S. 8(1)(b) permits an employee to deduct, in computing his or her income from an office or employment, amounts paid as or on account of legal expenses incurred by the taxpayer to collect or establish a right to salary or wages owed to the taxpayer by the employer or former employer of the taxpayer.

A proposed amendment would amend s. 8(1)(b) effective for amounts paid after 2000 to refer instead to such amounts paid in order to collect or establish a right to collect an amount that, if received, would be included in the individual's employment income. The technical notes of the Department of Finance stated:

Concern has been expressed that where an amount is not owed to the employee directly by the employer, any legal expenses incurred by the taxpayer would not be deductible under paragraph 8(1)(b), even though the amount, when received, would be taxable as employment income. This would be the case, for example, with respect to legal fees incurred by a taxpayer to collect insurance benefits under a sickness or accident insurance policy provided through an employer.

(The Farrell decision is an example of a situation where the pre-amendment wording potentially was problematic.)

Given that the amount, to be deductible, must have been incurred in order to collect or establish an entitlement to employment remuneration, amounts will not be deductible if they were incurred to challenge the award of employment to someone else (Turner-Lienaux), or in defending an action in a dispute that did not arise out of the terms of the employment (even if the individual's entitlement may be an ancillary element to the action) (Fenwick). Accordingly, legal expenses incurred in defending against serious charges which if substantiated might result in loss of employment generally will not be deductible (Wilson, Kaushik, Blagdon , see also Simolai). Legal fees incurred in order to challenge a termination of employment or to seek a larger damages payment for termination of employment generally be considered to have been incurred in order to establish an entitlement to a retiring allowance rather than to employee remuneration and, therefore, will be non-deductible under s. 8(1)(b)(Bonsma, Blagdon, MacDonald) (although they may be deductible under s. 60(o.1)).

It has been stated that s. s. 8(1)(b) covers not only enforcing an existing right to salary owing but also bringing into existence a right to salary which thereupon becomes owing to the taxpayer (Blackburn), so that legal expenses incurred by an employee who has been dismissed (or suspended) in order to secure a reinstatement of his employment generally will be deductible (Fernando). Similarly, litigation expenses incurred with a view to establishing that the employee is entitled to a higher salary generally will be deductible, regardless of the action's outcome (Loo).

Cases

Fenwick v. Canada, 2009 DTC 5525, 2008 FCA 370

expenses were incurred in a dispute broader than recovery or repayment of remuneration

Legal expenses incurred by the taxpayer in defending against a derivative action that was based on his allegedly having caused the corporation to have paid him excessive remuneration, were not deductible. Sharlow, J.A. stated (at para. 8):

Paragraph 8(1)(b) is not intended to permit legal expenses to be deducted when they are incurred in litigation involving a claim for damages involved in disputes other than those arising from the terms of employment, merely because the Defendant's entitlement to a particular remuneration is an element of the claim.

She also stated that "it is an open question whether paragraph 8(1)(b) also applies to legal expenses incurred by an individual who is being sued by an employer or former employer for reimbursement of an over-payment of salary or wages." (Para. 8.)

Loo v. Canada, 2004 DTC 6540, 2004 FCA 249

deductible expenses where suing re pay allegedly below the legal requirement

The taxpayer and other lawyers employed in British Columbia by the Department of Justice sued the Department in the British Columbia Supreme Court alleging that they were entitled to be paid at the same rate as lawyers employed by the Department in Toronto. As "Mr. Loo is trying to establish by litigation that, for the services he has rendered to his employer, the law requires that he be paid more than he has been paid", it followed that the taxpayer was trying to establish a right to salary "owed" to him by his employer.

Words and Phrases

owe

Turner-Lienaux v. The Queen, 97 DTC 5294 (FCA)

Legal expenses that were laid out by the taxpayer to challenge the outcome of a public service competition in which another position with the same employer was awarded to a third party, were not deductible.

Fernando v. The Queen, 93 DTC 5412 (FCTD)

Legal expenses (but not interest thereon) paid by a dismissed member of the Alberta Union of Public Employees in connection with a grievance before an arbitration board resulting in his reinstatement were deductible. Rothstein, J. was satisfied that the basic amount ordered and paid in the case was wages and not a retiring allowance.

Wilson v. The Queen, 90 DTC 6382 (FCTD), aff'd 91 DTC 5407 (FCA)

Legal expenditures made by a salaried school teacher in defending charges of rape and unlawful confinement were not deductible.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 54 - Capital Property		124

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Patents or other intangible property		49

Administrative Policy

11 April 2018 External T.I. 2017-0699751E5 - Deduction of legal expense

CRA now accepts that legal expenses incurred to recover salary are deductible even if no right to the salary is established

Q.2

Can a taxpayer request an amendment to a previous taxation year’s T1 return to claim a deduction for legal expenses paid in that year, if the established employment income is not paid until a subsequent taxation year? CRA responded:

If the conditions to claim a deduction under paragraph 8(1)(b) of the Act are met, a taxpayer may request an adjustment to a T1 Return for the legal expenses that were paid in the previous tax year (generally within 3 years).

Q.3

Is a deduction for legal expenses under s. 8(1)(b) only allowed when the claim is well founded in law, or is likely to succeed? CRA responded:

IT-99R5 … states that if a taxpayer is unsuccessful in court and fails to establish that an amount is owed, then no deduction is allowed. However, those comments are no longer accurate based on … Loo …[which] ruled that a taxpayer’s legal action need not be successful in order to deduct an amount under paragraph 8(1)(b)… .

However, it is still necessary to examine the nature of the action against the employer to establish whether the order sought by the taxpayer is for an amount owed to the taxpayer that would be included in income under subdivision a of Division B. Cases involving the deductibility of legal fees paid to establish a right to a promotion or a raise or where the claimant is seeking financial compensation in connection with allegations of unlawful or wrongful acts by an employer remain distinguishable.

Q.4

For the purposes of paragraph 8(1)(b) of the Act, how is it determined if the taxpayer has collected or established a right to collect an amount owed? CRA responded:

For the purposes of paragraph 8(1)(b) … the taxpayer needs to look at … if the purpose was to collect or establish a right to collect an amount owed. This approach is consistent with … Loo

Q.5

Are legal expenses paid by an individual (to reinstate the individual’s former employment position), deductible under paragraph 8(1)(b) of the Act when employment is reinstated without retroactive pay? CRA responded:

The legal expense incurred for the purposes of paragraph 8(1)(b) of the Act must be incurred by the taxpayer to collect, or to establish a right to, an amount owed. In Loo, the FCA referred to the New Oxford Dictionary of English (1998, Clarendon Press, Oxford) definition of the word “owe” as “an obligation to pay or repay (something, especially money) in return for something received.”

While the legal expenses paid may have facilitated the reinstatement of the individual’s employment, the legal expenses were not incurred to collect (or establish a right to collect) an amount that was owed and required to be included in employment income … .

12 February 2013 Internal T.I. 2013-0475631I7 - Treatment of Settlement Amounts

It is contemplated that a lump sum would be paid to the individual plaintiffs in a class action suit in settlement of their allegation that monthly long-term disability benefits received by them should not have been reduced by monthly benefits under the Pension Act. Applying the surrogatum principle in Tsiaprailis, CRA found that this amount would be taxable and included in the recipient's employment income in the year received under s. 6(1)(f), and found that the legal fees paid in the year by a class action member could be deducted from the class member's employment income in that year under s. 8(1)(b).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - 101-110 - Section 110.2 - Subsection 110.2(2)		100
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)		105
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(f)		80

19 November 2012 Internal T.I. 2012-0433201I7 - Legal fees incurred re: job reinstatement

Regarding a taxpayer's lawsuit for reinstatement of employment and associated retroactive pay, and to receive performance pay and other damages, CRA stated that the taxpayer's legal fees should be apportioned reasonably among the various objectives of the taxpayer's suit, and the deductibility of each portion should be considered based on its corresponding objective and on its success:

The portion relating to unpaid performance pay, which allegedly accrued during the taxpayer's employment, is deductible under s. 8(1)(b) regardless of the suit's outcome, in accordance with Loo.
The portions relating to reinstatement of employment and associated retroactive pay, banked leave, and lost promotional opportunities are not currently deductible (CRA stated that Turner-Lienaux establishes in general that a person is not "owed" salary or wages if he did not do the work or occupy the position that required the salary or wages to be paid). However, such portions may become deductible depending on the outcome:
- If the taxpayer's suit is successful and the taxpayer is reinstated, then these portions relate to salary or wages owing and are deductible under s. 8(1)(b) (Fernando).
- If the taxpayer's suit is successful in the main but the taxpayer is not reinstated, then these portions will fall under the s. 248(1) definition of "retiring allowance" and will be deductible under s. 60(o.1) to the extent of the amount received and included in income (e.g. not counting RPP and RRSP contributions).
- If the taxpayer's suit is unsuccessful, then these portions cannot be said to be owing, and are not deductible.
The portion relating to pain and suffering awards, if any, are not deductible because damages for pain and suffering are non-taxable.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(o.1)	apportionment among objectives	272

13 September 2012 Internal T.I. 2012-0442671I7 F - Dédommagement pour la perte de bénéfices

legal fees paid to recover damages for employer cancellation of insurance coverage, and medical plan, qualified and did not qualify, respectively

The former employees and retirees of a bankrupt corporation (the "Employer") received a lump for the cancellation of their rights in a group insurance plan and respecting legal costs incurred to recover the lump sum. The lump sum received for the Plan cancellation included compensation for the loss of medical and dental coverage and hospitalization coverage for themselves and their dependents (respecting the "Medical Plan"), as well as the loss of life insurance coverage (the "Coverage"). Damages also were claimed for the amounts owing under the Employment Standards Act (the "Dismissal Amount").

After finding that the portions of the lump sum allocable to both the termination of the Medical Plan and to the lost Coverage were taxable employment benefits (including in the case of the Coverage by virtue of s. 6(3), the Directorate found that a portion of the legal expenses incurred by the taxpayers was non-deductible by virtue of s. 8(2) and did not qualify for deduction under s. 8(1)(b), stating:

The amount of legal fees that the Objectors have paid that is attributable to the recovery of the amount they received in settlement of the loss of their rights under the Medical Plan … was paid to recover an amount that was not wages or salary. Consequently, paragraph 8(1)(b) does not apply to allow the deduction … of legal costs that have been paid to recover such an amount.

[Respecting the recovery regarding the Coverage] … we suggest that a deduction be allowed for the amount of the legal fees that were paid to recover the damages for the Coverage.

… You stated that the Dismissal Amount is a taxable amount as a wage or salary or retiring allowance. Thus, we are of the view that the amount paid as a legal expense attributable thereto is deductible in computing the Objectors' income under paragraph 8(1)(b) or 60(o.1) …depending on the circumstances.

… [T]here is no rule in the Act for the allocation of legal fees. … [I]t is reasonable to consider that legal fees should be allocated among the various components.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) - Subparagraph 6(1)(a)(i)	damages received after 2011 by employees of an insolvent company for cancellation of their medical plan have become taxable	306
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Death Benefit	damages received for loss of life insurance coverage were not rendered a death benefit under the surrogatum principle	303
Tax Topics - Income Tax Act - Section 6 - Subsection 6(3)	damages received by former employees of insolvent company for cancellation of their life insurance coverage were received in lieu of remuneration for their employment services	267

24 March 1995 T.I. 942430 (C.T.O. "Legal Fees")

Fees paid to a party other than a firm of barristers and solicitors could qualify as legal expenses if they can be regarded as being for services pertaining to the domain of law.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 60 - Paragraph 60(o.1)		33

IT-99R4 "Legal and Accounting Fees" under "Collection of Salary and Wages"

Paragraph 8(1)(c) - Clergy residence

Commentary

Inclusion in clergy member's income where provision of manse or housing allowances

It is common for members of the clergy to receive a significant portion of their remuneration from their employing church in the form of a housing allowance in respect of the costs of accommodation that is owned by them (or their spouses) or that is rented by them. Such allowances are included in their income under s. 6(1)(b). Similarly, being allowed to occupy the church manse free of charge will give rise to a benefit that is included under s. 6(1)(a) in their income from employment.

Computation of deduction

In the circumstances described below, s. 8(1)(c) provides a deduction in computing the income from employment of the clergy person in respect of the accommodation occupied by him or her.

Under s. 8(1)(c)(iii), where a residence or other living accommodation occupied by the taxpayer is supplied "in the course of, or because of" the employment (e.g., a manse that a church agrees at the time of hiring to make available for occupation by the minister and family), the amount of the deduction is equal to the value of the benefit derived from the supply of the accommodation (including amounts in respect of utilities), to the extent that the value is already included in income under s. 6. (As indicated in Williams, the quoted phrase "implies a need for a strong causal relation between" the occupation of the residence and the employment of the minister, so that this test will not be satisfied where the house in question is not provided by the employer and is simply a house in which the taxpayer chooses to reside.)

Under s. 8(1)(c)(iv), where the taxpayer's principal place of residence or other principal living accommodations which is ordinarily occupied by the taxpayer in the year is owned or rented by the clergy person, the deduction is equal to the least of three amounts:

the employee's remuneration for the year from the office or employment;
the greater of: (a)¹/3 of the employee's total remuneration from the employment for the year; and (b) $1,000 per month (to a maximum of ten months) in the year during which the employee meets the conditions set out in subparagraphs 8(1)(c)(i) and (ii); and
the rent paid or the fair rental value of the residence including utilities (this amount must be reduced by the total of all other amounts deducted in computing the employee 's income from a business or from an office or employment in connection with the same accommodation). This could arise, for example, where two spouses who are members of the clergy occupy the same accommodation.

Eligibility for deduction

To be eligible for the deduction from their employment income, an employee must satisfy two requirements.

First, the employee must be a member of the clergy or of a religious order, or be a regular minister of a religious denomination (s. 8(1)(c)(i)).

Second, the employee must be in charge of, or ministering to, a diocese, parish or congregation, or be engaged exclusively in full-time administrative service by appointment of a religious order or a religious denomination (s. 8(1)(c)(ii)). (As described in the Lefebvre decision, the "functions" requirement in what now is s. 8(1)(c)(ii) was added in 1956.)

In addition, to claim the deduction, the employee must include with his or her return a certificate of the employer (on form T1223) certifying that the conditions for the deduction have been satisfied: s. 8(10).

Member of religious order

It has been suggested that the following characteristics would be indicative of a religious order: its purpose should be primarily religious; its members must agree to adhere to a strict regime of dedication to its goals to the detriment of their own material well-being; the members' commitment should be full-time and of a long-term nature; the spiritual and moral discipline under which they live must be markedly stricter than that to which lay members are expected to adhere; admission to it must be in accordance with strict standards; and there should generally be a sense of communality (McGorman - see also Kirkbride). Organizations whose purposes are primarily educational are not religious orders (Zylstra Estate, Oligny) nor, apparently, is an organization whose principal purpose is assistance to needy persons or personal development through the conduct of sports or outdoor activities (Oligny cf. Alemu).

It has been found that an organization whose members earn comfortable incomes, devote a significant part of their time to raising funds for their own support and are free to earn income from other sources, is not a religious order (Koop). However, a trans-denominatinal Christian organization that operated group homes for developmentally challenged adults and children was found to be a religious order notwithstanding that is used a structured pay scale for employees rather than paying them only enough to satisfy their basic needs (Alemu).

Member of clergy

Bowman TCJ stated that although ordination was not required in order to qualify as a member of the clergy, what was required was "a formal act of recognition whereby that person is set apart from the other members of the church as a spiritual leader" together with "a formal, serious and long-term commitment to the Ministry" (Kraft). In Tidd, V.A. Miller stated that a spiritual leader "is one who... is aimed at changing people" and "who not only prays with those in need but offers them spiritual guidance." Reference also has been made for a requirement that there be some formal recognition (akin to ordination) (Kirkbride).

Regular minister

In Hardy v. The Queen, 98 UDTC 24, [1997] TCJ 1191, Rip J. noted (at para. 21) that in Saltmarsh v. Adair, [1942] SC(JC) 58, the justices:

...appear to infer that a "regular minister" is one who performs spiritual duties, the conduct of religious services, the administration of sacraments and the like;

ii is appointed by a body or person with the legitimate authority to appoint or ordain ministers on behalf of the denomination; and

iii is in a position or appointment of some permanence.

In the Lefebvre case, the Court approved the presence of a requirement that, in order to qualify as a regular minister, the individual's appointment must be of a permanent character. Accordingly, "the fact that a person hold a position or performs duties in a relatively permanent manner will not suffice if the person does not also have a legitimate appointment." As under canon law, Roman Catholic pastoral agents (unlike ordained ministers) were not considered to have a permanent status, they did not qualify as regular ministers.

A regular minister has been found to include an individual who regularly ministers to the spiritual need of a congregation (or parish or diocese) in a substantial way (see Austin, where a credentialed but not ordained minister of a Pentecostal church was found to be a regular minister notwithstanding that he devoted most of his time to musical matters), and who is qualified to so minister to the congregation's spiritual needs (see Kirkbride).

A half-time staff-associate can qualify as a "regular" minister (Kolot).

Ministering to congregation

As it is accepted, for example, that a chaplain at a correctional institute can qualify (see Shaw), the meaning of congregation appear to be broad. In the course of finding that a group of students were not a congregation to whom a professor of religious knowledge ministered, Bowman TCJ referred to a congregation as an "assemblage or gathering of persons to whom a minister provides spiritual counselling, advice, illumination and inspiration" (Fitch). In McNeil, Rowe TCJ referred to "a gathering for a shared religious purpose recognized by the Church," although the taxapyer in that case (a priest who also worked as a psychologist at a health clinic) was entitled to the deduction in respect of his part-time position as a chaplain to the RCMP (see also Kraft). The faculty and staff at the Ontario Bible College were not a congregation because they were encouraged to rely or in fact relied upon their own denominational church congregations for their primary spiritual life (Zylstra Estate).

Consistently with s. 33(2) of the Interpretation Act (references to the singular include the plural), ministering to multiple congregations can satisfy the test in s. 8(1)(c)((ii)(B) of ministering to a congregation (Kraft).

In McGorman, Bowman TCJ stated that "'to minister' means merely 'to serve', or 'to attend to the needs of'" and that the when Jesus traveled throughout the Holy Land dealing with people from all backgrounds and places it could not "reasonably be said that He was not ministering to a congregation." An individual can qualify as a member of the clergy who is ministering to a congregation even though he or she does not preach sermons (Tidd).

Full-time administrator appointed by religious order or denominaton

Appointment by an ecumenical or multi-denominational organization likely will not qualify as appointment by a religious denomination (Reimer). As "full-time" is used in contra-distinction to part-time, carrying out some pastoral duties will not necessarily disqualify an administrator as being full-time (McGorman). An individual who performs administrative services for an organization which does not qualify as a religious denomination nonetheless may qualify for the deduction if that organization was controlled by a religious denomination, so that it can be said that he or she was appointed by a religious denomination (Fitch), or where the controlling religious denomination in fact appointed him or her (Reimer).

Principal Place of Residence v. Principal Residence

The deduction under s. 8(1)(c)(iii) refers to "the residence or other living accommodation occupied by the taxpayer;" and the deduction under s. 8(1)(c)(iv) refers to "the taxpayer's principal place of residence (or other principal living accommodation), ordinarily occupied during the year by the taxpayer." CRA has stated that "principal place of residence" under s. 8(1)(c)(iv) differs from "principal residence" in that, while the taxpayer can designate his or her principal residence, the taxpayer's "principal place of residence" is always a question of fact. Whether the taxpayer "ordinarily occupies" a principal place of residence is analogous to whether the taxpayer is "ordinarily resident" in that place (4 June 2013 Memorandum 2012-0455961I7). (See s. 2(1) for the meaning of "ordinarily resident.")

Remuneration limitation

S. 8(1)(c) contemplates that an employed clergy person or administrator described in s. 8(1)(c)(i) and (ii) is accorded a deduction from his or her income from employment. It follows that an individual who is not employed, for example, a retired clergy person, will not be entitled to the deduction. Similarly, where a parson earns income that does not qualify as income from an office or employment, e.g., contributions received directly from members of the congregation, such income will not entitle him or her to a deduction under s. 8(1)(c) (Rumford).

Payments received by a chaplain from her employer's wage replacement plan during an extended sick leave were found to be "remuneration" so that she continued to be eligible for the deduction (Shaw).

Cases

Canada v. Lefebvre, 2010 DTC 5042 [at 6691], 2009 FCA 307

The taxpayers, who were Roman Catholic pastoral agents, did not qualify for the clergy residence deduction in 8(1)(c). In 1956, the provision (which originally had no function requirement) had been expanded so that the deduction would now be limited to persons who fulfilled the functions now described in s. 8(1)(c)(ii). As it was therefore status and not functions that are described in s. 8(1)(c)(i), an individual who performs duties in a relatively permanent fashion will not qualify as having the status of a regular minister if his or her appointment is not of a permanent nature. "In canon law, the distinction between ordained ministers and lay faithful (among whom pastoral agents are recruited) remains as fundamental today as it has always been;" and "only ordained ministers are conferred a status that can be said to be permanent." (Paras. 39-40.)

Canada (Minister of Citizenship and Immigration) v. Khan, 2005 DTC 5715, 2005 FC 398

The Tax Court Judge had not erred in finding that the taxpayer, who was engaged in full-time administrative service, had been appointed to his position by the Christian and Missionary Alliance of Canada (a religious denomination) and not by the Evangelical Fellowship of Canada or the World Evangelical Fellowship, which were not.

Rumford v. The Queen, 94 DTC 6121 (FCA)

The taxpayer was not an employee of the Erindale Bible Chapel but instead held a position there as a "commended worker." His compensation consisted of a fixed stipend of $3,660 each quarter plus the total voluntary contributions made by members of the congregation through envelopes on which his name was written.

Because the definition of "office" was restricted to a position entitling an individual to a "fixed or ascertainable stipend or remuneration", the taxpayer's deduction under s. 8(1)(c) was restricted to the fixed portion of his remuneration.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Office		99

Zylstra Estate and Small v. The Queen, 94 DTC 6687 (FCTD), aff'd sub-nominee McRae v. The Queen, 97 DTC 5124 (FCA)

The taxpayers, who were, respectively, the President of the Institute for Christian Studies ("ICS"), the Director of Alumni of Ontario Bible College and Ontario Theological Seminary ("OBC"), the President of OBC and the Director of Educational Services of the ICS, were not entitled to the deduction. Neither OBC nor ICS was a religious order given that there was "no expression of faith or of religious purpose of either institution apart from the educational purpose of each, that would mark the institution, and its members as distinct from the churches or denominations that each served" (p. 6693), and given that their primary purpose was educational. In addition, in the case of the taxpayers who had positions at OBC and who alleged that they were members of the clergy who ministered to a congregation, OBC could not be considered to constitute a congregation "since on the evidence the institution was seen as representative of, and serving several denominations through its educational programs" and "moreover, faculty, staff and students, and clearly alumni, were encouraged or had relied upon their own denominational church congregations for their primary spiritual life" (pp. 6696-7).

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - Noscitur a Sociis	noscitur a sociis and ejusdem generis compared	231

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - Ordinary Meaning		96

Administrative Policy

23 January 2020 External T.I. 2019-0796121E5 F - Déduction pour résidence des membres du clergé

s. 8(1)(c) does not entail any home office requirement

Is a regular minister, in addition to meeting the other conditions set out in IT-141R, required to maintain an office in the taxpayer's residence or use it in connection with the taxpayer’s duties as a member of the clergy in order to qualify for the clergy residence deduction? CRA responded:

[P]aragraph 8(1)(c) does not require that the taxpayer in question maintain an office in the taxpayer's residence or use it in connection with the taxpayer’s duties as a member of the clergy in order to qualify for the clergy residence deduction.

23 January 2014 External T.I. 2012-0467711E5 - Clergy Residence Deduction

flunked 4 of 6 religious order criteria

An organization did not appear to qualify as a religious order as there was no indication of financial self-sacrifice or more rigorous working conditions than for non-religious organizations, that all members had made long-term work commitments and had committed to live markedly stricter lifestyles, and of strict screening criteria.

5 November 2013 Internal T.I. 2013-0494611I7 - Religious order

CRA reiterated its position in IT-141R that the characteristics indicative of a religious order are that:

The purpose of the organization should be primarily religious.

The members must agree to adhere to and in fact adhere to a strict moral and spiritual regime of self-sacrifice and dedication to the goals of the organization to the detriment of their own material well-being.

The commitment of the members should be full-time and of a long-term nature. In some cases it may be for life, but this is not essential. It is important that it not be short term, temporary or part-time.

The spiritual and moral discipline and regime under which the members live must be markedly stricter than that to which the lay church members are expected to adhere.

Admission to the order must be in accordance with strict standards of spiritual and personal suitability.

There should generally be a sense of communality.

CRA provided more detailed commentary on the second, fourth, fifth and sixth characteristics, but noted that the sixth has minimal weight.

4 June 2013 Internal T.I. 2012-0455961I7 - Clergy Residence Deduction

In principle, two clergy members who are spouses could claim the s. 8(1)(c) deduction in respect of two different properties, provided that each could establish that the property in question were his or her own principal place of residence.

CRA noted that "principal place of residence" differs from "principal residence." Unlike the principal residence designation, a taxpayer's "principal place of residence" is always a question of fact, which CRA maintains means "the place where the employee maintains a self-contained domestic establishment." CRA stated:

In our view, the place where the individual normally sleeps is a significant factor in making this determination. Other significant factors include the location of the individual's belongings, where the individual receives his or her mail, and where the individual's immediate family, including the individual's spouse or common-law partner and children, reside."

Whether the individual "ordinarily occupies" a principal place of residence is equivalent to whether the individual "ordinarily resides" at the principal place of residence.

28 April 2004 External T.I. 2004-006767 -

An employee of a particular religious organization, whose duties as a minister are reduced, would meet the function test provided ministering is still an integral part of that job.

9 August, 1995 T.I. 951067 (C.T.O. "Clergyman's Residence Deduction")

The Pastoral Associate/Co-ordinator of Religious Education at a Roman Catholic church who was engaged exclusively in full-time administrative service by appointment, did not qualify for the deduction because the individual was not a member of the clergy.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(c)		21

9 August, 1995 T.I. 951067 (C.T.O. "Clergyman's Residence Deduction")

The pastoral Associate/Co-Ordinator of religious education at a Roman Catholic Church would not qualify as a member of the clergy.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(c)		38

28 July 1995 Memorandum 951399 (C.T.O. "For Admin of XXX")

Walsh v. Lord Advocate, [1956] 3 All E.R. 129 established that in order for there to be a "religious denomination" there must be a lay element which is being ministered to as well as a ministering or clerical element having special status. Accordingly, an Association being considerably RC did not qualify as a religious order or a religious denomination because the Association did not recognize a place in its organization for a lay element.

27 March 1992 T.I. and 15 April 1992 Memorandum (Tax Window, No. 18, p. 8, ¶1835)

Where both members of a couple are members of the clergy each performing duties which qualified them separately for the deduction, then where the couple pay rent, the rent should be allocated between them on some reasonable basis. Where the couple own their residence, they may deduct a fair rental value of the premises.

Subparagraph 8(1)(c)(iv)

Paragraph 8(1)(f) - Sales expenses

Commentary

S. 8(1)(f) permits a commissioned salesperson to deduct amounts expended by him or her for the purpose of earning income from employment to the extent of the commission income or similar amounts received by him or her in the year in question, provided that various requirements are satisfied. These requirements are as follows:

the taxpayer must be employed in the year in question in connection with the selling of property or the negotiating of contracts for the employer (preamble of s. 8(1)(f));
the taxpayer must be obligated under the contract of employment to pay his or her own expenses (s. 8(1)(f)(i));
the taxpayer must be ordinarily required to carry on the duties of employment away from the employer's place of business(s. 8(1)(f)(ii));
the taxpayer must be remunerated in whole or in part by commissions or other similar amounts fixed by reference to the volume of the sales made or the contracts negotiated (s. 8(1)(f)(iii));
the taxpayer must not be in receipt of an allowance for travel expenses in respect of the year in question which is not included in the taxpayer's income by virtue of s. 6(1)(b)(v); s. 6(1)(b)(v) excludes, from the allowances that are otherwise includible in employment income, reasonable allowances for travel expenses received by an employee from the employer in respect of a period when the employee was employed in connection with the selling of property or negotiating of contracts for the employer (s. 8(1)(f)(iv));
the amounts expended by the taxpayer must not be capital expenditures (except as described in s. 8(1)(j) respecting capital cost allowances for motor vehicles that are used or aircraft that are required for use in the performance of duties of the office or employment, or certain related interest financing costs) (s. 8(1)(f)(v));
the amounts expended are not described in s. 18(1)(l) (respecting expenses for the use or maintenance of a yacht, camp, lodge, or golf course or facility (subject to some exceptions) or membership fees or dues for most clubs) (s. 8(1)(f)(vi)); or
the amounts expended qualified as deductions in computing the automobile standby inclusion under. 6(1)(e) (s. 8(1)(f)(vii)).

In addition, to claim the deduction, the employee must include with his or her return a certificate of the employer (on form T2200) certifying that the conditions for the deduction have been satisfied: s. 8(10). A further requirement for the deduction of meal expenses is that the meals were consumed during a period while the taxpayer was required under the duties of employment to be away, for a period of not less than 12 hours, from the municipality in which the employer's establishment to which the taxpayer ordinarily reported to work was located (and, where applicable, also from the the metropolitan area in which that establishment was located): s. 8(4).

Where there is no explicit requirement to this effect in the taxpayer's contract of employment, a court likely will be prepared to infer that there nonetheless was a requirement for the taxpayer to incur and pay the expenses in question (see 2 above), or to ordinarily carry out his or her duties of employment away from the employer's place of business where failure to do so would have had a prejudicial effect on his or her career or continued employment (Verrier, Gilling), or on his or her ability to generate future commissions (Frappier). However, the employee may not be able to satisfy this test (respecting, for example, car expenses) where the collective bargaining agreement establishing the terms of his employment expressly states that use of a car is not complulsory (Hudema).

The jurisprudential tests developed in connection with applying the general prohibition (in the absence of specific provisions to the contrary) in s. 18(1)(b) against the deduction of capital expenditures in the computation of income from a business or property also apply to the prohibition in s. 8(1)(f)(v) against the deduction of capital expenditures in the computation of income from an office or employment (see 6 above). Similarly to the jurisprudence on the acquisition by a corporation of customer lists (see Tomenson, Sunstrum, Cumberland Investments, Butler, Dominion Dairies and Southam Business Publications), the acquisition by a broker employed by an investment dealer of the customer lists of a departing employee was found to be a capital transaction. However, damages which broker employees were required to pay to their former employer upon moving to a competitor were not capital expenditures (Raphael, Douthwright).

Cases

Urquhart v. Canada, 2016 FCA 76

implied obligation to incur costs to earn enhanced commissions under oral contract

The taxpayer was employed under an oral contract by a Ford dealership in Miramichi, New Brunswick. In allowing the taxpayer’s appeal from the disallowance of expenses claimed under s. 8(1)(f), Rennie J.A. stated (at para. 6):

[R]egarding the contract objectively, it was an implicit or implied term that the employee would be required to incur certain costs in order to earn the commissions contemplated by the contract; see Sattva [2014 SCC 53, [2014] 2 S.C.R. 633] at para 49 [“in contractual interpretation, the goal of the exercise is to ascertain the objective intent of the parties — a fact-specific goal — through the application of legal principles of interpretation”].

Rennie J.A. further found that the Tax Court had erred in not distinguishing required expenses from discretionary expenses, stating (at para. 7):

He did not identify and segregate those expenses that were related to development and marketing of the appellant’s sales (which he was not required to incur under the contract) and those expenses which, when the employment contract was viewed objectively, were directly needed for the appellant to fulfill his responsibilities and obtain his entitlements under the contract (to sell cars and earn commissions) and were expressly agreed with the dealership (charge back).

The required expenses consisted of vehicle transfer costs to obtain the higher commission the dealership had agreed to pay the taxpayer if the cars were present in Miramichi, and the costs of purchasing accessories which he and the dealership had agreed to share. They excluded various promotional costs.

Gifford v. Canada, 2004 DTC 6120, 2004 SCC 15, [2004] 1 S.C.R. 411

The acquisition by the taxpayer, who was employed as a broker by an investment dealer, of the customer lists of a departing employee of the same firm, was found to be made on capital account for purposes of s. 8(1)(f)(v). The purchase "significantly expanded Mr. Gifford's client network, the structure within which he earned his employment income" and the payment was intended to secure a lasting advantage.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Financing Expenditures		168
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Goodwill, Trademarks and Customer Lists		68

Hudema v. The Queen, 94 DTC 6287 (FCTD)

The taxpayer was not required to "pay his own expenses" as required by s. 8(1)(f) or "to pay the travelling expenses incurred by him" as required by s. 8(1)(h) given that the collective bargaining agreement specifically said that no employee was obliged to use his car, although it contemplated that he could be authorized to use his car. Furthermore, the receipt by him of a weekly car allowance of $44 per week plus reimbursement for actual gas, oil, lubrication and parking expenses was found to be a reasonable allowance given that the taxpayer "did not demonstrate that it was unreasonable for his employer to expect him to use his vehicle in an efficient way, with the allowance being expected only to pay for such incremental use of his car as his work required" (p. 6290).

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Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(v)		156

The Queen v. Gilling, 90 DTC 6274 (FCTD)

implied obligation to incur travel expenses in order to perform marketing duties

Part of the responsibilities of the manager of a grain elevator pool was the sale on a commission basis of farm supplies, in connection with which the taxpayer attended on farmers, delivered farm supplies, and provided services on site. Given "that his failure to perform these duties would have had a prejudicial effect on his employment or on his career" (pp. 6276-7), the travel and other expenses incurred by him were deductible.

Verrier v. The Queen, 90 DTC 6202 (FCA)

implied obligation to incur expenses away from showroom

followed in McKee v. The Queen, 90 DTC 6205 (FCA)

The taxpayer, who was a highly successful automobile salesmen employed by a Winnipeg dealership, deducted in computing his commission income: expenses of gas and oil for his demonstrator (provided free of charge by his employer) and for two "courtesy" cars owned and provided by him to his customers for their own use when their cars were being serviced; parking charges incurred while conducting business; advertising carried out by him on his own to seek customers for himself; entertainment expenses incurred for the benefit of customers or prospective customers; and commissions or finders' fees paid by him to persons referring customers to him where the referral resulted in a sale. Mahoney J. held that these expenses were deductible:

"It would seem to me that a failure to sell enough cars would have resulted in the Appellant's discharge and if both employer and salesman recognize that enough cars can only be sold if the salesman conducts some of his work away from the showroom, then the salesman is ordinarily required to carry on the duties of his employment away from his employer's place of business."

In the trial division Strayer J. stated that the term "ordinarily" describes "activities which are normal, or of regular occurrence".

Words and Phrases

ordinarily

The Queen v. Malik, 89 DTC 5141 (FCTD)

Reed, J. rejected an argument that interest on a loan that was no longer being used by the taxpayer to earn income from property was deductible because as a life insurance salesman he was required to keep himself in good financial standing. "Amounts paid with respect to debts unconnected to the employment, to enable a person to remain solvent and thereby retain a licence which allows him or her to engage in a profession or calling, are not closely enough connected to the earning of the employment income to fall under paragraph 8(1)(f).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 20 - Subsection 20(1) - Paragraph 20(1)(c)		23

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Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose		78

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Evidence	oral evidence of accountign transactions	126

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Onus		65

Administrative Policy

18 February 2015 External T.I. 2012-0471731E5 F - Déductibilité du droit d’usage pour automobile

reduced auto enjoyment not an expenditure

The “Employer” provides a commissioned sales person (who satisfies the s. 8(1)(f) conditions) with an automobile, and includes in the computation of the employee's income a taxable benefit for the use of the automobile. However, the automobile is painted an unusual color and displays the logo of the Employer for promotional reasons.

May the taxable benefit to the employee, for the use of automobiles, be reduced to reflect the fact that the employer has a commercial advantage? If not, may the employee deduct an amount for advertising in the calculation of employment income? After finding that the taxable benefit to the employee could not be reduced, also responded negatively to the second question, stating:

[W]e emphasize the keyword "expended." …

[N]o amount was expended by the taxpayer for advertising. Thus,,, the taxpayer is not entitled to an amount allocated in computing its income.

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Tax Topics - Income Tax Act - Section 6 - Subsection 6(2)	no reduction in benefit amount for benefits provided by employee to employer	212

11 April 2016 External T.I. 2015-0564161E5 F - IT-522R par. 36

non-taxable s. 6(1)(b)(v) allowance for one type of expense does not preclude s. 8(1)(f) deduction for other types

An employee (the "Seller"), who performed duties related to the selling of property for an employer, received a reasonable allowance, for example, an allowance based on the number of kilometres travelled, for travel expenses, that was not taxable under s. 6(1)(b)(v), and also spent additional amounts to fulfill duties of employment, for example, for meals, cell phone and promotional gifts. Does the receipt of the s. 6(1)(b)(v) allowance preclude the deduction under s. 8(1)(f) of the other expenses?

After quoting from IT-522R, paras. 34(a) and 36 as representing departures from the literal wording of s. 8(1)(f)(iv), CRA stated:

[A]ccording to this position, an allowance based on the number of kilometres travelled for motor vehicle expenses which is reasonable does not reduce the deduction claimed under paragraph 8(1)(f) by a Seller for reasonable meal expenses as they are two distinct types of expenses and the Seller has not received any non-taxable amount for meal expenses.

Thus, despite a Seller having received an allowance, which is not included in computing income under subparagraph 6(1)(b)(v), for a specific type of expense, it is possible to deduct other reasonable amounts expended to earn income from employment provided that all the other requirements of paragraph 8(1)(f) are satisfied.

8 October 2010 Roundtable, 2010-0373481C6 F - Remboursement de commissions

required repayment of sales commission potentially deductible under s. 8(1)(f)

An employee received an $80,000 sales commission in 2008 but was required to repay the commission in 2009 consequent on the cancellation of the related sales contract. Should the employer issue an amended T4 for the 2008 year, or should the correction be made in the 2009 tax returns of the employer and employee? CRA responded:

[P]aragraph 8(1)(f) could allow the taxpayer to deduct the amount of commissions repaid in 2009 in computing the taxpayer's income for the 2009 taxation year from an office or employment as an amount spent in 2009 to earn that income, provided all the requirements of subparagraphs 8(1)(f)(i) to (iv) are satisfied.

23 April 1991 T.I. (Tax Window, No. 2, p. 22, ¶1210)

An incentive award based on the achievement of pre-determined sales targets, personal utilization rates and on qualitative management criteria set annually by the company for each employee, and not paid unless the company has achieved a pre-determined annual level of overall profitability, does not qualify as a commission or similar amount.

13 January 1989 Memorandum (June 1990 Access Letter, ¶1299)

RC accepts the Neville case as a precedent.

Articles

Beam, Laiken, "Employee Deductions", 1991 Canadian Tax Journal, p. 338.

Paragraph 8(1)(g) - Transport employee’s expenses

Commentary

S. 8(1)(g) permits employees of a person whose principal business is the transport of passengers and/or goods to deduct qualifying expenditures to the extent that the employee is not reimbursed (and is not entitled to be reimbursed) for the expenditures.

Two requirements are stipulated:

the taxpayer's duties of employment required the taxpayer to regularly travel away from the employer's establishment where the taxpayer reported for work and away from the metropolitan area (if any) where that establishment was located, on vehicles used by the employer to transport the goods or passengers (s. 8(1)(g)(i));
those duties of employment also required the taxpayer to regularly make disbursements for meals and lodging while so away from that municipality and metropolitan area (s. 8(1)(g)(i)).

The phrase "meals and lodging" referred to in the 2nd test is to be read conjunctively, so that if the employee is only required to make disbursements for meals, the deduction under s. 8(1)(g) will not be available (Renko, Crawford). However, in Kasaboski, this restriction was interpreted as applying only where the employee returned to his home each day rather than being on the road for days or weeks on end - and it was found in any event that the "and lodging" requirement was satisfied if on most travel days the employee (who slept in the cab of the truck) only incurred meals expenses but on rare occasion incurred lodging expenses for which he or she was usually reimbursed by the employer. Elwood similarly notes that, although an employee must have both meal and lodging expenses to be eligible for a deduction, there is no requirement that the meals be connected to the lodging.

The question as to whether two municipalities are part of the same metropolitan area may be determined by the degree of integration with each other through infrastructure (such as roadways) and public services (Walls, Foster).

Cases

Renko v. Canada (Attorney General), 2003 DTC 5417, 2003 FCA 251

The phrase "meals and lodging" was to be read conjunctively, with the result that a deduction claimed in respect of meals alone was properly disallowed by the Minister.

Walls v. The Queen, 76 DTC 6309, [1976] CTC 501 (FCTD)

The establishment of the taxpayer's employer to which he reported to work was in Windsor. He was entitled to deduct unreimbursed meal expenses incurred by him while in Detroit. Detroit did not constitute part of the metropolitan area of Windsor as it was not integrated with the City of Windsor: "for example, there are no common infrastructures, municipal services such as streets, water, fire or police protection, and there is no political connection." (p. 6312) In addition, Detroit was so much larger than Windsor that it was nonsensical to refer to Detroit as part of the Windsor metropolitan area.

Administrative Policy

27 July 1998 T.I. 980774

Langley and Abbotsford are part of the metropolitan Vancouver area, and Nisku is part of the metropolitan Edmonton area.

8 February 1994 Memorandum 940065 (C.T.O. "Employment Expenses")

General discussion.

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Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(xi)		56
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(i) - Subparagraph 8(1)(i)(ii)		62

Paragraph 8(1)(h) - Travel expenses

Commentary

S. 8(1)(h) provides for the deduction of amounts expended by a taxpayer for traveling in the course of the taxpayer's office or employment where

the taxpayer is ordinarily required to carry on the duties of employment away from the employer's place of business or in different places (s. 8(1)(g)(i)); and
the taxpayer is required under the contract of employment to pay for such expenses (s. 8(1)(h)(ii));
the taxpayer is not in receipt of a travel allowance that (by virtue of s. 6(1)(b)(v), (vi) or (vii)) is not included in his or her income for the year in question (s. 8(1)(g)(iii)); and
the taxpayer does not claim a deduction for the year under s. 6(1)(e), 6(1)(f) or 6(1)(g).

Qualifying motor vehicle expenses are deducted under the similarly worded provisions of s. 8(1)(h.1).

A further requirement for the deduction of meal expenses is that the meals were consumed during a period while the taxpayer was required under the duties of employment to be away, for a period of not less than 12 hours, from the municipality in which the employer's establishment to which the taxpayer ordinarily reported to work was located (and, where applicable, also from the the metropolitan area in which that establishment was located): s. 8(4).

As the employee is only entitled to deduct expenses expended in the course of the taxpayer's employment, traveling expenses incurred in traveling between work and home (which generally are considered to be of a personal nature, provided that the home is not used as an office or other work site) do not qualify for deduction even if the "ordinarily away" requirement of s. 8(1)(h)(i) is satisfied (Diemert, Vickers, Blackburn, Gutscher - and the jurisprudence under s. 8(1)(h.1)). However, the general principle, that travel from home to work is a personal expense, is typically confined to cases where the taxpayer's destination is a regular place of business (see Velnot). Accordingly, in the Homsy case, travel expenses incurred by an auditor in traveling between home and various different audit sites were found not to be of a personal nature (see also Moore). Where the taxpayer commutes throughout the year to the same special work site of his employer, the "ordinarily...away" requirement will not be satisfied (Wright), unless the site is not a permanent establishment of the employer (see Martorelli). Where the employee regularly works at a home office, travel to the office of the employer in another city may qualify for deduction (Toutov).

An employee may be considered to be ordinarily required to carry on his or her duties away from the employer's place of business (which can include a school) where he or she annually attends professional development seminars is accordance with the employer's expectations (Imray), is expected to attend school board meetings at a different location (Patterson), is expected as an implied term of her employment contract to attend such matters as principals' meetings and extracurricular events (Moore), is required to attend a training course in another city (Tremblay) or in the course of his duties as a fire chief must spend time away from the fire station responding to emergency calls or conducting inspections (Gariépy). Reporting to work daily at a trailer of the employer is not considered to be inconsistent with the employer's place of business being elsewhere (Freake). However, the taxpayer will not satisfy the "ordinarily away" requirement if for each shift he or she reports to work at a different establishment of a different employer (Ménard).

In appropriate circumstances, the costs of maintaining a small apartment at a special work site apart from the taxpayer's home can qualify for deduction (Gariépy).

A requirement under the taxpayer's duties of employment to carry on those duties away from the employer's place of employment or in different places, or a requirement under the contract of employment to pay for the expenses incurred in the related travel generally will be inferred where failure to do so could impair job function to the point of termination (Mina), or where such failure would likely result in a bad performance evaluation which could affect the employee's future with the employer for years to come (Hoedel, see also Rozen).

Cases

Imray v. The Queen, 98 DTC 6580, 1998 CanLII 8609 (FC) (FCTD)

The taxpayer was required to attend an annual professional development seminar for teachers and had done so for 28 of the previous 29 years. In finding that the taxpayer's related traveling expenses were deductible, Campbell J. stated (at p. 6585) that he had "no hesitation in finding that teachers' convention attendance is 'normal', 'a matter of regular occurrence', 'commonly' and 'usually' occurs, and is a requirement which takes teachers 'from time to time away from the places which they usually work'."

Tremblay v. The Queen (1997), 223 N.R. 85, 1997 CanLII 5678 (FCA (FCA)

After the taxpayer, who lived in Val Bélair, was hired by the RCMP, he was immediately sent to Montreal to take an English course from September 1991 to May 1992. In affirming a finding that the taxpayer was entitled to deduct various living expenses incurred by him during this period, the Court stated that "even a literal interpretation of subparagraph 8(1)(h)(i) leads to the conclusion that the respondent was ordinarily carrying on the duties of his employment away from his employer's place of business while he was assigned to Montreal during the 1991 and 1992 taxation years".

The Queen v. Chrapko, 88 DTC 6487, [1988] 2 CTC 342 (FCA)

The taxpayer worked 75% of his time as an employee of the Ontario Jockey Club at two race tracks in Toronto, and 25% of his time at a race track in Fort Erie, and resided in Niagara Falls. Given that he ordianrily worked at his employers establishments in Toronto, he was entitled to deduct traveling expenses incurred while working at the Fort Erie race track, but not at the two Toronto race tracks.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		57

The Queen v. Patterson, 82 DTC 6326, [1982] CTC 371 (FCTD)

Automobile expenses incurred by a school principal as a consequence of attending numerous School Board meetings, student sports events and student nature study trips were deductible.

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Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(a)		18

The Queen v. Diemert, 76 DTC 6187, [1976] CTC 301 (FCTD)

A locomotive engineer who lived in Regina but for the most part was assigned to work for five or six days at a time in Assiniboia was unable to deduct his expenses (at 10¢ per mile) in driving to and from Assiniboia. Since the starting point of his work was found to be Assiniboia rather than Regina (notwithstanding that his assignment to Assiniboia was determined by the Regina establishment of his employer), his expenses were incurred in the course of traveling to his work rather than on his work, and the expenses accordingly were not incurred "in the course of his employment".

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Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(i) - Subparagraph 8(1)(i)(ii)		70

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Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(f)		56

Administrative Policy

18 March 2014 External T.I. 2012-0438941E5 - Deduction of expenses against executor fees

executor not required to bear expenses

An executor of an estate is considered to earn fees from an office rather than in the course of a business. The executor incurs expenses, with the estate being wound-up before the expenses could be reimbursed. Such expenses were not deductible under s. 8(1)(h) or (h.1) given that the estate would generally be required to reimburse the executor for his costs so that it could not be said that he was required to bear those costs.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Office	executor holding an office	32

22 March 2011 Internal T.I. 2010-0387551I7 F - Dépenses - travailleur indépendant

expenses of costumes, breast implants and rejuvenation expenses of erotic website were non-deductible

The taxpayer operated an erotic website for which she was the model and her husband took care of the technical side, with profits split equally. It was assumed that they were not in partnership. The Directorate stated:

[T]he costs of clothing, costumes and fine lingerie of a self-employed person who carries on a business in the form of an erotic website are personal expenses that are not deductible against the business income of the taxpayer where such clothing could be used other than in the course of carrying on the business. Those expenses also cannot qualify for capital cost allowance.

Similarly, fees for a fitness center membership, for breast implants, cosmetic treatments (such as botox injections, rejuvenation treatments, and hair removal) incurred by the taxpayer are not deductible since they represent, by their nature, expenses of a personal nature.

The CRA summary stated: “the expenses appear to be of a personal nature.”

Locations of other summaries		Wordcount
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 8 - Paragrpah 8(i)	erotic costumes used on website did not qualify	114

12 February 1998 External T.I. 5-973033 -

Employees, who cannot reside in the community because of cultural constraints, will not be able to deduct their travel expenses between their homes and their work location, because such expenses are considered personal expenses.

9 February 1990 Memorandum (July 1990 Access Letter, ¶1313)

Tree planters who report to several job sites in the course of the year and who cannot be considered to regularly or ordinarily report to any one place of business of the employer, can clearly meet the "in different places" requirement.

11 January 1990 Memorandum (June 1990 Access Letter, ¶1249)

Explanation as to why neither s. 8(1)(g) or (h) permits the deduction of the cost of food used for a meal which an individual carries from home to the job.

9 August 1989 Directive ASG-89-30 (June 1990 Access Letter, ¶1288)

Guidelines respecting whether an employee is ordinarily required to carry on his employment duties away from the employer's place of business and whether under the contract of employment he is required to pay the expenses incurred.

9 January 1989 Memorandum (June 1990 Access Letter, ¶1294)

In light of the Chrapko decision, a determination will have to be made of each employee's attendance at a particular track in order to locate the one where he usually works.

Subparagraph 8(1)(h)(i)

Cases

The Queen v. Phyllis Moore, 90 DTC 6200 (FCA)

It was an implied term of a school principal's employment contract that she travel away from the school premises in connection with such matters as attending principals' meetings away from her school, attending evening meetings at her school and participating in extracurricular activities. If she had not done so, she likely would have received unfavourable performance appraisals. Accordingly, the bulk of such expenses were deductible. However, "travel between home and her school, even though outside regular hours of work, was not in fulfillment of the requirement to carry on her duties 'away from her employer's place of business or in a different place', and were not deductible. "

The Queen v. Wright, 81 DTC 5004, [1981] CTC 14 (FCTD)

The taxpayer, who was employed by a construction company with its head office in London, Ontario, commuted throughout the 1975 taxation year directly from his residence to a construction site in Aylmer. Since the Aylmer construction site was a place of business of his employer, and he worked there throughout the year, his appeal failed.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h.1)		55

Administrative Policy

12 April 2017 External T.I. 2016-0642571E5 - Employee travel - board and lodging

logging employees working at a remote logging site unable to deduct their room and board fees

Employees travel from home to a remote forest camp where they receive board and lodging for a charge. Their employeer transports them daily between the camp and the logging site. In finding that the fees charged to them were not deductible under s. 8(1)(h), CRA stated:

[T]he camp is a place of business for [the employer]. Therefore…the expenses were not incurred while travelling away from the employer’s place of business… .

Subparagraph 8(1)(h)(ii)

Cases

The Queen v. Mina and Jacobi, 88 DTC 6245, [1988] 1 CTC 380 (FCTD)

Educational consultants employed by the North York Board of Education were entitled to deduct automobile expenses incurred by them in connection with making frequent daily trips between five schools and their office location in light of evidence that although lack of a car would not immediately lead to termination, termination would follow if the employee's job function were impaired. The receipt of (inadequate) mileage allowances did not affect this conclusion.

In determining the deductible car expenses, the percentage of miles driven in employment was applied to operating costs (gas, oil, repairs and car washes) and a combined percentage, reflecting both mileage and time used or available for employment, was applied to ownership costs (CCA, interest, licences and insurance).

Hoedel v. The Queen, 86 DTC 6535, [1986] 2 CTC 419 (FCA)

The taxpayer, who was a member of the Canine Division of the Regina Police Department, was provided with a vehicle that was specially adapted for transporting his dog and a general allowance of $70 per month. Transportation of the dog on his off-duty hours was a condition for him to be a member of the Canine Division in the sense that non-compliance with that condition "would likely result in a bad performance evaluation which could affect a member's future in the police force for years to come. "The taxpayer accordingly was entitled to deduct expenses incurred in transporting the dog between home and the police station, as well as increased expenses on trips of a purely personal character.

The Queen v. Jeromel, 86 DTC 6370, [1986] 2 CTC 207 (FCTD)

It was held that the taxpayer, who was granted a one-year sabbatical from his duties as a teacher for the purpose of undertaking graduate studies, was not required to undertake the course of studies as part of his duties of employment, and received his salary for the year on account of his previous employment rather than in payment for the current performance of duties. Travelling expenses which he incurred in the course of pursuing his studies were non-deductible.

Rozen v. The Queen, 85 DTC 5611, [1986] CTC 50 (FCTD)

A staff accountant at Thorne Riddell was required as an implied term of his employment contract to use his automobile in the course of performing audits at client premises at various locations within the City of Vancouver, and accordingly was entitled to the deduction. "If an employee is obliged to travel to do his work and his employer is not prepared to pay the exact and total cost of transportation, then he must come within the requirements of subparagraph 8(1)(h)(ii)."

The Queen v. Cival, 83 DTC 5168, [1983] CTC 153 (FCA)

It is not sufficient that under a contract of employment the employer undertook to reimburse the employee on a mileage basis for expenses that he incurred in using his car in the performance of his duties. The employee also must be contractually bound to use his car in doing his job.

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Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii)		12

Administrative Policy

8 February 1994 T.I. 940065 (C.T.O. "Employment Expenses")

The fact that the employee is not required to use her own personal vehicle but chooses to do so, as an option under the employment contract, does not automatically mean that she is not required under the contract to pay the travelling expenses or motor vehicle expenses as envisioned by s. 8(1)(h)(ii) and s. 8(1)(h.1)(ii). Once she chooses to use her vehicle then by implication she is required to pay the motor vehicle expenses.

86 C.R. - Q.75

The decision in Cival emphasized that the employee must be contractually bound to provide the automobile.

Subparagraph 8(1)(h)(iii)

Administrative Policy

11 July 1995 T.I. 950823 (C.T.O. ) "Work Space Deductible as Supplies")

"Workspace expenses which are deductible as 'supplies' under subparagraph 8(1)(i)(iii) of the Act consist of a reasonable proportion of expenses paid for the maintenance of the workspace such as the cost of fuel, electricity, light bulbs, cleaning material and minor repairs."

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(i) - Subparagraph 8(1)(i)(iii)		70
Tax Topics - Income Tax Act - Section 8 - Subsection 8(13)		25

6 June 1995 Memorandum 950298 (C.T.O. "Workspace in the Home")

A T2200 may be issued to an employee who is an auditor whose duties are performed for the most part at the taxpayer's place of business and at an office established in his home: s. 8(10) does not require that the limitations set out in s. 8(13) be considered.

22 July 1994 T.I. 941204 (C.T.O. "Employment and Teachers' Supplies") (See also 941752)

Regarding the deductibility of expenses incurred by teachers to purchase supplies for use in their classrooms, RC stated: "In order to determine if an expense incurred by an employee, which was not expressly required in the contract was actually an implied requirement, the Courts have reviewed whether or not the failure to meet the requirement could result in the cessation of employment, poor performance evaluation or other disciplinary action on the part of the employer."

18 July 89 T.I. (Dec. 89 Access Letter, ¶1042)

Where the employer provided an allowance for trips exceeding 15 kilometres which were non-taxable by virtue of s. 6(1)(b)(vii.1), the employee thereby was not permitted a deduction under s. 8(1)(h) for trips under 15 kilometres.

Articles

Wilson, "Employment Status Under the Income Tax Act", 1993 Conference Report, pp. 2:10-11: Discussion of meaning of "supplies".

Paragraph 8(1)(h.1) - Motor vehicle travel expenses

Commentary

S. 8(1)(h.1) is similar to s. 8(1)(h), except that the former deals only with motor vehicle expenses, which are excluded from the scope of potentially eligible expenses under s. 8(1)(h).

In order for the expenses in question to be deducible, they must be incurred while performing duties of employment (Hogg). Accordingly, travel that is simply getting oneself to the employer's place of work will not qualify for the deduction (O'Neil). However, the general principle, that travel from home to work is a personal expense, is typically confined to cases where the taxpayer's destination is a regular place of business (Velnot).

However, a special construction site of the employer generally will not be considered to be the place of business of the employer, so that costs of travel by the employee between his home and the construction site can potentially qualify for deduction (Martorelli).

Cases

Hogg v. Canada, 2002 DTC 7037, 2002 FCA 177

The taxpayer, who was a judge of the Ontario Provincial Court, Criminal Division, was not able to deduct the cost of travelling to and from his home to the Court House in his own car or of travelling in his car when presiding away from the Court House or when attending meetings in other locations. Nadon J.A. stated (at p. 7040):

"... a plain reading of both the French and English text of paragraph 8(1)(h.1) of the Act makes it clear that the words 'motor vehicle expenses incurred for travelling in the course of the office ...' necessarily require that these expenses be incurred by the taxpayer while performing the duties of his office."

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - French and English Version		46

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Estoppel		138
Tax Topics - General Concepts - Res Judicata		138
Tax Topics - Income Tax Act - Section 162 - Subsection 162(2)		62

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(vii.1)		198

Locations of other summaries		Wordcount
Tax Topics - Income Tax Regulations - Regulation 400 - Subsection 400(2)		88

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h) - Subparagraph 8(1)(h)(i)		55

Administrative Policy

14 September 2017 Roundtable, 2017-0703881C6 - CPA Alberta 2017 Q17: Electric Vehicle Taxable Benefits

requirements for employee deduction of electricity costs for home vehicle charging station

A free charging station is provided at an employee’s home for a car used in performing employment duties. As the charging station draws on the employee’s electricity, the employee effectively bearing a portion of the operating costs. In this regard, CRA stated:

Where an employer does not reimburse an employee for employment-related electricity costs paid by the employee and the employment-related electricity costs can be established, the costs may be deducted by the employee as motor vehicle travel expenses if all of the conditions in paragraph 8(1)(h.1) … are met …:

was normally required to carry out his or her employment duties away from the employer’s place of business (or in different places);

was required by the contract of employment to pay such expenses; and

did not receive a non-taxable allowance or reimbursement in respect of the motor vehicle expenses.

…[S]ubsection 8(10) … requires the employee to obtain a completed and signed Form T2200 …

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)	benefit from employer-provided charging station	191
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(k)	operating expense benefit from vehicle charging station reduced by employee's related personal electricity bill	78

2 February 2017 Quebec CPA Individual Taxation Roundtable Q. 1.7, 2016-0674811C6 F - Allocations automobiles & dépenses afférentes

if vehicle allowance is too low, employee can include the allowance and deduct the vehicle expenses/T2200 production expected

In discussing the situation where an employer limits the number of kilometers travelled by an employee in the course of employment for which it will pay a per-kilometer allowance, e.g., where the employer will stop paying once 10,000 kilometers have been driven in any year, or it does not pay for the first 20 km travelled in each employment-related trip, CRA stated:

In such cases, an allowance may not be high enough in relation to expenses that an employee is expected to incur in a specific situation, and thus not be reasonable. If applicable, the allowance is a taxable benefit that the employee will have to include in employment income in accordance with paragraph 6(1)(b). An employee may, however, if all of the requirements are met, claim the deductions provided in paragraphs 8(1)(h), (h.1) or (j). …

In addition, the CRA has stated…that where an employee elects to include in income the amount of a non-taxable motor vehicle allowance, the taxpayer can deduct the expenses for that vehicle which were actually incurred and which are otherwise deductible on condition that the taxpayer can demonstrate that such expenses are in excess of the allowance in question.

CRA also stated:

An employer is not required to complete or sign Form T2200 for an employee if the employer is of the opinion that the conditions of employment set out in paragraph 8(1)(h.1) or any of the other provisions referred to in subsection 8(10) are not satisfied. However, the CRA expects employers to complete Form T2200 in situations where employees have reasonable grounds to claim a deduction under paragraph 8(1)(h.1) or under the other provisions of section 8 referred to in subsection 8(10).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Regulations - Regulation 200 - Subsection 200(3)	correction of T4s	171

27 October 2014 External T.I. 2013-0507001E5 F - Obligation de remplir un T2200 pour un employé

employer expected to provide T2200 if applicable

Does the employer have an obligation to complete a form T2200 at the employee's request? CRA responded (TaxInterpretations translation):

An employer is not obliged to complete and sign a form T2200 for an employee if it knows that the conditions specified in paragraph 8(1)(h.1)…are not satisfied. CRA expects that employers will provide their employees with a duly completed and signed form T2200 in situations where the conditions set out in paragraph 8(1)(h.1) are satisfied.

19 August 2014 External T.I. 2014-0529741E5 F - Frais afférents à un véhicule à moteur (chantiers)

usual places of work of an employee (which can be multiple locations based on where the employee reports for work) is each a place of business of the employer

A construction employee is required to go from his residence to the various work sites of his employer. He works only a few days per construction site, for a total of about forty construction sites in the year. Does he satisfy the s. 8(1)(h.1) requirement that he is ordinarily required to carry on the duties of employment away from his employer’s place of business or in different places? Before indicating that this was a question of fact, CRA stated:

[W]here an employer has work sites at different locations to which the employee must report regularly in the course of employment, the CRA considers that prima facie the employee's travelling between teh employee's place of residence and the work sites to be of a personal nature. However, employees can claim their vehicle expenses under paragraph 8(1)(h.1) if they demonstrates that they are ordinarily required to carry on their duties of employment away from the places of business of their employer, and that the vehicle expenses were incurred in the performance of their duties.

The usual place of work of an employee constitutes a place of business of the employer. The place of business of the employer is established in relation to the employee (Nelson v. MNR, 81 DTC 190 (TRB)) and is generally the place where the employee must report for work to receive on-site instructions. An employee can have more than one usual place of work. In this case, the fact that an employee reports more frequently to one work place than to other places does not prevent the other places from also being usual places of work.

Words and Phrases

place of business

11 October 2013 Roundtable, 2013-0495591C6 F - Déplacement entre résidence et chantier

employer-requested travel to and from employee’s residence and a non-usual place of work is non-personal

Can a construction worker who is called upon to travel to about 30 construction sites annually at the request of his employer treat travel to and from his residence to the various sites as being in the course of his employment if his presence at each site is only for a few days or weeks and he may have to move between two sites occasionally at the employer’s request (or may travel at the employer’s request, e.g., visiting a supplier)? CRA responded:

Generally speaking, an employee's usual place of employment is the place where the employee must report for work and receive instructions from the person responsible at the site. An employee may have more than one usual place of work. In this case, the mere fact that an employee reports more frequently to one workplace than to others, does not prevent the other places from also being usual places of employment.

Where an employer has work sites in different places to which an employee must regularly report in the course of the employment, at first sight, we consider that the employee's travel between the employee’s residence and the employer's work sites is of a personal nature. ...

[T]ravel between an employee's residence and his or her usual place of work is not carried out in the performance of the duties of the office or employment, even if the employee is required to travel during working hours to different locations at the request of the employer. ...

However, when an employee leaves his or her residence to go to a place other than the employee’s usual place of work or returns from that place to the employee’s residence, this travel will generally be considered as travel in the performance of the duties of his or her office or employment.

5 October 2012 Roundtable, 2012-0454141C6 F - Déductibilité des frais afférents à un véhicule

s. 6(1)(b) inclusion and s. 8(1)(h.1) deduction where allowance received for daily travel only in excess of 40 kilometres

Interpretation 2010-0387391E5 indicated, respecting construction employees who travelled in their cars between different work sites to which they were assigned in the course of their employment, that "where an allowance is paid only for part of the employee's travel, the CRA is generally of the view that there are two trips, one covered by the allowance, the other which is not.” Thus, an employee who travels 60 kilometers and receives an allowance for the excess over the first 40 kilometers would make two trips: one of 40 kilometers not covered by the allowance: and one of 20 kilometers covered by the allowance. If the employee receives $0.44 per kilometer for travel, but only for the excess of travel over 40 kilometers, the allowance received by that employee is unreasonably low, since it does not cover the entire distance traveled. The employee could therefore, as stated in Interpretation 2006-0185451E5, voluntarily include the amount of the allowance in the employee’s income and deduct the expenses related to the use of the employee’s motor vehicle in computing the employee’s income.

Can the CRA indicate whether it agrees with the position set out above or whether it is maintaining its position in 2010-0387391E5? CRA stated:

The opinion described in your question has not been valid since July 15, 2011.

In the situation you described … the allowance based on a rate of $0.44 per kilometer received by the employee should be included in computing the employee’s income by virtue of paragraph 6(1)(b). Similarly, the employee may claim a deduction in computing the employee’s income for the employee’s motor vehicle expenses under paragraph 8(1)(h.1) in respect of the 60 kilometers that the employee traveled in the performance of the duties of the employee’s employment.

22 June 2011 External T.I. 2010-0387391E5 F - Allocations pour véhicule à moteur

employees entitled to s. 8(1)(h.1) deduction where they received an allowance that was taxable under s. 6(1)(b)(x)

reversed in 2012-0454141C6 F

Employees of a construction company work, for between a day and a few weeks, at various worksites in the province that are not their employer's place of business, and receive a travel allowance, for their travel by car between their home and the worksite, two rates of per-kilometer allowance based on whether the kilometers travelled exceeded a threshold.

CRA stated:

[T]he allowance is not reasonable since it is not based solely on the number of kilometers travelled by employees in fulfilling the duties of their employment. Those employees could therefore deduct all expenses incurred to travel from their place of residence to the worksites to which they are assigned. In fact, for the portion of their travel exceeding XXXXXXXX, the allowance paid for the travel exceeding XXXXXXXXXX would be deemed not to be reasonable, whereas the portion of their travel that is less than XXXXXXXXXX would not entitle them to an allowance.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(x)	allowance taxable (but s. 8(1)(h.1) deduction) where 2 different rates	187

12 September 1997 Memorandum 971645

The requirement that the employee be required under the contract of employment to pay the motor vehicle expenses "may also be considered to have been satisfied where it was testedly understood by the employer and the employee that the employee pay the travel expenses."

Where the employee is in receipt of a per debt kilometre allowance that is X% of the rate in Regulations 7306, the employee will be precluded from deducting motor vehicle travel expenses under s. 8(1)(h.1) if this allowance is not included in her income (as might be the case if the allowance is reasonable in amount).

The employee is not precluded from deducting motor vehicle expenses under s. 8(1)(h.1) if she elects not to draw on an allowance made available to her by her employer.

Paragraph 8(1)(i) - Dues and other expenses of performing duties

Subparagraph 8(1)(i)(i)

Commentary

S. 8(1)(i)(i) provides for the deduction in computing a taxpayer's income from an office or employment of annual professional membership dues whose payment is necessary to maintain a professional status recognized by statute.

This requirement will be considered to be satisfied where one or more provincial statutes require that certain services be performed by a member of the body to which the dues in question are paid (Montgomery). There is no requirement that the dues be paid to a body that is provincially regulated.

Cases

Montgomery v. Canada, 99 DTC 5186 (FCA)

The taxpayer, a Revenue Canada appraiser to the Appraisal Institute of Canada, who paid fees to the Appraisal Institute of Canada, which was not given any special status by statute although three provincial statutes or the regulations thereunder required certain appraisals to be performed by a member of that or a similar institute. In finding that the taxpayer was entitled to deduct the fees, Rothstein J.A. stated (at p. 5189):

"The dictionary definition of 'recognized' is, in this context, 'to acknowledge the existence, validity, character or claims of' ... . Parliament intended to restrict the meaning of 'recognized' to include the requirement of being 'incorporated', 'created' or 'regulated' by statute, it was open to it to use words to that effect."

Words and Phrases

recognized

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - Redundancy/reading in words	Appraisal Institute recognized by statute where statutes or Regulations required appraisals to be performed by members	44

The Queen v. Mousseau, 95 DTC 5089 (FCTD)

An appraiser who was required to pay annual dues to the Appraisal Institute of Canada in order to maintain his A.A.C.I. designation was unable to point to any legislative enactments in effect in the taxation year in question (1987) which made reference to the designation of A.A.C.I.

James Alonzo Petrin v. Her Majesty The Queen, 91 DTC 5266, [1991] 1 CTC 94 (FCTD)

Because the Appraisal Institute of Canada and the Institute of Municipal Assessors are not recognized by statute, annual professional membership dues paid to them by the taxpayer were not deductible from his employment income.

The Queen v. Swingle, 77 DTC 5301, [1977] CTC 448 (FCTD)

A highly educated chemist who was employed by the federal Department of Transport and who was designated as an analyst pursuant to S.731(1) of the Canada Shipping Act (for the purposes inter alia of giving certificates as to pollution counts) did not have a professional status that was recognized by statute, and fees paid to various chemical and allied societies accordingly were non-deductible.

Collier, J. indicated in obiter dicta that the question of necessity should be determined by reference to the practical and business sense of what is necessary.

Administrative Policy

8 August 2019 Internal T.I. 2019-0804641I7 - Professional Dues 8(1)(i)(i)

“recognized by statute” can include recognition in a statute’s supporting regulations (but not in by-laws)

To be eligible for an Active Membership in the “Society,” various requirements respecting educational requirements were specified. In addition, Regulations enacted in support of legislation in certain provinces imposed requirements respecting services to be provided by a member of the Society. ETA Sched V, Pt. VI, s. 18, generally exempted “a supply of a membership made by an organization membership in which is required to maintain a professional status recognized by statute.”

The Excise and GST/HST Rulings Directorate queried the view in 2014-0530691E5 , respecting language, similar to that quoted above, appearing in ITA s. 8(1)(i)(i), that:

a professional status would generally have to be acknowledged in the statute itself to satisfy the “recognized by statute” condition in subparagraph 8(1)(i)(i) … .

After stating that Montgomery:

clarified that the phrase “recognized by statute” should be afforded a broad interpretation, and that “recognized by statute” does not necessarily mean that a professional status was incorporated, created, or regulated by a particular statute

and noting that 2014-0530691E5 was somewhat inconsistent with 2012-0444181M4, the Income Tax Rulings Directorate concluded:

[W]e would agree with your views that for purposes of the meaning of the phrase “professional status recognized by statute” … applying a textual, contextual and purposive analysis, a “professional status” can be “recognized by a statute” for purposes of subparagraph 8(1)(i)(i) … even if it is only recognized in the supporting regulations of an act.

However … where a “professional status” is only acknowledged in an organization’s bylaws, the “professional status” would not likely be considered “recognized by statute” … .

Locations of other summaries		Wordcount
Tax Topics - Excise Tax Act - Schedules - Schedule V - Part VI - Section 18	recognition by statute can include recognition by regulation	134

11 September 1996 T.I. 962253 (C.T.O. "Annual Professional Membership Dues")

A trainee enrolled as a member of the Association of British Columbia Professional Foresters is not entitled to the deduction because the trainee is not permitted to practise professional forestry.

The deduction also is not available for late payment penalties or for the fee payable upon becoming reinstated as a member.

1995 Institute of Chartered Accountants of Alberta Round Table, Q. 6 (C.T.O. "Professional Dues" No. 9511910)

In accordance with RC's policy of fairness, professional membership dues that are paid by an employer and included on the employee's T4 as a taxable benefit are deductible by the employee if they otherwise qualify under s. 8(1)(i).

23 June 1995 T.I. 950085 (C.T.O. "Professional Dues")

With respect to the situation where annual fees payable to the Barreau du Quebec are paid by the employer, RC stated that it "considers that an amount in respect of such dues paid by his or her employer in circumstances where the employer is required to include the payment in the employee's income as a taxable benefit is effectively an amount paid by the employee".

13 July 1992 T.I. 921266 (January - February 1993 Access Letter, p. 9, ¶C5-183)

The amount of professional membership dues deductible under s. 8(1)(i)(i) includes GST paid thereon.

22 January 1991 Memorandum (Tax Window, Prelim. No. 3, p. 20, ¶1082)

In the case where the payment of professional membership fees of an employee by his employer is a taxable benefit, the fees are deductible to the employee if the otherwise qualify under s. 8(1)(i).

Subparagraph 8(1)(i)(ii)

Commentary

S. 8(1)(i)(i) provides for the deduction from a taxpayer's income from an office or employment of office rent, or the salary of an assistant or substitute, the payment of which was required by the contract of employment.

Home mortgage payments do not qualify as rent (Thompson).

Some commissioned brokers or sales persons have been successful in deducting salaries paid to their spouses even though their contracts of employment did not explicitly contemplate that they would retain their spouses as assistants (Longtim, Schnurr, cf. Vickers, see also Aprile).

The requirement that the assistant's salary be paid by the taxpayer can be satisfied if the taxpayer's employer pays the salary and the taxpayer reimburses the employer for those amounts (Williams).

Cases

Blott v. The Queen, 2018 TCC 1 (Informal Procedure)

retaining an assistant was not a requirement of employer

The taxpayer, a securities dealer employee, claimed a deduction for salary to his wife of $12,000 per annum for her administrative support. In finding that the taxpayer had not satisfied the requirement that employing an assistant was required by his employer, C Miller J stated ()at paras. 17-18):

His course of action to have his wife assist was entirely self-driven, and not as a result of any implicit requirement in his agreement with WMC.

I combine this view with the fact that the T2200 was checked in the negative regarding the requirement to hire an assistant and find the requirement of section 8(10) of the Act has simply not been met.

Words and Phrases

required

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Payment & Receipt	giving a spouse access to a joint account was not payment to her	152

The Queen v. Thompson, 89 DTC 5439 (FCTD)

A salesman was not permitted to deduct a portion of his home mortgage payments, alleged to relate to his home office, as "rent". McNair quoted with approval (at p. 5443) a statement by Rip TCJ in Felton v. MNR, 89 DTC 233 (TCC) that the word "rent" contemplates "a payment by a lessee or tenant to a lessor or landlord who owns the office property in return fro the exclusive possession of the office, the property leased by the latter to the former."

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 67		220

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h)		117

Locations of other summaries		Wordcount
Tax Topics - General Concepts - Payment & Receipt	payments in kind	72

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(i) - Subparagraph 8(1)(i)(iii)		52
Tax Topics - Income Tax Act - Section 8 - Subsection 8(13) - Paragraph 8(13)(a) - Subparagraph 8(13)(a)(i)		42

Administrative Policy

28 March 2019 External T.I. 2019-0799241E5 F - Dépenses d'emploi (employé qui n'est pas à commission)

property taxes and insurance expenses of home office do not qualify

At the October 2018 APFF Roundtable (2018-0768871C6 F), CRA indicated that the home office expenses of an employee (other than a commission employee governed by s. 8(1)(f) rather than s. 8(1)(i)) may include “property taxes, and home insurance costs associated with maintaining the office.” CRA then issued this correction, stating: [TaxInterpretations translation]

Where a taxpayer claims a deduction under paragraph 8(1)(i), property taxes and home insurance premiums are not deductible. Those are not included in home office expenses for office rent for purposes of subparagraph 8(1)(i)(ii) of the Act. Similarly, they are not included in the cost of supplies that were consumed directly in performance of the duties of the office or employment for the purposes of subparagraph 8(1)(i)(iii).

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(13)	home office expenses generally cannot include property taxes or insurance	171

8 February 1994 Memorandum 940065 (C.T.O. "Employment Expenses")

Although ordinarily the requirement in the contract of employment to provide a work space necessitates that there be an expressed requirement in the written contract of employment, it is RC's general position that this requirement may also be considered to have been satisfied where it is understood by the employer and the employee that the work space be provided by the employee.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b) - Subparagraph 6(1)(b)(xi)		56
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(g)		2

Subparagraph 8(1)(i)(iii)

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(i) - Subparagraph 8(1)(i)(ii)		43
Tax Topics - Income Tax Act - Section 8 - Subsection 8(13) - Paragraph 8(13)(a) - Subparagraph 8(13)(a)(i)		42

Administrative Policy

14 March 2013 External T.I. 2012-0472361E5 F - Fournitures/outils - guides de pêche

implicit requirement to provide “supplies” (e.g., potentially materials provided to clients) can be sufficient

Employed fishing outfitters and guides provide materials, such as salmon flies or filament to repair fishing lines, to clients, to ensure the success of the fishing trip. The collective agreement is silent on whether the employees must incur these expenses. The employees receive remuneration, regardless of whether the client is fishing, and they are reimbursed for equipment expenses up to specified limits. Is the cost of bait and filament to repair a fishing line deductible in the computation of their employment income? CRA responded:

[S]upplies, which may be deducted by virtue of subparagraph 8(1)(i)(iii), are consumed directly in the performance of the duties of the employment and cannot be reused thereafter for similar functions.

[The materials here] could constitute supplies. However, it is not clear that all of the other conditions of subparagraph 8(1)(i)(iii) have been met with respect to your employees, particularly the requirement that employees not be reimbursed for the cost of supplies they incur. …

In order to determine whether an expense incurred by an employee, which was not expressly provided for in an employment contract, is in fact an implicit requirement of an office or employment, the courts have considered whether the fact of failure to comply could result in termination of employment, poor evaluation of employee performance or other disciplinary action by the employer.

Words and Phrases

supplies

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(s)	materials provided to clients were not “tools"	187

11 July 1995 T.I. 950823 (C.T.O. ) "Work Space Deductible as Supplies")

"Work space expenses which are deductible as 'supplies' under subparagraph 8(1)(i)(iii) of the Act consists of a reasonable proportion of expenses paid or the maintenance of the work space such as the cost of fuel, electricity, light bulbs, cleaning and material and minor repairs ... . [O]nly expenses (deductible as supplies) related to work space and not supplies consumed in the performance of employment duties are subject to subsection 8(13) rules."

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h) - Subparagraph 8(1)(h)(iii)		42
Tax Topics - Income Tax Act - Section 8 - Subsection 8(13)		25

26 July 1994 T.I. 941545 (C.T.O. "Employment Benefits - Special Clothing")

The word "supplies" is limited to materials that are used up directly in the performance of the duties of employment, and does not include special clothing customarily worn by employees in the performance of their duties. In addition, there is no provision within s. 8(1)(i) that would permit a deduction in respect of personal grooming costs.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a)		28

9 February 1994 T.I. 933587

The word "supplies" is limited to materials that are used up directly in the performance of the duties of employment, such as gasoline and oil used in the operation of power saws owned by employees in wood operations, dynamite used by miners, bandages and medicines used by salaried doctors and stationery items used by teachers. However, they do not include special clothing customarily worn or required to be worn by employees in the performance of their duties, and any types of tools which fall into the category of equipment. The cost of a knife used for shucking scallops is deductible provided that it has a relatively short life span and a small cost.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(b)		73

Subparagraph 8(1)(i)(iv)

Cases

Crowe v. Canada, 2003 DTC 5288, 2003 FCA 191

Dues paid by the taxpayer to the Alberta Provincial Judges' Association were not deductible given that "as ordinarily understood, the term 'public servants' does not include judges but approximates to 'civil servants' or 'government employees', not independent office holders" (p. 5291) and "given the labour relations context of subparagraph 8(1)(i)(iv), it would be incongruous to find in the same category, namely, 'public servants', two fundamentally different groups of workers: those who may bargain over terms and conditions of employment or work and those who are constitutionally precluded from such activities" (p. 5295).

Lucas v. The Queen, 87 DTC 5277, [1987] 2CTC 23 (FCTD)

Dues in order to be considered annual must be of a recurring kind, as opposed to initiation or entrance dues paid once and for all on becoming a member. An increase in the annual dues of the Alberta Teachers' Association in response to the financial drain from a teachers' strike in Calgary was deductible to the member in the face of the Crown's contention that the increase should be characterized as a special levy. Although this increase did not recur, it was capable of recurring.

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - Resolving Ambiguity		23

Administrative Policy

5 May 2017 External T.I. 2016-0681161E5 - Deductibility of annual membership dues

a trade union need not be certified

An Association collectively negotiates conditions of employment (e.g., salaries, benefits, hours of work) for its members with the Employer, but is not a certified labour organization, and management and certain non-management employees holding positions that require confidentiality will automatically become members of the Association when hired by the Employer. The Association proposes to have the Employer collect annual dues from all Members on its behalf through payroll deduction and use the dues solely to defray the Association’s ordinary operating expenses and for no other purpose. Are such dues deductible by the employees under s. 8(1)(i)(iv)?

Before concluding that the Association would likely be considered a trade union, so that annual dues paid to maintain membership in the Association likely would be deductible, CRA stated that under its established position:

[A]n association does not have to be certified trade union in order to be considered a trade union for purposes of subparagraph 8(1)(i)(iv)… . Generally, an association whose primary purpose is to collectively negotiate with an employer to further the working conditions of its members is considered to be a trade union for purposes of subparagraph 8(1)(i)(iv).

Words and Phrases

trade union

1 April 2014 External T.I. 2013-0513781E5 - Trade union dues

non-certified union

An employee association (the" Association") is a company-wide organization that collectively negotiates employment agreements covering compensation, benefits, and occupational health and safety but is not certified by Human Resources and Skills Development Canada as a labour organization. All non-management employees are required to be members and the employer collects Association dues bi-weekly via payroll deduction. Before concluding that the Association likely would be considered a trade union for purposes of s. 8(1)(i)(iv), CRA stated:

[A]n association need not be certified as a trade union to be considered a trade union for [such] purposes…[and] an association which negotiates collectively with an employer for improvements in the members' working conditions is generally considered to be a trade union for [such] purposes… .

Paragraph 8(1)(j) - Motor vehicle and aircraft costs

Administrative Policy

10 September 1990 T.I. (Tax Window, Prelim. No. 1, p. 17, ¶1009)

Where an employee begins a drive between home and the employer's place of business and during the course of that drive is contacted by a cellular phone and diverted to another place to perform an employment activity, the portion of the drive from the point of the diversion will be considered employment related and the portion of the drive up to that point will be considered to be personal in nature.

Paragraph 8(1)(m) - Employee’s registered pension plan contributions

Cases

The Queen v. Kurisko, 88 DTC 6434, [1988] 2 CTC 254 (FCTD), aff'd 90 DTC 6376 (FCA)

6% of a federally-appointed judge's salary was required, by virtue of s. 29.1 of the Judges Act, to be withheld and contributed to the Consolidated Revenue Fund, which was also deemed by that provision to be contributed under a registered pension plan for purposes of the Income Tax Act. It was held that the amount so deemed to be a contribution was also subject to the $3500 limit in s. 8(1)(m). Although this had the effect of subjecting the amount of the contribution over the limit to double taxation (because the pension income would be fully taxable), the independence of the judiciary was not undermined.

Locations of other summaries		Wordcount
Tax Topics - Other Legislation/Constitution - Charter (Constitution Act, 1982) - Subsection 15(1)		50
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)		75

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

U.S. social security contributions made by a U.S. citizen who was a Canadian resident employee were not deductible under s. 8(1)(l) or (m).

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 56 - Subsection 56(2)		120
Tax Topics - Statutory Interpretation - Interpretation Bulletins, etc.		17

Administrative Policy

13 June 1991 T.I. (Tax Window, No. 4, p. 30, ¶1305)

If an employer's excess contributions to a health and welfare trust are transferred to a pension plan, the transferred amount is neither an employer contribution nor an employee contribution, and is not deductible by the employee under s. 8(1)(m).

19 April 1990 T.I. (September 1990 Access Letter, ¶1407)

Discussion of situation where individual receives tax-free long-term disability payments from an insurance company and as part of the same arrangement the insurance company makes contributions to a registered pension plan on behalf of the employee.

Paragraph 8(1)(m.2) - Employee RCA contributions

Administrative Policy

21 February 2018 External T.I. 2017-0702061E5 - RCA contributions and taxable inc earned in Canada

no deduction permitted where plan provided only for a lump sum payment or where it was excluded from SDA treatment by para. (j) (re athletes)

A Canadian professional sports team has established an RCA for the benefit of an athlete employee under which the athlete and the team are each required to each annually contribute $400,000 to the RCA, would the athlete be entitled to a deduction under s. 8(1)(m.2) for his contributions to the RCA? In finding that no such deduction was permitted, CRA stated:

Generally, a plan will be considered to be a pension plan where contributions have been made to the plan by or on behalf of an employer or former employer of an employee in consideration for services rendered by the employee and the contributions are used to provide an annuity or other periodic payment on or after the employee's retirement.

… [A] plan will not be a pension plan where the only payment provided for under the terms of the plan is a single lump sum payable on retirement or loss of employment. … [A] plan that is excluded from being a salary deferral arrangement (“SDA”) by virtue of the special exception for professional athletes in paragraph (j) of the SDA definition in subsection 248(1) [also] will not be a pension plan, regardless of the form of benefits provided.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 115 - Subsection 115(1) - Paragraph 115(1)(a) - Subparagraph 115(1)(a)(i)	s. 6(1)(a)(ii) exclusion for employer RCA contributions was effectively allocated between Cdn and US employment income of an athlete	229
Tax Topics - Income Tax Act - Section 6 - Subsection 6(1) - Paragraph 6(1)(a) - Subparagraph 6(1)(a)(ii)	s. 6(1)(a)(i) exclusion applied first before s. 4 allocation of income between Canada and U.S.	144

Articles

"Employee Contributions to Unregistered Pension Plans Are Now Permitted", Taxation of Executive Compensation and Retirement, October 1990, p. 342.

Paragraph 8(1)(n) - Salary reimbursement

Administrative Policy

19 December 2016 External T.I. 2016-0643191E5 F - Deferred Salary Leave Plan (DSLP)

deduction where “repayment” of advances made during employee leave

In the course of a comprehensive discussion of the deferred salary leave plan (“DSLP”) rules in Reg. 6801(a), CRA provided an example of an arrangement in which, during an employee leave, the employee first receives amounts whose recognition was deferred under the DSLP rules, and then receives advances of salary or wages which are to be earned after returning – with CRA stating that both types of amounts “must be included in the employee's income in the leave year under subsections 6(3) and 5(1).” After noting that such an arrangement implies a “repayment period” in which the advances are repaid out of reduced pay cheques following the return to work, CRA stated:

Paragraph 6801(a) does not apply during the repayment period, as there is no deferred amount or an EBP [employee benefit plan] within the meaning of subsection 248(1) of the Act during that period. Subsections 6(3) and 5(1) of the Act require that the total salary or wages earned by the employee during that period (the gross amounts, before deduction of the repayment amounts) be included in income. However, paragraph 8(1)(n) of the Act applies so that the employee can deduct from his or her employment income the amounts deducted by the employer as repayment of the employee advances received by the employee during the leave.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)	salary advance arrangement results in recognition when advances made rather than when earned	123
Tax Topics - Income Tax Regulations - Regulation 6801 - Paragraph 6801(a)	comprehensive discussion, including: seasonal workers cannot participate; and DSLP can be married with a salary advance arrangement	436

26 April 2016 Internal T.I. 2015-0623571I7 - one-time salary transition payment

deduction for repayment of transitional advance

CRA considered that an advance to an employee is current s. 5 income to him or her even if the advance is required to be repaid if the future services are not performed. Accordingly, a “transitional payment” made to employees, as a result to switching the payroll system to an arrears system, would be currently taxable even if the employees were required to repay any overpayment on termination of employment.

Respecting the deduction under s. 8(1)(n) for a repayment, CRA stated:

[A]n employee may claim a deduction from employment income for any repayment of all or part of a salary advance that was previously included in the employee’s income and that was for a period which he or she did not perform the duties of employment. This deduction is available in the tax year in which the repayment is made and cannot exceed the advance that was previously included in the employee’s income… .

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 5 - Subsection 5(1)	advance to employee is current s. 5 income	229
Tax Topics - Income Tax Act - Section 80.4 - Subsection 80.4(1)	employee advance not a “loan”	115

16 March 2015 External T.I. 2014-0524371E5 F - Assessment beyond normal reassessment period

no reversal of taxable benefits if repaid in subsequent year

An individual after being assessed for taxable benefits for certain years was subsequently required by his employer to reimburse the employer for the benefit amounts. Could s. 152(4.2) be applied to reverse the taxable benefit amounts in the years of assessment?

CRA noted that, in contrast to 2011-0394301I7, where "an error had been committed and there was no basis for including the amount in the computation of the taxpayer's income," here "the benefits were rightly considered taxable in the years of their grant" (TaxInterpretations translation).

Even if s. 152(4.2) applied, a deduction would not be permitted as "only the reimbursements of remuneration specifically contemplated by the terms of paragraph 8(1)(n) are a permissible deduction in the computation of the income of a taxpayer derived from an office or employment, and that paragraph does not contemplate the type of reimbursement which you envisage."

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4.2)	s. 152(4.2) not applicable if amount was not erroneous at time of return filing	100

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

After noting that education-related expenses paid by an employer are considered employment income (at paras. 3.11-3.12), CRA stated:

3.13 Where a student is required to repay an employer for education expenses the employer previously incurred on their behalf, the student will be entitled to deduct the repayment under paragraph 8(1)(n) where the repayment is made by or on behalf of the student in the year pursuant to an arrangement requiring the reimbursement of any amounts received for a period throughout which the student did not perform the duties of the office or employment. However, the deduction under paragraph 8(1)(n) will be limited to the extent that:

the amounts received were included in computing the student's employment income; and

the total reimbursements do not exceed the total of the amounts received by the student for the period throughout which the student did not perform the employment duties.

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 56 - Subsection 56(1) - Paragraph 56(1)(r)		144

13 June 2012 Internal T.I. 2012-0448961I7 F - Paiements en trop faits par un employeur

salary mistakenly paid after expiry of sick leave period and then repaid, treated as clerical error rather than s. 8(1)(n) adjustment

An employee was on extended sick leave but nonetheless received remuneration from the payroll service, which was not informed of the leave. On the employee's return to employment a number of years later, the error was discovered, and it was agreed that the overpayments would be repaid over a period covering two calendar years through deduction from the employee's post-return remuneration. In applying RC4120 (below), the employer treated this as a situation of overpayment of remuneration for duties not performed, rather than a situation of clerical or administrative error. CRA stated (TaxInterpretations translation):

...[T]he overpayments were in this case made by reason of an administrative or clerical error. In such a case, the amounts received by the employee are not considered as salary as the employee had no right to them.

As indicated in the section of Guide RC4120 entitled "Clerical or administrative errors," the employer should issue a revised T4 form for the taxation year in question ... excluding the amounts of the excess payments. A copy of the revised slip must be sent to the ...CRA ... as well as the employee, informing the employee that the employee may request the CRA to reassess the employee’s XXXXXXXXXX taxation year. However, no change can be made to the T4 slips for the XXXXXXXXXX taxation years to reduce employment income for the reimbursed amounts. ...

Following the issuance by the payroll service of a revised T4 slip for the XXXXXXXXXX taxation year, the employee can request the CRA to make an adjustment to the statement of income and benefits for the XXXXXXXXXX taxation year in order to refund, if applicable, the excess tax paid in that year.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 80.4 - Subsection 80.4(1)	grant of extended period for employee to repay overpayment was not a s. 80.4 loan	95

4 November 2010 Internal T.I. 2010-0358441I7 F - Indien, avance de salaire

salary repayment could generate non-capital loss

An Indian living on a reserve and performing a portion of his duties of employment on a reserve takes an unpaid leave of absence that is funded by a salary advance, that is required to be repaid over a number of years. After finding that the advance was taxable when received, CRA went on to state:

Paragraph 8(1)(n) clarifies the tax treatment of a salary reimbursement to an employer. Paragraph 8(1)(n) generally permits a deduction in computing income from an office or employment to the extent that the amount to be repaid was previously included in computing income from an office or employment. If the deduction in a taxation year is greater than the amount of employment income for the year, then there will be a loss arising from employment, which could be considered a non-capital loss as defined in subsection 111(8).

Locations of other summaries		Wordcount
Tax Topics - Other Legislation/Constitution - Federal - Indian Act - Section 87	salary advance cannot be exempt	145
Tax Topics - Income Tax Act - Section 6 - Subsection 6(3) - Paragraph 6(3)(a)	salary advance is taxable under s. 6(3)	69
Tax Topics - Income Tax Act - Section 111 - Subsection 111(8) - Non-Capital Loss	s. 8(1)(n) deduction could generate NCL	32

RC4120 "Employers' Guide Filing the T4 Slip and Summary"

Employee did not perform duties

When an employee repays you, in the same or a later year, for salary or wages received when the employee did not perform his or her duties, the repayment is considered to be a repayment of salary and wages. Examples include:

an employee who is on a leave of absence and receives salary and disability payments for the same period of time;
an employee who was advanced vacation leave credits, but quit working for you before actually earning the credits; or
an employee who was paid a signing bonus but did not work for the time agreed to in the employment contract.

Your employee should repay you the gross amount of the salary overpayment. You cannot adjust the employee's T4 slip or the payroll records to reduce the total employment income or source deductions by the amount of the repayment.

Clerical or administrative errors

We will not consider an amount to be salary, wages, or an advance in the year the employee received it if the employee is overpaid because of an administration or clerical error (mistake). If you discover the error after issuing a T4 slip for the employee, you must issue an amended T4 slip for that year to exclude this amount.

However, the amount should be included on a T4 slip in the following situations:

The employee says he or she will repay the amount and does not. Include the amount in employment income in the year the employee agrees to repay the amount but does not.
The employee says he or she will not repay the amount. Include the amount in employment income in the year of the overpayment.
The employer forgoes his or her right to the amount. Include the amount in employment income in the year of forgiveness.
There was knowledge or collusion and the employee does not repay the amount. Include the amount in employment income in the year of the overpayment.

Articles

Christina Medland, Jennifer Sandford, "Tax Treatment of Share-Based Compensation", Taxation of Executive Compensation and Retirement, September 2005, p. 583.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 248 - Subsection 248(1) - Salary Deferral Arrangements		0
Tax Topics - Income Tax Act - Section 7 - Subsection 7(1) - Paragraph 7(1)(a)		0

Paragraph 8(1)(p) - Musical instrument costs

Paragraph 8(1)(q) - Artists’ employment expenses

Administrative Policy

20 August 1992 T.I. 922074 (April 1993 Access Letter, p. 131, ¶C5-191; Tax Window, No. 23, p. 21, ¶2158)

Film editors, film directors, sound editors, directors of photography, art directors and costume directors would not qualify unless they belong to a professional artists' association certified by the Department of Communications.

Paragraph 8(1)(s)

Administrative Policy

14 March 2013 External T.I. 2012-0472361E5 F - Fournitures/outils - guides de pêche

materials provided to clients were not “tools"

Employed fishing outfitters and guides provide materials, such as salmon flies or filament to repair fishing lines, to clients, to ensure the success of the fishing trip. The collective agreement is silent on whether the employees must incur these expenses. The employees receive remuneration, regardless of whether the client is fishing, and they are reimbursed for equipment expenses up to specified limits. After discussion the potential deduction under s. 8(1)(i)(iii) (as to which the materials might qualify as “supplies”), CRA stated:

Since there is no definition of the term "tradesperson" in the Act, this term should be interpreted in its ordinary meaning and it is our view that fishing guides could be considered as tradespeople.

… [I]t appears that the property described in your letter is not tools. [Per IT-422, para. 2] in order for an asset to be a tool it must be designed to create a physical change in something or to be used as an instrument of measurement or manipulation. Examples are hammers, saws, squares, screwdrivers and hand-held power tools. Therefore, no amount could be deductible by fishing guides by virtue of paragraph 8(1)(s).

Words and Phrases

tradesperson tool

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(i) - Subparagraph 8(1)(i)(iii)	implicit requirement to provide “supplies” (e.g., potentially materials provided to clients) can be sufficient	221

Subsection 8(2) - General limitation

Administrative Policy

S3-F4-C1 - General Discussion of Capital Cost Allowance

No terminal loss

1.101 A terminal loss cannot be claimed in the case of depreciable property for which CCA was claimed in computing income from an office or employment (see paragraphs 8(1)(j) motor vehicle and aircraft costs and 8(1)(p) musical instrument costs). This is because subsection 8(2) restricts the deductions that can be claimed in computing income from an office or employment to those permitted by section 8… .

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(b) - Capital Expenditure v. Expense - Improvements v. Repairs or Running Expense		476
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Undepreciated Capital Cost - A		669
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21) - Depreciable Property		170
Tax Topics - Income Tax Act - Section 16.1 - Subsection 16.1(1)		248
Tax Topics - Income Tax Act - Section 13 - Subsection 13(28)		194
Tax Topics - Income Tax Act - Section 13 - Subsection 13(27)		178
Tax Topics - Income Tax Act - Section 13 - Subsection 13(29)		145
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2)		184
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(2.2)		267
Tax Topics - Income Tax Regulations - Regulation 1100 - Subsection 1100(3)		60
Tax Topics - Income Tax Act - Section 18 - Subsection 18(3.1)		140
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7.5)		167
Tax Topics - Income Tax Act - Section 261 - Subsection 261(2)		53
Tax Topics - Income Tax Act - Section 128.1 - Subsection 128.1(1) - Paragraph 128.1(1)(b)		204
Tax Topics - Income Tax Regulations - Regulation 1102 - Subsection 1102(1) - Paragraph 1102(1)(c)		150
Tax Topics - Income Tax Act - Section 13 - Subsection 13(7) - Paragraph 13(7)(e)		55
Tax Topics - Income Tax Act - Section 43 - Subsection 43(1)		142
Tax Topics - Income Tax Act - Section 68		153
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(a)		65
Tax Topics - Income Tax Act - Section 13 - Subsection 13(21.1) - Paragraph 13(21.1)(b)		117
Tax Topics - Income Tax Act - Section 13 - Subsection 13(1)		403
Tax Topics - Income Tax Act - Section 20 - Subsection 20(16.1)		142
Tax Topics - Income Tax Act - Section 13 - Subsection 13(9)		207
Tax Topics - Income Tax Act - Section 152 - Subsection 152(4)		299
Tax Topics - Income Tax Regulations - Schedules - Schedule II - Class 8		214
Tax Topics - Income Tax Act - Section 13 - Subsection 13(5)		259
Tax Topics - Income Tax Act - Section 13 - Subsection 13(6)		191

17 August 1992 T.I. (Tax Window, No. 23, p. 20, ¶2137)

An employee may not deduct home telephone expenses even where she is required to be available at home to respond to calls during off-duty hours.

18 October 1990 T.I. (Tax Window, Prelim. No. 1, p. 16, ¶1019)

The exclusion in s. 6(1)(a) will not apply to employer reimbursements of payments by an employee for counselling services in respect of his physical or mental health or that of a family member, and no deduction under s. 8 will be available to him.

79 C.R. - Q.39

Since the compensation of an individual executor is income from an office, he is only entitled to expenses specifically allowed in the Act.

Subsection 8(4) - Meals

Cases

Healy v. The Queen, 79 DTC 5060, [1979] CTC 44 (FCA)

In 1973 the appellant was required to work approximately 2/3 of his time at two race tracks located in Metropolitan Toronto, and 1/3 of his time at a race track in Fort Erie. The purpose of s. 8(4) "is to first find the municipality where an employee usually reports for work and then to find whether or not he is entitled to meal expense deduction for having, in the course of his employment, to be away from that municipality for more than twelve hours ... [I]t matters not whether there is only one or there are several establishments in the 'base' municipality". Since the appellant commonly and usually, or "ordinarily", worked at the two Toronto race tracks, the deduction was available to him.

Locations of other summaries		Wordcount
Tax Topics - Statutory Interpretation - Interpretation Act - Subsection 33(2)		31

Administrative Policy

5 October 2018 APFF Roundtable Q. 8, 2018-0768791C6 F - Frais de repas

commissioned employees can deduct only 25% of the restaurant tab when they take out a client in the city

By virtue of the combined operation of s. 8(4) and s. 67.1(1), the deduction for when a commissioned employee takes a client out to a restaurant within the metropolitan area of the employer is limited to 25% of the bill, i.e., a complete denial for the employee’s portion under s. 8(4) and a 50% denial for the client’s portion under s. 67.1(1). The Quebec equivalent of s. 8(4) provides an exception from its application where the commissioned employee takes a meal with a client.

After effectively confirming that s. 8(4) operated as described, CRA stated:

There is nothing in the Income Tax Act that allows the CRA to not apply subsection 8(4) where an employee's meal was not consumed during a period while the taxpayer was required by the taxpayer’s duties to be away, for a period of not less than 12 hours, from the municipality where the employer’s establishment to which the taxpayer ordinarily reported for work was located and away from the metropolitan area, if there is one, where it was located. …

At the request of the APFF, the situation described in the statement of the question and the response of the CRA will be brought to the attention of that Department [of Finance].

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 67.1 - Subsection 67.1(1)	s. 67.1(1) applies to client portion of restaurant tab even where s. 8(4) applies to employee	63

Subsection 8(5) - Dues not deductible

Administrative Policy

26 November 2013 External T.I. 2013-0492411E5 - Union Dues

recurring union dues to fund union pension plan shortfall

Employees have a pension plan ("EE plan") that is fully funded by their Union. The Union plans to collect a special union dues levy from the Members ("Dues") over XX years to cover a possible funding shortfall in the EE plan. The Dues are required to maintain Union membership and will be refunded if there is no shortfall. In finding that ss. 8(5)(a) and (c) did not deny the deduction of the Dues, CRA stated:

[U]nion dues used to fund the pension plan of union employees are generally not considered levied for or under a superannuation fund or plan. Further…union contributions to a pension plan for its employees are generally considered to be related to the ordinary operating expenses of the union.

28 December 1995 T.I. 952934 (C.T.O. "Union Owing Shares")

Before noting that the use of surplus operating funds by a union to acquire shares of a business corporation might result in the loss of deductibility of the dues, RC stated that a union's ordinary operating expenses "can be defined as an expenditure which falls into place as part of the undistinguished common flow of the trade union's activity; that the expenditure forms part of the normal business carried on, calling for no remarks and arising out of no special or particular situation."

2 May 1995 T.I. 950640 (C.T.O. "Union Dues - Weekly Levy - Funds for a Law Suit")

A $5 dollar per week levy on all members of a union in order to fund a law suit would not qualify as being in respect of ordinary operating expenses, which "can be defined as an expenditure which falls into place as part of the undistinguished common flow of the trade union's activity". Here, the law suit arose out of a special or particular situation, i.e. , a situation that went beyond what was ordinarily and frequently encountered in negotiations to promote working conditions.

Subsection 8(13) - Work space in home

Administrative Policy

28 March 2019 External T.I. 2019-0799241E5 F - Dépenses d'emploi (employé qui n'est pas à commission)

home office expenses generally cannot include property taxes or insurance

In Section 3.2 (3rd paragraph) of 5 October 2018 APFF Roundtable Q. 16, 2018-0768871C6 F, CRA indicated that the home office expenses of an employee (other than a commission employee governed by s. 8(1)(f) rather than s. 8(1)(i)) may include “property taxes, and home insurance costs associated with maintaining the office.” CRA now issued this correction, stating: [TaxInterpretations translation]

Where a taxpayer claims a deduction under paragraph 8(1)(i), property taxes and home insurance premiums are not deductible. Those are not included in home office expenses for office rent for purposes of subparagraph 8(1)(i)(ii) of the Act. Similarly, they are not included in the cost of supplies that were consumed directly in performance of the duties of the office or employment for the purposes of subparagraph 8(1)(i)(iii).

Consequently, our answer should have been the following:

“Home office expenses may include the portion of expenses such as electricity, heating, and maintenance associated with maintaining the office. However, they cannot include property taxes, home insurance premiums, mortgage interest or capital cost allowance for a building.”

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(i) - Subparagraph 8(1)(i)(ii)	property taxes and insurance expenses of home office do not qualify	121

27 October 2014 External T.I. 2012-0471391E5 F - Entreposage d'inventaire à domicile

inventory storage part of work place

A commissioned employee carries out his principal duties at his home where he has a home office as well as being required by his employer to have inventory storage space either in a separate room or the same room for use in client presentations. CRA responded (TaxInterpretations translation):

[T]he inventory storage space could form part of the place where the individual principally performs the duties of his office or employment if the use and storage of the inventory is necessary for the accomplishment of his office or employment at the home.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(12)	separate samples storage room part of home office	86

30 October 2013 External T.I. 2013-0500831E5 F - Frais de bureau à domicile

inapplicable where corporation uses its individual shareholder's office

After noting that “Form T2200 must generally be completed by an employer where an individual, under his or her employment contract, is required to pay certain expenses to earn income from an office or employment,” CRA indicated that where a corporation is using an office in its individual shareholder’s home, because the “person who uses the workplace in this situation is the corporation … Form T2200 cannot be completed.”

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(a) - Income-Producing Purpose	to deduct applicable home expenses, individual shareholder must charge rent to corporation using home office	42
Tax Topics - Income Tax Act - Section 45 - Subsection 45(1) - Paragraph 45(1)(c)	incidental rental use of home does not result in part disposition	131

7 October 2011 Roundtable, 2011-0411891C6 F - Dépenses- EPSP - négociant en vente

home office of a PSP corporation’s employee could qualify

A corporation carries on a personal services business (PSB). Is it possible for the employee to personally deduct, from the employee’s otherwise-determined employment income, expenses in respect of the employee’s home office under subsection 8(13)? The employee’s home is the principal place of business of the corporation and the form T2200 will be completed by the employer, i.e., such corporation.

CRA indicated that there would be deductibility if the usual conditions in ss. 8(13) and 8(1)(i) were satisfied.

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 18 - Subsection 18(1) - Paragraph 18(1)(p) - Subparagraph 18(1)(p)(iii)	s. 18(1)(p)(iii) deduction limited to commission income	172

11 July 1995 T.I. 950823 (C.T.O. ) "Work Space Deductible as Supplies")

"Equipment storage space in the home does not meet the requirements of subsection 8(13) of the Act for work space in the home for deduction proposes."

Locations of other summaries		Wordcount
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(h) - Subparagraph 8(1)(h)(iii)		42
Tax Topics - Income Tax Act - Section 8 - Subsection 8(1) - Paragraph 8(1)(i) - Subparagraph 8(1)(i)(iii)		70

15 June 1992 Memorandum 921443 (December 1992 Access Letter, p. 7, ¶C5-180)

An employee is not entitled to claim a deduction under s. 8(13) unless he has also met the conditions set out in s. 8(1)(f), or (i) and s. 8(10).

Paragraph 8(13)(a)

Articles

Jiani Qian, "COVID-19 and Employees' Home Office Expenses", Canadian Tax Focus, Vol. 10, No. 2, May 2020, p.2

Requirement of employee to incur expenses can be formalized subsequently (p. 2)

Home office expenses may be deductible to an employee under either paragraph 8(1)(f) or (i) … . Subsection 8(13) provides additional requirements.

… 2000-0022015 …and 2011-0394321E5 … [indicate] that a work-from-home arrangement may be initially entered into voluntarily and formalized later … .

CRA “physical” meeting requirement cf. Landry (p. 2)

Subparagraph 8(13)(a)(ii) requires that the workspace be used exclusively for the purpose of earning employment income and used on a regular and continuous basis for meeting customers or other persons in the ordinary course of performing the employment duties. … "[M]eeting" means a physical encounter … [per] 2013-0481171E5 … [notwithstanding] Landry.

“Principally” requirement in s. 8(13)(a)(i) may require 6 months or more at home (p.2)

An alternative route to deductibility is subparagraph 8(13)(a)(i), which requires that the workspace at home be where the employee "principally" performs the duties of the office or employment. The CRA's view is that, in this context, "principally" means more than 50 percent of the time. … Since subsection 8(1) refers to "computing a taxpayer's income for a taxation year from an office or employment," it would be reasonable to infer that the "principally" test should be determined over the course of the full period of employment in the calendar year, rather than for just the part of the year during which the employee is required to work from home for that employment. This would imply … at least 6 months in order to meet the test.

Subparagraph 8(13)(a)(i)

Administrative Policy

3 December 1992 Memorandum (Tax Window, No. 27, p. 20, ¶2335)

Salespersons who do not spend the majority of their time working in their home office will not be entitled to deduct the restricted expenses.

The restrictions do not apply to the costs of long distance telephone calls, cellular telephone air time, and stationery items.

Subparagraph 8(13)(a)(ii)

Administrative Policy

10 December 2013 External T.I. 2013-0481171E5 - Home Office Expenses

"meetings" must be in person

After noting that "to meet" means for "(two or more people) [to] come into each other's company" and "that some informal Tax Court of Canada decisions have held that the phrase "meeting customers" may include meetings held by telephone," CRA stated:

[T]he phrase "meeting customers or other persons"… includes only face to face encounters.

Words and Phrases

meeting

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Section 8

Table of Contents

Subsection 8(1) - Deductions allowed

Paragraph 8(1)(a)

Cases

The Queen v. Patterson, 82 DTC 6326, [1982] CTC 371 (FCTD)

Paragraph 8(1)(b) - Legal expenses of employee

Commentary

Cases

Fenwick v. Canada, 2009 DTC 5525, 2008 FCA 370

Loo v. Canada, 2004 DTC 6540, 2004 FCA 249

Turner-Lienaux v. The Queen, 97 DTC 5294 (FCA)

Fernando v. The Queen, 93 DTC 5412 (FCTD)

Wilson v. The Queen, 90 DTC 6382 (FCTD), aff'd 91 DTC 5407 (FCA)

See Also

Clément v. The Queen, 2020 CCI 33

Kurnik v. The Queen, 2019 TCC 206 (Informal Procedure)

Catlos v. The Queen, 2018 TCC 177

Ross v. The Queen, 2016 TCC 170 (Informal Procedure)

Allan v. The Queen, 2013 DTC 1072 [at 390], 2013 TCC 65

Caruso v. The Queen, 2012 DTC 1200 [at 3511], 2012 TCC 233 (Informal Procedure)

Lester v. The Queen, 2012 DTC 1030 [at 2642], 2011 TCC 543 (Informal Procedure)

Chagnon v. The Queen, 2011 DTC 1205 [at 1216], 2011 TCC 268

Blackburn v. The Queen, 2010 DTC 1073 [at 2898], 2010 TCC 69 (Informal Procedure)

Bonsma v. The Queen, 2010 DTC 1227 [at 3639], 2010 TCC 342 (Informal Procedure)

Kaushik v. The Queen, 2006 DTC 2277, 2005 TCC 207 (Informal Procedure)

Cimolai v. The Queen, 2005 DTC 1800, 2005 TCC 767

Farrell v. The Queen, 2005 DTC 842, 205 TCC 352

Blackburn v. The Queen, 2004 DTC 2409, 2004 TCC 180 (Informal Procedure)

Blagdon v. The Queen, 2003 DTC 804 (TCC), aff'd 2003 DTC 5491, 2003 FCA 269

L'Écuyer v. The Queen, 95 DTC 241 (TCC)

MacDonald v. MNR, 90 DTC 1751 (TCC)

Administrative Policy

Q.2

Q.3

Q.4

Q.5

24 March 1995 T.I. 942430 (C.T.O. "Legal Fees")

IT-99R4 "Legal and Accounting Fees" under "Collection of Salary and Wages"

Paragraph 8(1)(c) - Clergy residence

Commentary

Inclusion in clergy member's income where provision of manse or housing allowances

Computation of deduction

Eligibility for deduction

Member of religious order

Member of clergy

Regular minister

Ministering to congregation

Full-time administrator appointed by religious order or denominaton

Principal Place of Residence v. Principal Residence

Remuneration limitation

Cases

Canada v. Lefebvre, 2010 DTC 5042 [at 6691], 2009 FCA 307

Canada (Minister of Citizenship and Immigration) v. Khan, 2005 DTC 5715, 2005 FC 398

Rumford v. The Queen, 94 DTC 6121 (FCA)

Zylstra Estate and Small v. The Queen, 94 DTC 6687 (FCTD), aff'd sub-nominee McRae v. The Queen, 97 DTC 5124 (FCA)

See Also

Lichtman v. The Queen, 2017 TCC 252 (Informal Procedure)

Parker v. The Queen, 2015 DTC 1118 [at 745], 2015 TCC 86 (Informal Procedure)

Tidd v. The Queen, 2012 DTC 1060 [at 2785], 2012 TCC 16 (Informal Procedure)

Shaw v. The Queen, 2010 DTC 1144 [at 3267], 2010 TCC 210 (Informal Procedure)

Kirkbride v. The Queen, 2003 DTC 966, 2003 TCC 229 (Informal Procedure)

Koop v. The Queen, 99 DTC 707 (TCC)

Austin v. The Queen, 99 DTC 710 (TCC)

Alemu v. The Queen, 99 DTC 714 (TCC)

Fitch v. The Queen, 99 DTC 721 (TCC)

McGorman v. The Queen, 99 DTC 699 (TCC)

Kraft v. The Queen, 99 DTC 693 (TCC)

Oligny v. The Queen, 96 DTC 1744 (TCC)

McNeil v. The Queen, 95 DTC 702 (TCC)

Kolot v. MNR, 92 DTC 2391 (TCC)

Administrative Policy

28 April 2004 External T.I. 2004-006767 -

9 August, 1995 T.I. 951067 (C.T.O. "Clergyman's Residence Deduction")

9 August, 1995 T.I. 951067 (C.T.O. "Clergyman's Residence Deduction")

28 July 1995 Memorandum 951399 (C.T.O. "For Admin of XXX")

27 March 1992 T.I. and 15 April 1992 Memorandum (Tax Window, No. 18, p. 8, ¶1835)

Subparagraph 8(1)(c)(iv)

See Also