not frustrated because, in the corporate law context, until a dividend is declared, the profits belong to a corporation as a juridical person ... Had a dividend not been declared and paid to a third party, it would not otherwise have been received by the taxpayer."

In addition, having regard to the commercial realities of the particular transaction, Mrs. McClurg had played a vital role in the financing of the formation of the company and the payments to her therefore "represented a legitimate quid pro quo and were not simply an attempt to avoid the payment of taxes".

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - Resolving Ambiguity		60

Winter v. The Queen, 90 DTC 6681 (FCA)

An individual ("Outerbridge") had a company controlled by him ("Littlefield") sell shares of another corporation ("Harvey") to his son-in-law for a sale price that was less than their fair market value. The difference between the fair market value of the shares of Harvey and their sale price was included in Outerbridge's income pursuant to s. 56(2).

Marceau J.A. found that although "when the doctrine of 'constructive receipt' is not clearly involved, because the taxpayer had no entitlement to the payment being made or the property being transferred, it is fair to infer that subsection 56(2) may receive application only if the benefit conferred is not directly taxable in the hands of the transferee" (p. 6684), in this case it was clear that the son-in-law (who held 0.01% of the shares of Littlefield) entered into the transaction qua son-in-law and not qua shareholder of Littlefield, so that the son-in-law could not have been assessed with respect to the transaction under s. 15(1). Accordingly, s. 15(1) did not override s. 56(2).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)	s. 56(2) applied to taxpayer rather than 15(1) to son-in-law as de minimis shareholder	70
Tax Topics - Income Tax Act - Section 245 - Subsection 245(2)	specific provisions applied before GAAR	96

R. v. Century 21 Ramos Realty Inc., 87 DTC 5158, [1987] 1 CTC 340 (Ont.C.A.)

S.56(2) applied when a mortgage owing to a company owned by the individual accused ("Ramos") was discharged and replaced by a mortgage owing to a second company ("409668") owned by Ramos. The entry made by 409688's accountant ("Mr. Mosey") on the books of 409668 was: Dr. Accounts receivable - $75,000; Cr. Amount due to shareholder - $75,000. "It was only in April, 1980, when Ramos informed Mr. Mosey that the mortgage was owned by him personally and the financial statement of 409668 was finalized, that Ramos had irrevocably made the mortgage his own. The appropriation of the mortgage occurred, therefore, in 1980."

Locations of other summaries		Wordcount
Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Subsection 15(1)		45
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)	benefit based on actual rather than subjective value	91

Boardman v. The Queen, 85 DTC 5628, [1986] 1 CTC 103 (FCTD)

The Saskatchewan Court of Queen's Bench pursuant to s. 22 of the Married Women's Property Act (Sask.) directed the Registrar of Land Titles to transfer title to two houses, then held by a company ("Saskan") which was owned by the taxpayer, to the taxpayer's divorced wife. Although counsel for the taxpayer had objected to an order for transfer of the property, he had asked that if such a transfer order were to be made it should be directed to the Registrar. In addition, the taxpayer had taken no action to have Saskan object to the transfer of the houses, and for these two reasons he had concurred in the transfer. There was a "benefit" to him because his property might have been ordered to be transferred instead of that of Saskan. S.56(2) accordingly included the value of the equities of redemption of the houses in his income.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 246 - Subsection 246(1)		67
Tax Topics - Income Tax Act - Section 69 - Subsection 69(4)		32

The Queen v. Hoffman, 85 DTC 5508, [1985] 2 CTC 347 (FCTD)

The defendant's Canadian employer deducted amounts from his salary and remitted them to its U.S. parent pursuant to an agreement between the parent and the I.R.S. which provided inter alia for obligatory social security contributions by U.S.-citizen employees of the parent's foreign affiliates. Rouleau, J. held that the "defendant's silence, over the course of several years, as to the contractual arrangement between [the U.S. parent] and the U.S. government constituted concurrence in the transfer of the withheld amounts, notwithstanding the fact that the defendant was not a party to the contract." The remitted social security payments accordingly were included in his income by virtue of s. 56(2) (as well as by virtue of s. 5(1)).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 126 - Subsection 126(7) - Non-Business-Income Tax		45
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		65
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(m)		25
Tax Topics - Statutory Interpretation - Interpretation Bulletins, etc.		17

De Groote v. The Queen, 85 DTC 5008, [1985] 1 CTC 687 (FCTD)

S.56(2) did not apply to a payment of dividends since the payor corporation, instead of paying the dividends to the beneficial owner of shares pursuant to the direction of the registered owner, paid the dividends to the registered owner who then made payment to the beneficial owner.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(4)		92
Tax Topics - Income Tax Act - Section 82 - Subsection 82(1) - Paragraph 82(1)(a)	no longer beneficial shareholder	74

The Queen v. Chrapko, 84 DTC 6544, [1984] CTC 594 (FCTD), rev'd 88 DTC 6487, [1988] 2 CTC 342 (FCA)

The Ontario Jockey Club deducted from each pay cheque that it paid to a race track cashier the amount of cash shortages due to errors made by him. Since under the collective agreement, the appellant cashier "'was entitled only to salary at the calculated rate less cash shortages, the amounts of such shortages cannot be regarded as payments or transfers of property made with the concurrence of the Appellant to his employer. They were never his to pay or transfer in the first place.'"

Locations of other summaries		Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Federal Court Rules - Rule 420 [Amendment of Pleadings]		36
Tax Topics - Income Tax Act - Section 67		69

Barbeau v. The Queen, 81 DTC 5379, 84 DTC 6148, [1981] CTC 496 (FCTD)

Commissions paid by a company to a "technical and financial advis[ory]" company owned by the taxpayer's family were taxable to him. The commissions were referable to the skill of the taxpayer (who remained an employee of the company) in purchasing lumber, the level of his salary paid to him by the company appeared to indicate that it was reduced by the commissions paid to the family company, no services were performed by the family company in addition to those performed by the taxpayer, and the taxpayer was unable to prove the existence of any contract whereby the company hired the family company to purchase lumber.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 177 - Subparagraph 177(b)(iv)		82

Champ v. The Queen, 83 DTC 5029, [1983] CTC 1 (FCTD)

The Class "A" voting shares of a company, which shares were owned by the taxpayer, had the same rights attached to them as the Class "B" voting shares which were owned by his wife. It was held that since the Class "A" and "B" voting shares were entitled to share in dividends rateably, there had been a transfer of property under S.56(2) from the taxpayer to his wife when the company, which was controlled by the taxpayer, declared and paid dividends on the wife's shares but not on the husband's.

Cox v. The Queen, 82 DTC 6287, [1982] CTC 322 (FCTD)

Where executors of an estate conveyed land to the taxpayer and his wife jointly in satisfaction of a quantum meruit claim which the taxpayer had brought against the executors for the value of services performed by him, the full value of those services constituted income to the taxpayer notwithstanding the form of conveyance.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 9 - Compensation Payments		84

Fraser Companies, Ltd. v. The Queen, 81 DTC 5051, [1981] CTC 61 (FCTD)

Substantial interest-free loans were made by a New Brunswick pulp company to a subsidiary that was exempt from taxation by virtue of its status as a "foreign business corporation". Interest income earned on the loaned money by the subsidiary was not attributed to the parent because:

S.56(2) applies only to a "payment or transfer" of property, not to a loan;
even if S.56(2) applied to loans, it does not attribute the income generated by the borrowed moneys to the lender;
commercial contracts, by their nature, do not result in the conferral of a "benefit";
the funds loaned by the parent were not obtained from a taxable source but, rather, from a tax-free capital disposition.

Locations of other summaries		Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Federal Court Rules - Rule 413(1)(a)		65
Tax Topics - General Concepts - Tax Avoidance		38
Tax Topics - Income Tax Act - Section 56 - Subsection 56(4)		20
Tax Topics - Statutory Interpretation - Interpretation Act - Section 14		68

Murphy v. The Queen, 80 DTC 6314, [1980] CTC 386 (FCTD)

S.56(2), unlike S.74(1) does not refer to property being transferred "either directly or indirectly by means of a trust or by any other means whatever". Doubts accordingly were expressed as to whether the language of S.56(2) was broad enough to cover, as contended by the Crown, a variation approved pursuant to the Variation of Trusts Act (Ontario) whereby the plaintiff's vested right to receive income from a trust was foregone, and a discretionary trust was created whose beneficiaries included the plaintiff's wife. The Crown had contended that there had been a transfer of property to the wife instead of simply to the discretionary trust.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property		44
Tax Topics - Income Tax Act - Section 74.1 - Subsection 74.1(1)		93

McClain Industries of Canada Inc. v. The Queen, 78 DTC 6356, [1978] CTC 511 (FCTD)

When the vendor shareholders of a company agreed to assign unpaid accrued management commissions to the purchaser, the amounts of the commissions which previously had been owed to them by the company were included in their income pursuant to s. 56(2).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(e)		97

Perrault v. The Queen, 78 DTC 6272, [1978] CTC 395 (FCA)

It was indicated, obiter, that it was doubtful that s. 56(2) could be applied to the payment of a dividend which was included in the income of the recipient under the statutory predecessor of s. 82(1)(a), before making a deduction under the predecessor of s. 112(1).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)		112
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28)		30
Tax Topics - Income Tax Act - Section 84 - Subsection 84(2)		52

Nelson v. The Queen, 74 DTC 6266, [1974] CTC 360 (FCA)

Although it was the intention of the four related shareholders of a company that father hold 100 voting participating shares and each of his three sons hold 100 non-voting participating shares, at the time of the payment by the company of a $1,000 dividend to each of the four shareholders the three sons (due, in part, to an oversight of the company's solicitor) held one voting participating share of the company. It was held that "each of the four shareholders was entitled to the $1,000.00 actually paid to him by the company either because the 96 shares issued to the appellant as part of the consideration for the partnership property were held by the appellant on a resulting trust for the members of the partnership in equal shares, or because the agreement between them called for them to have equal equity shareholdings in the company and to share equally in any divisions of the profits of the company". S.56(2) accordingly did not apply to include approximately 97% of the dividend in the income of father.

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Effective Date		185

The Queen v. Quinn, 73 DTC 5215, [1973] CTC 258 (FCTD)

Under a contract with the Canadian Scholarship Trust Fund it was agreed that interest on funds deposited by the taxpayer would be transferred to the Trustee on the maturity of the plan, to be applied to the education costs of the taxpayer's son if certain conditions were met, or otherwise for the benefit of other beneficiaries. Since the transfer of accrued interest did not occur until the maturity or termination of the plan, s. 56(2) did not apply to attribute accrued interest to the taxpayer in a year prior to maturity.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 12 - Subsection 12(1) - Paragraph 12(1)(c)		85
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2)		94

Administrative Policy

8 June 2018 Internal T.I. 2017-0683021I7 - Assignment of capital interest in a trust

potential application of s. 56(2) to income distribution to non-qualifying transferee of trust interest

As a discretionary irrevocable personal family trust, which had non-resident beneficiaries (Y and Y’s spouse (Z)), was approaching the 21-year deemed realization date, its trustees resolved to distribute an equal share of the Trust’s assets to each of Y and Z to the complete exclusion of any other beneficiary (the “vesting”). After the vesting, Y and Z assigned their respective capital interests in the Trust under s. 85(1) to an unlimited liability company (“ULC”).

CRA found that ULC did not become a beneficiary under the Trust as the Trust indenture defined “Beneficiary” to mean Y, Y’s spouse (Z) and Y’s issue, and the trustees were not empowered to vary the Trust or to add new beneficiaries. This meant that taxable dividends paid by the Trust to ULC were includible in the income of Y and Z under s. 104(13), i.e., were subject to Part XIII tax under s. 212(1)(c).

If Y and Z argued that s. 104(13) did not apply to them because no amount was payable to them in the year, CRA would apply s. 56(2) or (alternatively) s. 105(1) to include the dividend amounts in their income – but without any s. 104(6) deduction to the Trust.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(13)	purported drop-down of trust interests to an excluded beneficiary resulted in s. 104(13) inclusions to transferors	327
Tax Topics - Income Tax Act - 101-110 - Section 107 - Subsection 107(5)	purported drop down of trust interests by non-resident beneficiaries to ULC was ineffective so that s. 107(2.1) applied to subsequent purported asset distribution to ULC	186
Tax Topics - Income Tax Act - 101-110 - Section 105 - Subsection 105(1)	potential application of s. 105(1) to income distribution to non-qualifying transferee of trust interest	265
Tax Topics - Income Tax Act - Section 248 - Subsection 248(25) - Paragraph 248(25)(a)	para. (a) refers to beneficiary in ordinary sense - and does not include assignee	56

28 October 2016 External T.I. 2016-0654331E5 F - Transfer of rights to income

s. 56(2) could apply to shareholder of purchaser of lands if vendor did not pay FMV consideration for retaining rights to rents

Upon a sale by A of leased land to a non-arm’s length corporation (Corporation A) in which A did not hold any shares, A and Corporation A agreed to a redistribution of income in which Corporation A undertook to pay to A all the related rental income. Would s. 56(2) apply? After finding that the rentals received by Corporation A would be included in its income under s. 56(4) (so that the amount otherwise included in the income of A under s. 9 would be excluded from A’s income), CRA went on to state:

[A] shareholder of Corporation A could have been directed to give the right to income to A at a value less than its fair market value. …[T] he shareholder may have desired to benefit A. Thus, all the criteria for taxation of the shareholder of Corporation A under subsection 56(2) may be satisfied if the right to income was not disposed of for consideration equal to its fair market value.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 9 - Nature of Income	where rental lands purchased subject to obligation to pay the rents to vendor, rents did not have quality of income to purchaser under s. 9	159
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Incurring of Expense	where rental lands purchased subject to obligation to pay the rents to vendor, no income inclusion and deduction of the rents by the purchaser under ss. 9 and 18(1)(a)	83
Tax Topics - Income Tax Act - Section 56 - Subsection 56(4)	where rental lands purchased subject to obligation to pay the rents to NAL vendor, s. 56(4) trumps s. 9 to include rents in purchaser’s income	157

6 December 2016 External T.I. 2016-0666841E5 F - Sale of property for POD less than FMV

potential application to immediate shareholder re benefit on indirect shareholder

Opco’s shares are held as to 40%, 40% and 20% by Holdco A, Holdco B and Holdco C, which are wholly owned by three individual shareholders (A, B and C), who deal with each other at arm’s length. “None of the shareholders controls Opco in any manner whatsoever.” Opco disposes of a condo to B's child for proceeds equal to half of its fair market value.

After discussing the potential application of ss. 15(1.4)(c) and 246(1), CRA stated:

In order to respond to a question on subsection 56(2), it would be necessary to know who gave the instructions or with whose concurrence the disposition of the condominium unit occurred. Since Holdco B would have been taxed on the benefit under subsection 15(1) if it had received it directly, subsection 56(2) could also apply in respect of Holdco B if the conditions for its application were satisfied. On the other hand, if the benefit had been granted by Opco in accordance with B's instructions or with B’s concurrence…all these facts should be examined to determine whether B should have included an amount in B’s income if Opco had made the transfer directly to B. If that were the case, subsection 56(2) would apply.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.4) - Paragraph 15(1.4)(c)	application to Holdco shareholder of Opco where Opco conferrred a benefit on child of Holdco's shareholder	200
Tax Topics - Income Tax Act - Section 246 - Subsection 246(1)	s. 246(1) applicable to indirect shareholder benefit if direct shareholder influenced the benefit conferral	193

14 March 2016 External T.I. 2016-0626781E5 - Neuman Type Situation

s. 56(2) likely non-applicable where spouse subscribes nominal consideration for Opco shares and receives a large discretionary dividend

The only issued and outstanding share of Opco (which has retained earnings of $500,000) is 1 Class A common share, with a fair market value of $1,000,000 owned by Mr. A. Opco issues to Mrs. A, for nominal consideration, 1 non-voting Class B preferred share, which is redeemable and retractable “for the fair market value for which it is issued” and entitled to discretionary dividends as and when declared.

In Scenario 1, Opco immediately declares and pays out a $100,000 dividend on the Class B preferred share, which would have the effect of reducing the FMV of Opco and the 1 Class A common share by the same amount.

In Scenario 2, Opco does not declare and pay the $100,000 dividend until after it has earns an additional $100,000 of income, and the FMV of Opco after the dividend is at least $1,000,000.

What would be the consequences for Opco and its shareholders of such issuance and dividend? CRA responded:

Consistent with… Neuman….generally, subsection 56(2) will not apply to arrangements involving the payment of dividends by a corporation, provided that the applicable taxpayer does not have a pre-existing entitlement to the dividends and provided that proper consideration was given for the shares when issued. …

While we have considered the application of subsection 245(2) in respect of the Neuman type income splitting arrangements in the past and have taken the position that GAAR does not apply, we have also specifically stated that this comment regarding the non-application of GAAR relates only to the Neuman case.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)	s. 15(1) might apply where spouse subscribes nominal consideration for Opco shares and receives a large discretionary dividend	214
Tax Topics - Income Tax Act - Section 246 - Subsection 246(1)	Kieboom treated as entailing disposition of right to receive dividends	316
Tax Topics - Income Tax Act - Section 73 - Subsection 73(1)	spousal rollover for Kieboom disposition of economic interest	68

24 June 2015 External T.I. 2015-0575911E5 F - Benefit to shareholder or conferred on a person

benefit conferred on spouse of individual shareholder of parent

Corporation A, is wholly owned by Holdco, which has equal unrelated Shareholders 1, 2, 3 and 4. Corporation A disposes of a capital property to the spouse (who is not herself a shareholder) of Shareholder 4 at a price which is determined to be less than the property's fair market value. What are the consequences? After discussing the potential application of s. 15(1.4)(c), CRA stated (TaxInterpretations translation):

Alternatively…the difference between the fair market value of property transferred and the consideration received by Corporation A could be included in computing the income of Holdco pursuant to subsection 56(2) to the extent that it was possible to demonstrate that a payment or transfer of property (the capital property) was made by Corporation A pursuant to the direction of, or with the concurrence of, Holdco, to the spouse of Shareholder 4…and was desired by Holdco to be conferred on the spouse...and to the extent that a payment or transfer of property would be included in the income of Holdco if such payment or transfer had been made by Corporation A to Holdco. [F]or example, it could be argued that a payment or transfer of property from Corporation A in favour of Holdco would be required to be included in computing the income of Holdco by inter alia subsection 15(1). Furthermore…it appears possible that the difference….could be included in computing the income of Shareholder 4.

See summaries under s. 15(1.4)(c) and s. 246(1).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1.4) - Paragraph 15(1.4)(c)	benefit only conferred on one shareholder (the husband) if wife of one of four sibling shareholders receives benefit	303
Tax Topics - Income Tax Act - Section 246 - Subsection 246(1)	benefit conferred on spouse of individual shareholder of parent	137

S2-F3-C1 - Payments from Employer to Employee

directed employment payment

1.8 A payment from an employer that is deemed [by s. 6(3)] to be employment income is included in an employee's income…[when] the amount is paid or transferred to another person for the benefit of the employee or such other person, at either the employee's direction or with the employee's agreement (see subsection 56(2))

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		104
Tax Topics - Income Tax Act - Section 6 - Subsection 6(3.1)		164
Tax Topics - Income Tax Act - Section 6 - Subsection 6(3)		65
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(f)		164

10 April 2014 External T.I. 2013-0514321E5 - Donated vacation

donated vacation/no double taxation

Employees, who are otherwise entitled to convert their vacation leave to cash, may donate a portion of their annual vacation entitlements for use by other employees ("donees") who have exhausted their vacation entitlements due to personal or family hardship. CRA stated:

[W]here a donor directs or concurs that his or her vacation be transferred to a donee, subsection 56(2) of the Act will apply to include the vacation amount in the income of the donor to the extent that it would have been if the donor had converted his or her vacation to cash. The amount should be included in the income of the donor in the year the donee takes the vacation….

After finding that the donated vacations likely would not be an employment benefit to the donees, CRA went on to state:

[I]t is the practice of the Canada Revenue Agency not to assess the same income twice. Accordingly, even if it is determined that paragraph 6(1)(a)… does apply [to the donee], the amount would not be required to be included in the donee's income as long as it was included in the donor's income under subsection 56(2)… .

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)	donated vacation/no double taxation	162

13 March 2014 External T.I. 2013-0510791E5 - Non-cash long-service award and cash donation

employee-directed cash donation in lieu of long-service award

Will an employee realize a taxable benefit upon foregoing the receipt of a non-cash gift valued over $500 in recognition of long service and directing the employer to make a cash gift of a specified amount to a specified registered charity? CRA stated:

[W]here a taxpayer directs that an amount to be received from an office or employment be paid directly to a charity, subsection 56(2)… will apply to include that amount in the income of that taxpayer to the extent that it would have been if it were received by the taxpayer. … Therefore, in light of the fact that the first $500 of a non-cash long-service award would have been non-taxable if it were received by the employee, it is our view that only the amount of the donation that exceeds $500 would be required to be included in the employee's income.

11 March 2014 Internal T.I. 2013-0513221I7 F - Stock options

s. 56(2) benefit where corporation implicitly consented to consultant's options being issued by client directly to its shareholder

Publico determined to grant stock options to its directors and consultants, as a result of which a private corporation ("Corporation") was entitled to receive a grant of options. However, such options instead were granted directly to Mrs. Y, the sole shareholder of Corporation, who subsequently exercised and sold the acquired Publico shares, reporting a capital gain.

After finding that s. 56(4) applied to Corporation, CRA found in the alternative that s. 56(2) also would apply on the basis that the issuance of the common shares of Publico on exercise would be a payment for s. 56(2) purposes, and passive or implicit consent of Corporation to the conferral of the benefit could be inferred given that it did not stand on its right to receive the stock option benefit, which would have been included in its business income.

Such income inclusion to Corporation did not detract from there also being a taxable benefit to Mrs. Y under s. 15 (or 6(1)(a), if it was received by virtue of employment).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)	double income inclusion under s. 56(2) or (4) to consulting corporation, and under s. 15(1) to its shareholder, where consultant's options issued directly by client to shareholder	109
Tax Topics - Income Tax Act - Section 56 - Subsection 56(4)	implicit transfer by corporation when stock options earned by it were issued directly by its client to its shareholder	169
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28)	s. 248(28) does not prevent a double income inclusion to corporation under s. 56 and shareholder under s. 15	218
Tax Topics - Income Tax Act - Section 9 - Timing	no s. 9(1) income inclusion from consultant being granted stock options until exercise	216
Tax Topics - General Concepts - Fair Market Value - Options	stock options with no in-the-money value could have nil FMV	128
Tax Topics - Income Tax Act - Section 52 - Subsection 52(1)	s. 15 benefit due to shareholder receipt of stock options earned by corporation added to the ACB of the exercised shares	157

27 February 2014 External T.I. 2013-0506401E5 - Loan from a partnership to an individual

bona fide loan not a transfer

A partnership between Holdco1 as the 99.9% LP and Holdco2 as the 0.1% GP (owned by an arm's length individual) makes a $2 million non-interest-bearing demand loan to the taxpayer, the individual shareholder of Holdco1. CRA stated:

[J]urisprudence has established that subsection 56(2) will not generally be applicable in a situation involving a bone fide loan between persons because such a loan does not constitute a "payment of transfer of property"… .[I]f, when the loan is made by a lender, it is apparent that the borrower will not be able to repay the loan and/or provide reasonable security for repayment…there would be a decrease in the value of the lender and the provisions of subsection 56(2) may apply depending on the circumstances... .

[However] subsection 15(2) appears to be applicable…subject to the exceptions outlined in subsections 15(2.2) to 15(2.6)... .

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(2)	partnership to partner shareholder loan	63

15 November 2013 Internal T.I. 2013-0478621I7 F - Transfer of intangibles - TP adjustments

secondary adjustment re group sale with Canco not charging for intangibles

Pursuant to a sales agreement between Canco, its immediate non-resident parent (Parent) and the ultimate U.S. parent of Canco (Pubco), as vendors, and an arm's length purchaser (Acquireco1), for the sale of Division 1 for a sum of U.S.$XX, Canco disposed of assets of Division 1 to a subsidiary of Acquireco1 for their book value. The Montreal TSO took the view that the Division 1 assets included intangible assets whose value was not reflected in this selling price. Similar transactions occurred for the sale of Division 2 to Acquireco2.

After finding that s. 247(2) should be applied "if appropriate" to Canco as if it should have received a higher sale price, CRA turned to the question of a secondary adjustment respecting Parent through the application of s. 56(2) (TaxInterpretations translation):

In this instance, taking as established that the payments or transfers of property were made pursuant to the direction of or with the concurrence of Parent, for its benefit or as a benefit it desired to confer on Pubco, the conditions of subsection 56(2) could be satisfied for the disposition of Division 1 and Division 2. In effect, if each payment or transfer of property had been made by Canco in favour of Parent, the value of the advantage could be included in the computation of the income of Parent in accordance with subsection 15(1). Hence, the combined application of subsections 56(2), 212(2) and paragraph 214(3)(a) would support an adjustment to Parent for Part XIII tax in these circumstances.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 247 - New - Subsection 247(2)	group sale with Canco not charging for intangibles should engage s. 247(2)	141
Tax Topics - Income Tax Act - Section 69 - Subsection 69(4)	s. 69(4) inapplicable where grandchild Canco undercharges for asset sale, enhancing sales proceeds received by ultimate U.S. parent	166

19 August 2013 External T.I. 2013-0488011E5 - Real Estate Referral Fees

If a real estate agent directed the real estate brokerage to pay a portion of the commission to the home purchaser as a referral fee, how would the fee be treated?

CRA indicated that the referral fee is probably not a windfall, gift, or other voluntary payment, as it is paid pursuant to an agreement between the home purchaser and agent; and whether it is income to the purchaser from a source is a question of fact.

Regardless of its treatment in the hands of the home purchaser, it is included in the agent's income pursuant to s. 56(2). CRA stated:

[I]t is the practice of the Canada Revenue Agency not to assess the same income twice. Accordingly, a brokerage would not be required to issue a T4A slip to a home purchaser under the circumstances described as long as the amount was included in the agent's income under subsection 56(2).

14 February 2013 Internal T.I. 2011-0424341I7 F - Amounts forwarded to trustee/beneficiary

s. 56(2) did not apply to trustee/beneficiary of discretionary trust who directed income to her children and did not exercise discretion in her own favour

The financial advisor of Mother settled a discretionary trust of which Mother and her friend (Y) were the trustees (with decisions to be made unanimously), and she, her issue and certain corporations (including Holdco) were the beneficiaries. Under an estate freeze, Trust was issued Class A shares of a corporation that became a small business corporation. Y had no real involvement in Trust decisions. Mother determined to make annual income distributions to her adult children, and then required them to repay most of those amounts to her in repayment of amounts for their personal expenses (e.g., rent) which she had paid on their behalf.

In finding that s. 56(2) did not apply to attribute dividends received on the Class A shares by the Trust to mother having regard to the fourth condition enumerated in Neuman that “the payment would have been included in the reassessed taxpayer’s income if it had been received by him or her,” CRA stated:

Mother (or Y) did not exercise her fiduciary powers in her favour. Thus, Mother did not have a pre-established right. Since no designation was made in her favour, she was not entitled to claim anything from the Trustees. Therefore, this last condition is not satisfied.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 75 - Subsection 75(2)	s. 75(2) not applicable to dividends on common shares issued to discretionary family trust on estate freeze	223
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(13)	income was received by children beneficiaries as agent for their mother	255
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(6) - Paragraph 104(6)(b)	Quebec discretionary trust with two named trustees but, in fact, only one trustee, would not be entitled to s. 104(6)(b) deductions	151

9 January 2013 External T.I. 2010-0384221E5 F - Paiements indirects

payments rquired to be made by a collective agreement were not intended as redirected income

In finding that where a company was required under a collective agreement respecting self-employed workers which required it to pay certain fees as a contribution to a group insurance fund, s. 56(2) did not apply as there appeared to be “no intention to redirect income that would otherwise have been included in the computation of” the company’s income.

6 December 2012 External T.I. 2012-0461711E5 F - Paiements indirects / Indirect payments

56(2) inapplicable to incorporated artist respecting producer paying mandatory contributions to the fund for the artist’s union

A producer who retains the services of an incorporated performing artist is required to pay a percentage of the fees otherwise payable by it to the artist’s Corporation (respecting the services performed by the artist as an employee of the Corporation) directly to the benefits plan (the “CSA”) for the Union des Artistes (UDA). In finding that s. 56(2) would not apply to include the amount of such producer contributions in the income of the artist, CRA stated:

[I]f the Corporation or the Taxpayer does not control the payment of the producer's mandatory contributions to the CSA, subsection 56(2) would not have the effect of including that contribution in the computation of their income. In that event, a T4A slip would not be issued by the producer to the Corporation or the Taxpayer respecting the mandatory contribution.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(1)	no T4A slip to be issued by producer paying mandatory contributions to the fund for the union of the artist whose corporation receives fees from the producer	189

30 October 2012 Ontario CTF Roundtable, 2012-0462891C6 - Application of 56(2) to discretionary trust

sole trustee as discretionary beneficiary

In response to a query as to whether, in the context of a fully discretionary trust where the sole trustee is also a discretionary beneficiary of the trust, s. 56(2) will apply to the trustee in respect of distributions made in favour of discretionary beneficiaries related to the trustee where no similar distribution is made to the trustee in the trustee's capacity as a discretionary beneficiary, CRA stated:

While the Supreme Court [in McClurg] has held that subsection 56(2) will not apply to the payment of dividends, this rule is not directly transferrable to the situation you have described. Whether subsection 56(2) applies will depend on a review of the facts and circumstances of each case.

20 November 2012 Internal T.I. 2011-0416761I7 - Non-Resident, Part XIII Tax

repayment of advance after FX change

Although the facts are unclear, a possible approximation is that a partnership with Canadian partners, of which USco was the controlling shareholder, advanced a foreign currency loan to a non-resident sister (Forco), with Forco, after making a voluntary disclosure, repaying the advance at a time that the Canadian dollar had appreciated, so that in Canadian dollar terms there was not a full deduction under s. 227(6.1) . The TSO's position was that there would be a taxable conferral of a benefit, giving rise to Part XIII tax under s. 214(3)(a), if the Partnership paid this withholding tax liability. The Directorate stated:

On the basis that USCo has, in fact, directed that [the Partnership] transfer property to Forco for the benefit of USco and such amount, if paid directly to USCo, would have been included in USco's income under subsection 15(1) of the Act as a shareholder benefit, subsection 56(2) of the Act may apply.

However, it recommended, in light of the circumstances, that Part XIII tax not be imposed on the amount of the payment of the outstanding withholding tax liability by the Partnership.

25 September 2012 BC Tax Conference Roundtable, 2012-0457551C6 - Application of 56(2) to discretionary trust

trustee as discretionary beneficiary

CRA concluded that it could not "confirm, as requested, that subsection 56(2) will not apply in every case where the sole trustee (who is also a beneficiary) of a fully discretionary trust makes distributions in favour of other beneficiaries related to the trustee, but no similar distribution is made to the trustee." In its summary, CRA stated:

...we would not automatically apply ss 56(2) in all situations...however we have seen several instances where elaborate arrangements are made to divert professional or business income where 56(2) would apply; also McClurg's outcome should be contained to similar situations...involving shares - not transferrable to trust situation where relationship between trustees & beneficiaries are different from those involving directors and shares.

Income Tax Technical News, No. 16, 8 March 1999

RC now accepts that s. 56(2) "does not apply in the Neuman-type situations" and, further, has concluded that GAAR would not apply.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Reasonable Expectation of Profit		8
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(h)		4
Tax Topics - Income Tax Act - Section 18 - Subsection 18(4)		4
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c)		49
Tax Topics - Income Tax Act - Section 251 - Subsection 251(2) - Paragraph 251(2)(c) - Subparagraph 251(2)(c)(i)		5
Tax Topics - Income Tax Act - Section 3 - Business Source/Reasonable Expectation of Profit		38
Tax Topics - Income Tax Act - Section 3 - Business Source/Reasonable Expectation of Profit		8
Tax Topics - Income Tax Act - Section 55 - Subsection 55(2)		4
Tax Topics - Treaties - Income Tax Conventions - Article 4		5

1998 Strategy Institute Round Table, No. 981310

S.56(2) will not apply where: the freezor exchanges common shares of an investment holding company ("Holdco") under s. 86(1) for redeemable retractable preference shares of Holdco having a fair market value redemption price equal to the fair market value of the common shares for which they were exchanged; a trust for adult children subscribes for new common shares; some of the freeze preference shares are redeemed each year in lieu of paying dividends on the freeze shares; and in each year dividends, which do not impair the redemption value of the outstanding preference shares, are paid on the common shares to the trust.

29 October 1996 T.I. 963032 (C.T.O. "Trustee Directing Payment or Right to Income")

With respect to a testamentary trust with four trustees who are siblings and who are beneficiaries along with their spouses and children, RC found that the exercise of discretion by four trustees to direct a distribution of income to the spouse of one trustee did not result in the application of either s. 56(2) or s. 74.1(1). The trustee did not transfer property or concur in the transfer of property which would otherwise have led to an income inclusion if the property had not been transferred: the trustee had no right to the income but was only one of a class of discretionary beneficiaries.

30 October 1995 Internal T.I. 7-951631 -

Discretionary dividends were found to be valid in light of the McClurg and Neuman decisions.

2 June 1995 T.I. 950375 ("Charitable Gift Annuity in RRSP")

Discussion of application of ss.56(2) and 146(8) where an annuitant wishes to use some or all of the property in his RRSP to purchase a charitable gift annuity.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 146 - Subsection 146(8)		27

2 November 1994 Memorandum 942044 (C.T.O. "Redirection of Salary During a Strike")

Where the union and management negotiate an agreement whereby the union will supply a certain number of essential workers during a strike, with the pay that the essential workers otherwise would receive being paid to the union, s. 56(2) will apply to include the amounts paid to the union in the income of the essential workers given that it is extremely doubtful that the union would be able to redirect the salary earned by the employees without the concurrence of the employees.

28 October 1994 T.I. 940246 (C.T.O. "Non-Capital Losses and Corp. Debt")

In response to a question respecting intercorporate debt between related corporations designed to permit them to utilize non-capital losses within a corporate group, RC affirmed its position at the 1981 Revenue Canada Round Table, Q. 51, and stated that where "it is apparent at the time the loan is made that the corporation receiving the funds will not be in a position to repay the loan or to provide reasonable security for repayment, the shareholder who has directed the payment may be considered to have deliberately and permanently removed value from the corporation".

17 May 1993 Memorandum (Tax Window, No. 32, p. 2, ¶2592)

Pension income equally divided between two spouses as a result of a marriage breakdown would be subject to s. 56(2) in Alberta, but not in B.C.

11 May 1994 Memorandum 932735 (C.T.O. "IAAC Payments Applied to a Loan after Bankrupt Discharged")

In the case of a wrap-around IAAC where the taxpayer does not actually receive the funds, the annuity payments would ordinarily be included in the annuitant's income under s. 56(2). However, in the case of an annuitant of an IAAC who has since declared bankruptcy and been discharged therefrom, the bankrupt may receive no further benefit from the redirection of the IAAC payments to the trust company that had financed the IAAC with a fully secured loan, in which case s. 56(2) would not apply.

92 C.R. - Q.22

RC's position that s. 56(2) ordinarily will be applicable if a waiver of dividends in a closely held corporation is undertaken for the purpose of transferring income to other shareholders, is the same whether the dividend or waiver was to be effective for the whole year or whether it applied only to a specific dividend.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2)		27

92 C.R. - Q.22

RC will continue to assess a benefit in situations where a shareholder receiving a dividend on a discretionary share did not make adequate contributions to the corporation.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2)		54

24 February 1992 Memorandum (Tax Window, No. 13, p. 12, ¶1628)

Generally, s. 56(2) will not be applied in the case of a waived or discretionary dividend where the shareholders deal at arm's length with one another. In non-arm's length situations, RC will invoke s. 56(2) where shareholders receiving discretionary dividends did not make adequate financial or other contribution to the corporation, or where the waiver is intended to accomplish a transfer of income to other shareholders.

13 November 1990 T.I. (Tax Window, Prelim. No. 2, p. 9, ¶1044)

Ss.56(2) and (4.1) will apply to a family mortgage plan under which a parent purchases a GIC from a financial institution at less than the going rate of interest, and the same financial institution provides a residential mortgage loan to the child at less than the going rate.

23 March 1990 T.I. (August 1990 Access Letter)

In response to a suggestion that a corporation could be purged of non-qualifying assets in order to qualify as a qualified small business corporation by issuing a special class of shares for their nominal redemption amount to Holdco and then paying a large dividend on those shares to Holdco, RC indicated that a class of shares that is entitled to receive a disproportionately large dividend in priority to other shares of the corporation would, in most cases, come under the scrutiny of s. 56(2).

14 July 1989 Inter-Divisional Memorandum (Dec. 89 Access Letter, ¶1045)

In a situation similar to McClurg, where both the husbands and the wives held shares of the corporation and the corporation declared dividends only to the wives, s. 56(2) was to be applied to the husbands, but the wives' income was to be reduced accordingly, provided that they provided waivers or the taxation years were not statute-barred.

87 C.R. - Q.72

S.56(2) applies where the board has the discretion to pay dividends on one or more classes of shares at its discretion. McClurg is being appealed.

86 C.R. -Q.40

It would be "unlikely" that s. 56(2) would apply to an income-splitting to which s. 74.4 doesn't apply by virtue of the small business corporation exception.

86 C.R. - Q.41

It is not possible to state that it is ever possible to waive dividends in favour of related shareholders without the application of s. 56(2).

85 C.R. - Q.6

Where the taxpayer is assessed under s. 56(2), the recipient's income (particularly where not statute-barred) will be reduced.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28)		13

84 C.R. - Q.24

S.56(2) will ordinarily be applicable if the waiver of dividends in a closely held corporation is undertaken for the purpose of transferring income to other shareholders.

84 C.R. - Q.82

RC will accept the payment of large discretionary dividends as a special recompense to the active shareholders, provided that the non-active shareholder is dealing with them at arm's length.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 67		54

81 C.R. - Q.26

s. 56(2) would ordinarily be applicable if the waiver of dividends in a closely held corporation is undertaken for the purpose of transferring income to other shareholders, or where discretionary-dividend shares are used to accomplish the same result.

79 C.R. - Q.19

Where a waiver of dividends in a closely-held corporation is undertaken for the purpose of transferring income to the other shareholders (generally, the chief shareholder's children) and has no other bona fide purpose, s. 56(2) generally will be invoked.

IT-468R "Management or Administration Fees Paid to Non-Residents"

The portion of a management or administration fee paid to a non-resident affiliate that is in excess of a reasonable amount may be treated as a deemed dividend.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 69 - Subsection 69(2)		34
Tax Topics - Treaties - Income Tax Conventions - Article 7		37

IT335R2 "Indirect Payments" 12 July 2004

13. An amount to which subsection 56(2) applies could be included in the income of both the taxpayer and the person who receives the payment or the property. However, it is normally the...CRA...practice not to assess the same income twice. Accordingly, where the taxpayer agrees to the reallocation, the recipient's income will be reduced. Where the taxpayer does not agree, the CRA will also reduce the recipient's income, without requiring a waiver, provided that at the time of the assessing action, the recipient's return was not about to become statute-barred; in those cases, the CRA will seek a waiver.

Articles

Bowman, "New Wine in Old Bottles - Using Personal Trusts as Business Vehicles", Business Vehicles, Vol. III, No. 1, 1996, p. 114

"Trust-partnership structures may permit greater flexibility than a single corporation ... since management of the business can be left in the hands of one or more general partners at the partnership level, while distributions of a limited partner's income would be determined by the trustees acting under the terms of the trust. By having different individuals performing these roles ... a lower risk of reassessment under subsection 56(2)" may obtain.

Beam, Laiken, "Recent Developments on Subsection 56(2): Indirect Payments", 1995 Canadian Tax Journal, Vol. 43, No. 2, p. 447.

Subsection 56(3) - Exemption for scholarships, fellowships, bursaries and prizes

Subsection 56(3.1) - Limitations of scholarship exemption

Paragraph 56(3.1)(b)

Administrative Policy

20 August 2014 External T.I. 2014-0529481E5 - Scholarship exemption

reduction where shortened enrolment

In response to a general inquiry, CRA noted:

[I]n the Department of Finance technical notes… example, an individual receives a bursary which suggests that it is intended to provide support for one year of study. If the individual then only enrolls in a three-week educational program, the scholarship exemption for this individual would be limited to an amount that is reasonable, in respect of the three-week program. The balance of the bursary would be taxable to the individual.

31 July 2013 External T.I. 2012-0452591E5 F - Matériel lié à un programme d'études

meaning of “materials related to the program”

What is the meaning of “materials related to the program”? CRA responded:

As described in … S1-F2-C3 … 3.94 … materials related to the program includes the cost of items that are essential for the completion of the program and are expected to have a lifespan use generally limited to the program length, such as books, lab coats, brushes and paints. However, it does not include, for example, the cost of e-book readers, personal computers, generic software or musical instruments.

Subsection 56(4) - Transfer of rights to income

Cases

Shaw v. The Queen, 89 DTC 5194 (FCTD), aff'd 93 DTC 5213 (FCA)

The taxpayer and her husband had operated a service station in partnership and then transferred pursuant to s. 85(2) the assets of the business other than the land (which was leased under a head lease to BP Oil Ltd., which subleased the land back to the taxpayer) to a corporation owned by them. It was found that on the same incorporation transactions she had assigned to the corporation her right to receive gallonage and other rental payments from BP under the head lease as well as assigning the head lease and sublease (considered as an integrated whole). S.56(4) did not apply because there was no diversion by the taxpayer to the corporation of income to which she otherwise would have been beneficially entitled. Instead, the corporation was beneficially entitled to the BP gallonage payments as the party who had earned the income represented thereby.

In addition, the exclusion for property transfers (namely, the assignment of the rents payable and the lease) applied.

Words and Phrases

rent

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Effective Date		8
Tax Topics - General Concepts - Substance		33
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Property		20

De Groote v. The Queen, 85 DTC 5008, [1985] 1 CTC 687 (FCTD)

The taxpayer sold shares to, and executed a declaration of trust in favour of, a company controlled by him and then, while still retaining the registered ownership of the shares, received dividends thereon and paid them to the controlled company. The dividends received by him were not included in his income because the dividends were declared subsequent to the date of the assignment of the shares to the controlled company, notwithstanding that the record date stipulated in the declaration of dividends by the directors was prior to the date of the assignment.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2)		47
Tax Topics - Income Tax Act - Section 82 - Subsection 82(1) - Paragraph 82(1)(a)	no longer beneficial shareholder	74

Fraser Companies, Ltd. v. The Queen, 81 DTC 5051, [1981] CTC 61 (FCTD)

S.56(4) relates to the transfer or assignment of a right to an amount, not to the loaning of an amount.

Locations of other summaries		Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Federal Court Rules - Rule 413(1)(a)		65
Tax Topics - General Concepts - Tax Avoidance		38
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2)		114
Tax Topics - Statutory Interpretation - Interpretation Act - Section 14		68

The Queen v. Canadian-American Loan and Investment Corp. Ltd., 74 DTC 6104, [1974] CTC 101 (FCTD)

The taxpayer sublet 1/4 of the premises which were used by it in its marina business to an affiliated company ("Georgia") with accumulated losses, and assigned to Georgia the rentals accruing to the taxpayer from contracts for the storage of boats. Cattanach, J. found that the revenues which the taxpayer had purportedly transferred to Georgia related to a business of storing and handling boats, and the business income supposedly earned by Georgia accordingly did not meet the exception for income from property.

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Payment & Receipt	receipt of sums collected by affiliate	143

The Queen v. Burns, 73 DTC 5219, [1973] CTC 264 (FCTD)

Cheques received by an employee which were endorsed by him to a company owned by him were included in his income pursuant to s. 56(4).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		60

Administrative Policy

28 October 2016 External T.I. 2016-0654331E5 F - Transfer of rights to income

where rental lands purchased subject to obligation to pay the rents to NAL vendor, s. 56(4) trumps s. 9 to include rents in purchaser’s income

Upon a sale by A of leased land to a non-arm’s length corporation (Corporation A) in which A did not hold any shares, A and Corporation A agreed to a redistribution of income in which Corporation A undertook to pay to A all the related rental income. How might ss. 9(1) and 56(4) apply? After finding that the rentals received by Corporation A would probably not have the "quality of income” to it since it would not have “an absolute and unconditional right to these amounts,” CRA went on to state:

[S]ubsection 56(4) would apply to Corporation A… to include the rent amount in its income without a corresponding deduction for its payment to A.

and (quoting from IT-440R, para. 10):

where the transfer or assignment of the right to an amount that is income does not constitute a deliberate attempt to evade or avoid tax, the amount will be included only in the income of the transferor.”

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 9 - Nature of Income	where rental lands purchased subject to obligation to pay the rents to vendor, rents did not have quality of income to purchaser under s. 9	159
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Incurring of Expense	where rental lands purchased subject to obligation to pay the rents to vendor, no income inclusion and deduction of the rents by the purchaser under ss. 9 and 18(1)(a)	83
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2)	s. 56(2) could apply to shareholder of purchaser of lands if vendor did not pay FMV consideration for retaining rights to rents	162

11 March 2014 Internal T.I. 2013-0513221I7 F - Stock options

implicit transfer by corporation when stock options earned by it were issued directly by its client to its shareholder

Publico determined to grant stock options to its directors and consultants, as a result of which a private corporation ("Corporation") was entitled to receive a grant of options. However, such options instead were granted directly to Ms. X, the sole shareholder of Corporation, who subsequently exercised and sold the acquired Publico shares, reporting a capital gain. The option terms provided that they were non-assignable.

CRA found that s. 56(4) applied to Corporation on the basis that the Corporation, as the consultant, was the party entitled to the options, would have recognized business income on exercise of the options and on the facts of the situation it could be considered that the rights to such amount were transferred or assigned by it to Ms. X. Furthermore, as such amount would be business income to Corporation, the closing exception did not apply.

Such income inclusion to Corporation did not detract from there also being a taxable benefit to Ms. X under s. 15 (or 6(1)(a), if it was received by virtue of employment).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 15 - Subsection 15(1)	double income inclusion under s. 56(2) or (4) to consulting corporation, and under s. 15(1) to its shareholder, where consultant's options issued directly by client to shareholder	109
Tax Topics - Income Tax Act - Section 56 - Subsection 56(2)	s. 56(2) benefit where corporation implicitly consented to consultant's options being issued by client directly to its shareholder	164
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28)	s. 248(28) does not prevent a double income inclusion to corporation under s. 56 and shareholder under s. 15	218
Tax Topics - Income Tax Act - Section 9 - Timing	no s. 9(1) income inclusion from consultant being granted stock options until exercise	216
Tax Topics - General Concepts - Fair Market Value - Options	stock options with no in-the-money value could have nil FMV	128
Tax Topics - Income Tax Act - Section 52 - Subsection 52(1)	s. 15 benefit due to shareholder receipt of stock options earned by corporation added to the ACB of the exercised shares	157

10 July 2013 Internal T.I. 2013-0475501I7 F - Amounts returned to trustee/beneficiary

payment of distributed family trust income by children to father did not engage s. 56(4) as it was only potential income to him

Father and Y were the trustees of a Quebec family trust, whose beneficiaries included father and his three children. Distributions made by the Trust to the children's bank accounts were, in large part, immediately "returned" out of the bank accounts to father, to reimburse him for expenses (both specific and general) which he claimed were their responsibility and for their benefit.

After finding that the amounts returned to the father were income to him under s. 104(13), CRA went on to indicate (TaxInterpretations translation) that such amounts should not be included in his income under s. 56(4):

Since Father is both beneficiary and trustee, the income that was allocated to the Children could have been allocated to him and paid (section XXXXXXXXXX of the trust deed provides that in the exercise of his discretion the trustee may designate Father to receive income). However, neither Father nor Y exercised this discretion in favour of Father. Thus Father had only a potential right to Trust's income. Therefore, subsection 56(4) does not apply.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(13)	family trust income distributed to children but repaid as reimbursement to father for family expenses was income to him, not them	199
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(24)	distributions to children immediately paid to father	174
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(6)	distributions to children immediately paid to father were deductible even though received by children as his agents	169
Tax Topics - Income Tax Act - 101-110 - Section 105 - Subsection 105(1)	payment of income distributions by children to father not a benefit under the trust	222

29 April 2003 External T.I. 2003-00646 -

Allocations made to the spouse of a retired partner pursuant to s. 96(1.1) would, depending on the circumstances, also be included in the income of the retired partner under s. 56(2) or (4). S.248(28) would not prevent this result.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(28)		36
Tax Topics - Income Tax Act - Section 96 - Subsection 96(1.1)		36

8 September 1997 External T.I. 5-970715 -

Where self-employed BC real estate sales people purportedly incorporate their proprietorships, with the Superintendent of real estate allowing the licensing of the corporation in order to sell real estate but with a requirement that the individual realtor remain personally liable for any damages resulting from a sale, then the question as to whether s. 56(4) apply will turn on the factual determination whether it is the individual or the corporation who is carrying on the real estate sales business.

3 February 1994 External T.I. 5-923647 -

Although s. 56(4) could apply in some circumstances to a contractor transferring unapproved billings and unapproved holdbacks to a controlled corporation, RC generally will not apply this provision where the recipient of the transfer includes such amounts in its income as business income.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 85 - Subsection 85(1.1)		19

3 December 1993 T.I. 920099 (C.T.O. "Transfer of Farm Inventory to a Corporation")

Where a farmer, who is guaranteed under the Gross Revenue Insurance Program ("GRIP") to receive a price of $4 per bushel of wheat, transfers his wheat inventory to a corporation at a time that he was already entitled to receive a GRIP amount, s. 56(4) would apply to include this amount in his income in the year of transfer.

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Fair Market Value - Other		64

Subsection 56(4.1) - Interest free or low interest loans

Administrative Policy

92 C.R. - Q.7

Re application of s. 56(4.1) to "immigrant's trust".

91 C.R. - Q.5

s. 56(4.1) will apply to any income derived by a non-resident trust established for the benefit of an immigrant where the non-resident trust is exempted from the application of s. 94(1) by virtue of s. 94(1)(b)(i)(A)(III), it was established for the purpose of reducing the Canadian tax liability of the immigrant, and the trust will derive all of its income from assets that are sold to the trust by the immigrant for fair market value consideration in the form of a non-interest bearing promissory note payable on demand.

8 May 1990 T.I. (October 1990 Access Letter, ¶1461)

Where an individual makes an interest-free loan to his son-in-law who invests the money in a private corporation controlled by him by way of loan or a purchase of shares, the interest or dividends will be attributed to the lender even after repayment of the loan until such time as the son-in-law disposes of his investment in the corporation.

89 C.R. - Q.47

"The provisions of subsection 56(4.1) will not normally apply where there is a bona fide sale of property (instead of property being loaned) by one individual to another non-arm's length individual in order to reduce the seller's income taxes and the seller receives a mortgage, agreement for sale or similar money purchase obligation as security for the loan of the unpaid purchased price."

88 C.R. - "Finance and Leasing" - "Interest" - "Loans to Non-Arm's Length Parties"

A loan by a parent to an adult child on an interest-free basis to assist the child in acquiring a home to be used as a principal residence normally is not subject to s. 56(4.1).

Articles

Joseph Frankovic, "Income Splitting and Attribution", Tax Topics, Wolters Kluwer, No. 2250, April 23, 2015

Although the attribution rules do not apply to transfers of property to adult family members other than a spouse, subsection 56(4.1) can apply where an individual (creditor) lends property to a non-arm's length individual, including an adult (debtor). Unlike the other attribution rules, this provision has a purpose element to it, in that it can apply only if it can be considered that one of the main reasons for the loan was to reduce or avoid tax by causing income from the loaned property or substituted property to be included in the income of the debtor.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 120.4 - Subsection 120.4(1) - Split Income - Paragraph (c)		170
Tax Topics - Income Tax Act - Section 74.3 - Subsection 74.3(1)		227

Emes, "Planning for Immigration to Canada from Countries other than the United States", 1993 Corporate Management Tax Conference Report, c. 13.

Discussion of immigrant trusts.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 74.4 - Subsection 74.4(2)		4

Brahmst, "Subsection 56(4.1) - An Update", Canadian Current Tax, January 1992, p. P47.

Subsection 56(6)

Administrative Policy

14 May 2013 External T.I. 2013-0484971E5 F - PUGE - décès du conjoint

deceased had spouse at the end of her terminal year

A taxpayer ("Ms. A") died on October 1 of Year 1. Mr. A, her surviving spouse, did not have a new spouse at the end of the year. Ms. A and Mr. A were the parents of a child under the age of six and were paid $1,299 and $300, respectively, as universal child care benefits (“UCCB”) in Year 1. A separate rights and things return was filed for Ms. A for that year.

CRA indicated that it concurred with the correspondent’s analysis of s. 56(6), which included a statement that “since Ms. A had a spouse at the end of her taxation year, that is, at the time of her death, and Mr. A was the spouse with the lowest income, Mr. A should report the UCCB amount of $900, received by Ms. A, by virtue of paragraph 56(6)(b).”

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(9.1)	deceased’s income did not include income on her rights and things return	60

Subsection 56(9.1)

Administrative Policy

14 May 2013 External T.I. 2013-0484971E5 F - PUGE - décès du conjoint

deceased’s income did not include income on her rights and things return

A taxpayer ("Ms. A") died on October 1 of Year 1. Mr. A, her surviving spouse, did not have a new spouse at the end of the year. A separate rights and things return was filed for Ms. A for that year.

CRA concurred that the income of Ms. A under s. 56(9.1) did not include income on her rights and things return.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(6)	deceased had spouse at the end of her terminal year	134

Subsection 56(12) - Foreign retirement arrangement

Cases

Serra v. Canada, 98 DTC 6602 (FCA)

Marceau J.A. stated (at pp. 6603-4) that "the argument of counsel for the applicants, which in a nutshell would insert the adjective 'absolute' before the word 'discretion' ... so that the slightest general earmarking of a support payment would mean that it could no longer be characterized as a taxable allowance, is untenable ..."

The Queen v. Arsenault, 96 DTC 6131 (FCA)

The taxpayer met the requirements of s. 60(b) where, notwithstanding the requirements of a separation agreement stipulating that he was to pay maintenance of $400 per month to a separated spouse and $100 per month for each their three children, he instead provided her with monthly cheques of $690 (later $760) made payable to the landlord, which were accepted by her.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(b)		58

Administrative Policy

29 January 2018 External T.I. 2017-0682301E5 - Deemed Distribution and Withdrawal from IRA

deemed ITA inclusion on deemed distribution from IRA on renouncing U.S. citizenship or relinquishing green card

Where a U.S. long-term resident relinquishes her green card (or a U.S. citizen renounced citizenship) after having become a Canadian resident, there would be a deemed taxable distribution to her of the amount in her IRA for Code purposes – which by virtue of ss. 56(1)(a)(i)(C.1) and 56(12) would be deemed to be included in her income at that time for ITA purposes as well. This generally would accommodate a s. 126(1) foreign tax credit.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 56 - Subsection 56(1) - Paragraph 56(1)(a) - Subparagraph 56(1)(a)(i) - Clause 56(1)(a)(i)(C.1)	the deemed U.S. income inclusion from an IRA on renouncing U.S. citizenship or relinquishing a green card also is recognized for ITA purposes	353
Tax Topics - Income Tax Act - Section 126 - Subsection 126(1)	deemed Code taxability of IRA on renouncing U.S. citizenship generally would generate an FTC to deemed Cdn-resident recipient	119

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Payment & Receipt	bonus booked as loan back/constructive receipt	129
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		182

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Substance		95
Tax Topics - Income Tax Act - Section 245 - Subsection 245(4)		266
Tax Topics - Income Tax Act - Section 97 - Subsection 97(2)	partnership subscription for taxpayer affiliate pref shares not boot	259

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 104 - Subsection 104(2)	damages not received as constructive trustee as not received qua director	183
Tax Topics - Income Tax Act - Section 9 - Compensation Payments	damages not corporate income as not received qua director	183
Tax Topics - Income Tax Act - Section 9 - Nature of Income	agreement assigned rights to proceeds of law suit rather than entitlement under law suit	305

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Section 56

Table of Contents

Subsection 56(1) - Amounts to be included in income for year

Paragraph 56(1)(a) - Pension benefits, unemployment insurance benefits, etc.

Cases

Woods v. The Queen, 2010 DTC 1095 [at 2996], 2010 TCC 106, aff'd 2011 DTC 5049 [at 5681], 2011 FCA 90

Watts v. The Queen, 2004 DTC 3111, 2004 TCC 535 (Informal Procedure)

Subparagraph 56(1)(a)(i)

Cases

Burchill v. Canada, 2010 DTC 5096 [at 6922], 2010 FCA 145

See Also

Rasmussen v. The Queen, 2019 TCC 124 (Informal Procedure)

Mammone v. The Queen, 2018 TCC 24, rev'd 2019 FCA 45

Gill v. The Queen, 2012 DTC 1261 [at 3764], 2012 TCC 302

Brilla v. The Queen, 98 DTC 1502 (TCC)

Walker v. The Queen, 95 DTC 753 (TCC)

Kaiser v. The Queen, 95 DTC 13 (TCC)

Administrative Policy

3 March 2004 External T.I. 2003-004715 -

16 January 1996 T.I. 952921 (Tax Window Files "401(k), Double Tax in Canada")

27 October 1994 T.I. 942712 (C.T.O. "Deferral of Lump Sum Severance Payment")

20 November 1991 T.I. (Tax Window, No. 13, p. 9, ¶1601)

7 March 1991 T.I. (Tax Window, No. 1, p. 21, ¶1151)

8 September 89 T.I. (February 1990 Access Letter, ¶1097)

88 C.R. - Q.5

Clause 56(1)(a)(i)(C.1)

See Also

McKenzie v. The Queen, 2017 TCC 56 (Informal Procedure)

Administrative Policy

Subparagraph 56(1)(a)(iii)

See Also

Scott v. The Queen, 2017 TCC 224, 2017 TCC 224

Subparagraph 56(1)(a)(ii)

Cases

Doyle v. The Queen, 83 DTC 5383, [1983] CTC 339 (FCTD)

Lawson v. The Queen, 82 DTC 6331, [1982] CTC 368 (FCTD)

Administrative Policy

29 April 1991 T.I. (Tax Window, No. 2, p. 21, ¶1217)

Paragraph 56(1)(b) - Support

Cases

Tossell v. Canada, 2005 DTC 5365, 2005 FCA 223

The Queen v. Jasper, 94 DTC 6519 (FCTD)

The Queen v. Sigglekow, 85 DTC 5471 (FCTD)

The Queen v. Sills, 85 DTC 5096, [1985] 1 CTC 49 (FCA)

See Also

Welch v. The Queen, 2012 DTC 1288 [at 3892], 2012 TCC 350 (Informal Procedure)

Blais v. MNR, 92 DTC 1497 (TCC)

Morley-Clarke v. Jones, [1985] BTC 460 (C.A.)

The Queen v. Sills, 85 DTC 5096, [1985] 1 CTC 49 (FCA)

Articles

Durnford, Toope, "Spousal Support in Family Law and Alimony in the Law of Taxation", Canadian Tax Journal, 1994, Vol. 42, No. 1, p. 1.

Paragraph 56(1)(c)

Cases

James v. The Queen, 85 DTC 5172, [1985] 1 CTC (FCTD)

Paragraph 56(1)(d) - Annuity payments

Cases

The Queen v. Rumack, 92 DTC 6142 (FCA)

Wilder v. Minister of National Revenue, 52 DTC 1014, [1951] CTC 304, [1952] 1 S.C.R. 123

See Also

Short v. The Queen, 99 DTC 1146 (TCC)

Administrative Policy

20 May 1994 T.I. 940504 (C.T.O. "Structured Settlement under No-Fault Insurance")

29 January 1993 T.I. 9200395 (Tax Window, No. 27, p. 1, ¶2360)

22 January 1993 T.I. 9203635 (Tax Window, No. 27, p. 1, ¶2360)

29 October 1992 T.I. 922997 (September 1993 Access Letter, p. 414, ¶C56-252)

21 January 1991 T.I. (Tax Window, Prelim. No. 3, p. 28, ¶1099)

ATR-40 (18 March 1991) "Structured Settlements"

80 C.R. - Q.26

Paragraph 56(1)(h) - Registered retirement savings plan, etc.

See Also

Maass-Howard v. The Queen, 2013 DTC 1009 [at 59], 2012 TCC 307, briefly aff'd 2013 DTC 5167 [at 6429], 2013 FCA 234

Paragraph 56(1)(l.1) - Idem [Legal expenses]

Cases

Scharf v. Freure Homes Ltd., 95 DTC 5074 (Ont. Ct. J. (G.D.))

Administrative Policy

8 October 1996 T.I. 962701 (C.T.O. "Loss of Employment, Mental Distress, Damages")

Paragraph 56(1)(n) - Scholarships, bursaries, etc.

Cases

Simser v. Canada, 2005 DTC 5001, 2004 FCA 414